New marketing integrity and oversight provisions warrant review and comment.
On June 14, the Centers for Medicare and Medicaid Services (CMS) in the U.S. Department of Health and Human Services (HHS) published its proposed rule "Program Integrity: Exchanges, SHOP, Premium Stabilization Programs, and Market Standards." The proposed rule implements provisions under the Affordable Care Act (ACA) and addresses oversight and technical ground rules for the new Affordable Insurance Exchanges (Exchanges). HHS proposes a number of program integrity provisions, including documentation, auditing, and reporting requirements.
The proposed rule also establishes standards for Qualified Health Plan (QHP) vendors, processes to handle consumer complaints, and the process for QHPs to appeal the imposition of civil monetary penalties (CMPs) or decertification for alleged noncompliance. One of the recurring themes in the rule is HHS providing states with substantial flexibility in establishing and operating Small Business Health Options Program (SHOP) Exchanges.
The proposed rule will require Exchanges, QHPs, and the vendors that service QHPs to revisit and update their program integrity compliance obligations, particularly for entities that have limited exposure to the program integrity requirements under Medicare Advantage and the Health Insurance Portability and Accountability Act (HIPAA).
Comments to the proposed rule are due by 5:00 p.m. ET on Friday, July 19.
Beginning on October 1, 2013, eligible individuals and employers will be able to purchase QHPs through Exchanges. A QHP is a health insurance plan that an Exchange certifies if the plan meets a set of minimum standards, including marketing requirements, choice of healthcare providers, accreditation on clinical quality measures and consumer assessment surveys, and uniform enrollment forms. Although states were expected to set up their own Exchanges, the majority of states have chosen to let this duty fall on HHS by choosing Federally Facilitated Exchanges (FFEs).
Requirements for Group and Individual Health Insurance Markets
- Geographic Rating Area for Premiums in Small Group and Individual Markets. Under the ACA, non-grandfathered individual and small group market premium rates may vary only with respect to family size, age, tobacco use, and the geographic rating area. The proposed rule clarifies that the geographic rating area for small group market premiums will be based on the principal business address of the group policyholder (e.g., employer) and, for individual market premiums, on the address of the primary policyholder, regardless of the location of other individuals covered under the plan (e.g., employees or family members).
- Group Market Distinctions for Guaranteed Availability/Renewability of Coverage. Under the ACA, "group market" insurers must accept (or renew) every employer in the state that applies for coverage. The proposed rule clarifies that this guaranteed availability/renewability requirement applies only within the applicable market segment (i.e., the small group market vs. the large group market). For example, an insurer must offer to large employers all products that are approved for sale in the large group market but not those products approved only for the small group market.
- Calendar-Year Policies for Individual Market Plans. The proposed rule clarifies that, as of January 1, 2015, all non-grandfathered policies in an individual market, or in an individual market merged with small group risk pools, must be offered on a calendar-year basis.
Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment
- State-Operated Reinsurance Program Oversight and Transparency. HHS proposes oversight requirements for state-operated reinsurance programs established under the ACA, including requirements that the states do the following: (1) maintain records for at least 10 years and make them available to HHS, the Office of Inspector General (OIG), or the Comptroller General upon request; (2) submit annual reports to HHS on their reinsurance program operations and make such reports public; (3) report to HHS the results of independent external audits, highlighting any identified material weakness or significant deficiency and proposing a corrective action plan, and make public a summary of each external audit; (5) account for reinsurance funds received from HHS for administrative expenses and all such expenses incurred for state reinsurance programs; (6) carry over unused operating expense funds for use in subsequent benefit years; (7) not use reinsurance operating funds for staff retreats, promotional giveaways, excessive executive compensation, or lobbying (mirroring the prohibitions applicable to Exchanges); and (8) account for reinsurance program receipts and expenses in accordance with generally accepted accounting principles (GAAP).
- State-Operated Risk Adjustment Program Standards. HHS proposes that a state-operated risk adjustment program must do the following: (1) maintain records for at least 10 years and make them available to HHS, the OIG, or the Comptroller General upon request; (2) submit interim reports to HHS on its risk adjustment activities during the first 10 months of the first benefit year; (3) submit annual reports to HHS on its risk adjustment program operations for the most recent benefit year (after the third benefit year for which the state was certified) and make such reports public; and (4) account for risk adjustment program receipts and expenses in accordance with GAAP.
- Changes to Risk Adjustment Methodology. The proposed rule sets forth two modifications to the risk adjustment payment transfer formula applicable only to states using family tiering rating structures.
- Health Insurance Issuer and Group Health Plan (GHP) Standards Related to Reinsurance Program. The proposed rule clarifies the liability for reinsurance contributions when a GHP provides health coverage through more than one policy to an individual, where no single policy constitutes major medical coverage but where, in the aggregate, the policies provide major medical coverage for that individual. HHS proposes, for instance, that an issuer may be liable for reinsurance contributions if its coverage provides a percentage of benefits that is greater than the percentage provided by any other policy. Also, for entities required to contribute to reinsurance, HHS proposes to impose the 10-year document retention requirement noted above.
- Limitations on Health Insurance Issuer Standards Related to Risk Corridors Program. Under the ACA, QHPs offered in the individual or small group market must participate in the risk corridors program. HHS had previously stated that stand-alone dental plans are QHPs, but it now clarifies that certain risk corridor program requirements do not apply to such limited benefit plans. Specifically, such stand-alone plans would not be subject to the federal prohibition on underwriting premiums or the requirement to base pricing using the single risk pool or fair health insurance premium limitations.
- Health Insurance Issuer Standards Related to Risk Adjustment Program. For issuers of risk adjustment covered plans, HHS proposes to impose the 10-year document retention requirement noted above.
- Distributed Data Collection for HHS-Operated Programs. HHS seeks the authority to impose CMPs against issuers in states where HHS operates the reinsurance or risk adjustment program for certain violations specified in the proposed rule (e.g., failure to establish a secure and dedicated distributed data environment). Although HHS would have the authority to impose the maximum penalties allowed under the law, HHS states that it would, as a general principle, work collaboratively with issuers to address problems related to establishing dedicated distributed data environments, where the totality of the circumstances would be taken into account, including issuers' demonstration of good faith through compliance monitoring and improvement efforts. HHS also proposes that, for issuers of risk adjustment covered plans that fail to establish a dedicated distributed data environment or fail to give HHS such data, HHS would assess a default risk adjustment charge.
Exchange Establishment and Other Related Standards
- Exchange Establishment. Whereas states previously had three options to run their individual and SHOP Exchanges as FFEs, partnership Exchanges, or state-based Exchanges, the proposed rule appears to create a fourth alternative by permitting states to run a SHOP Exchange. HHS had previously stated that a state's operation of an Exchange required both QHP and SHOP components. HHS now proposes to permit states to establish just a SHOP in states where HHS would otherwise have been required to establish an Exchange for both offerings. For 2014, this option would be available only for states that timely apply for certification for 2014 and receive conditional approval of their applications. HHS has not taken a position on whether SHOP-only states are eligible to establish a risk adjustment program.
- Broker Requirements. For brokers who enroll qualified individuals and employers in QHPs through an Exchange, the proposed rule relaxes somewhat the information disclosure requirements for websites used by such brokers and requires, in relevant part, that the brokers display only the information furnished by the Exchange or issuer as well as a list of all available QHPs. Also, for brokers who use delegates for enrollment activities, the proposed rule requires the brokers to require their delegates to comply with the same program requirements that apply to the brokers directly and to continue to furnish HHS with a list of such delegates. HHS also proposes additional compliance obligations for agents and brokers. For instance, brokers would be required to establish a privacy and security compliance program that includes the development of policies and procedures, training, and monitoring. The rule would also authorize HHS to terminate an agent's or broker's agreement for cause, subject to an informal resolution process that could allow the agent/broker to cure the noncompliance.
- Electronic Information Exchange Standards. The proposed rule would give flexibility to update the electronic transactions standards for Exchanges to a standard that has been adopted by the HHS Secretary. HHS also proposes that the Accredited Standards Committee (ASC) HIX 820 standard be utilized since the existing ASC X12 standard lacks features necessary for Exchanges to fulfill the ACA business requirements.
- Oversight and Monitoring of Privacy and Security Requirements. HHS proposes to monitor FFEs and non-Exchange entities associated with FFEs for compliance with applicable privacy and security standards. Monitoring activities may include audits, investigations, and other reasonable activities. HHS also proposes definitions of security and privacy "incidents" and "breaches" that mirror the definitions adopted by the Office of Management and Budget, which are broader than those under HIPAA. FFEs and non-Exchange entities associated with FFEs would also be required to report incidents and breaches to HHS within one hour of discovery.
- Eligibility Determinations. To align the Exchange processes with the existing state processes for Medicaid and the Children's Health Insurance Program, HHS proposes a notice process for incomplete applications. The applicant would have between 15 and 90 days to provide the information requested in the notice. In addition, the Exchange may make an eligibility determination if the applicant has provided sufficient information to make that determination, even if other application information is missing. HHS also proposes to allow a health plan that is a government program providing benefits to disclose to HHS HIPAA-protected health information that is needed to verify an applicant's eligibility for minimum essential coverage as part of the eligibility determination process for advance payments of premium tax credits or cost-sharing reductions. Also, for state Exchanges facilitating the collection and payment of premiums to QHP issuers, HHS proposes to require an Exchange to notify an enrollee and furnish a refund within 30 calendar days of discovering an improper application of the advance payment of the premium tax credit (similar to the requirements applicable to QHP issuers that collect premiums directly). As an alternative, the state Exchange may deduct the amount from the enrollee's premium for the next month.
- Enrollment in QHPs. HHS proposes to allow Exchanges to use an issuer's customer service representatives (who are not agents or brokers) to assist individuals in the individual market in applying for an eligibility determination, applying for insurance affordability programs, and facilitating the selection of a QHP offered by the issuer, subject to certain proposed requirements. HHS also clarifies that the special enrollment period for only individual market Exchanges will be available if an Exchange determines that a consumer has been incorrectly or inappropriately enrolled due to misconduct by a non-Exchange entity.
- Small Business Health Options Program. HHS proposes to allow entities that traditionally assisted employees in filing applications (i.e., "SHOP application filers") to furnish such assistance. QHPs participating in a SHOP would be prohibited from making rate changes more frequently than once per quarter. For Exchanges operating in both an individual market and a SHOP, the SHOP would furnish data related to the eligibility and enrollment for an employee to the individual market Exchange. SHOP-only states would be permitted to focus their Navigator programs on outreach to small employers. SHOPs would also be relieved of the requirement to accept paper and telephone applications, which can be costly to process. HHS also proposes that SHOPs develop uniform standards to terminate coverage in a QHP, pursuant to certain proposed parameters (e.g., an employer would have 30 days from termination to request reinstatement).
- Oversight and Financial Integrity Standards for State Exchanges. HHS proposes policies for terminations due to the nonpayment of premiums in federally funded SHOPs. For instance, employers would have 30 days from termination to request reinstatement. Such standards would not apply to FFEs, which are operated by CMS and are already subject to similar standards as a government agency. State Exchanges would also be required to account for their receipts and expenditures in accordance with GAAP and maintain a process to monitor Exchange-related activities for effectiveness, efficiency, integrity, transparency, and accountability. HHS proposes to require that state Exchanges also submit annual reports, due to HHS by April 1, of their Exchange activities and financial statements. Additional reports would be required on eligibility and enrollment issues (e.g., nondiscrimination safeguards) and on performance monitoring data (e.g., financial sustainability and operational efficiency). State Exchanges must also engage independent qualified auditing entities and submit audit reports (along with corrective actions) annually to HHS. State Exchanges would also be subject to the 10-year document retention and government auditing requirements that are to be applied to other Exchange entities under the proposed rule.
Health Insurance Issuer and Exchange-Related Standards
- Single Risk Pool Rating Modifications. The proposed rule clarifies when issuers may modify rates under the single risk pool arrangements to align with limitations applicable to rate setting for Exchanges and SHOPs. Specifically, rates modifications would be permitted on an annual basis for issuers in individual markets or markets where individual and small group risk pools were merged. For issuers in the small group market, rate changes would be permitted on a quarterly basis.
- QHP Minimum Certification Standards. HHS clarifies that all QHP issuers offering coverage in SHOPs must comply with the termination of coverage requirements once they become applicable to SHOPs on January 1, 2015.
- FFE QHP Issuer Standards. The proposed rule requires QHP issuers participating in FFEs to notify HHS of changes of ownership (based on the state-law standard for insurers) at least 30 days prior to the change.
- Standards for Downstream and Delegated Entities. HHS proposes to impose standards on a QHP's delegated and downstream entities, mirroring the standards for entities that contract with Medicare Advantage organizations. The QHP issuer will be responsible for the compliance of its delegated or downstream entities and must include flow-down provisions in all agreements with such entities, including, for example, the 10-year document retention requirement.
- Health Insurance Issuer Advantage Payments of Premium Tax Credit and Cost-Sharing Reductions. HHS proposes steps a QHP issuer must take when cost-sharing reductions due an enrollee are misapplied. Specifically, the issuer must notify the enrollee of the improper application and refund any excess cost sharing paid during the affected period within 30 calendar days of discovering the improper application. However, if the issuer provides more cost-sharing reductions than required, the issuer would not be eligible for reimbursement for any excess payments. Additional refund requirements are proposed when a QHP issuer reassigns an enrollee between certain types of plans. The proposed rule also includes provisions to address a QHP issuer's failure to reduce an enrollee's premium to account for advantage payments of the premium tax credit. The issuer would be required to send a notice and refund to an affected enrollee within 30 calendar days after the issuer discovers the improper assignment of payment. As an alternative to refund, the issuer may credit that refund to the enrollee's premium for the following month. HHS proposes a quarterly reporting requirement, beginning in the 2015 benefit year, where a QHP issuer must provide to HHS and the Exchange a report on any improper applications of cost-sharing reductions or premium reductions. The proposed rule would also impose the 10-year document retention requirement with respect to records relating to cost-sharing reductions and advantage payments of the premium tax credit and a requirement to report to HHS annually with summary statistics relating to the administration of these funds.
- Oversight and Financial Integrity Standards for QHP Issuers in FFEs. HHS is authorized under the ACA to solicit and examine records and reports of Exchange activities. Mirroring the document retention requirements for other Exchange entities, the proposed rule would impose a comparable 10-year retention period and government access rights on such records for QHPs that participate in FFEs. Such QHPs would also be subject to compliance reviews by HHS to assess compliance with Exchange standards. Although HHS suggests that such reviews would be less rigorous than Medicare Advantage reviews due to the separate reviews that would be conducted by states in the regulation of insurance, the proposed rule would allow HHS to conduct on-site reviews, and these reviews could occur up to 10 years from the last day of the applicable plan benefit year.
- FFE Enforcement Remedies. Under the ACA, HHS may use CMPs to enforce Exchange requirements when a state fails to substantially enforce these requirements. Under the proposed rule, HHS is authorized to determine whether a QHP offered through an FFE is compliant with Exchange standards and whether it should be subject to CMPs and/or decertification. The proposed rule also sets forth the bases and processes for imposing CMPs and decertifications. HHS states that it would not duplicate or interfere with the traditional regulatory enforcement of state departments of insurance and would, instead, focus on the enforcement of Exchange-specific standards (e.g., the correct administration of advance payments of the premium tax credits).
HHS anticipates that decertification would be rare in the first year and would only occur after the issuer had an opportunity to cure deficiencies of the integrity/operations of the FFE that were not egregious and did not pose immediate or severe harm to enrollees. Under the proposed rule, a "standard" decertification process (i.e., decertification effective within 30 days of the notice of noncompliance) would be used unless the deficiencies were sufficient to require an "expedited" decertification process (i.e., immediate termination).
- Administrative Review of QHP Issuer Sanctions in FFEs. The proposed rule sets forth an administrative hearing process, subject to the Administrative Procedure Act, for individuals and entities that have been subject to a CMP in connection with an Exchange. HHS modeled the process on existing administrative review processes available for state and HIPAA enforcement actions.
FFEs may also, under the ACA, decertify QHPs, and the proposed rule establishes a process to appeal such decertifications. Although HHS considered modeling this process on the hearing process for Medicare Advantage contract terminations, the proposed process is based on the HIPAA process for CMPs due to its similarity to state processes and the potential confusion that could arise with issuers unfamiliar with the Medicare Advantage hearing process. As proposed, the process to appeal decertifications would mirror the process to appeal CMPs with only a few differences.
- Cases Forwarded by HHS to QHPs and QHP Issuers in FFEs. The proposed rule sets forth requirements to resolve complaints forwarded to the QHP issuer participating in an HHS-FFE (e.g., enrollee complaints about call center waiting times). QHP issuers must investigate and resolve, as appropriate, such complaints within 15 calendar days, with complaints involving the need for urgent medical care resolved within 72 hours, unless state laws require a quicker response. Issuers must also document the resolution in a tracking system developed or approved by HHS within seven business days of the resolution.
- Quality Standards. Under the ACA, HHS must develop an enrollee satisfaction survey that will be available to the public. The proposed rule establishes a process for approving and overseeing the vendors that will administer the surveys on behalf of QHP issuers. HHS also stated that it would, in future rulemaking, require the surveys to be modeled on the Consumer Assessment of Healthcare Providers and Systems (CAHPS) health plan survey and direct QHP issuers to contract with HHS-approved survey vendors in a process similar to the CAHPS survey process for Medicare Parts C and D.
- QHP Issuer Responsibilities. QHP issuers will need to review HHS's monthly payment and collections report and respond to HHS within 15 calendars days to confirm the accuracy of the list or identify any inaccuracies. HHS will permit QHP issuers to enroll applicants who initiate enrollment directly with the QHP (e.g., through its website) and classify these applicants as being enrolled through the Exchange, so long as certain specified conditions are met (e.g., the issuer must notify applicants of the availability of other QHP products offered through the Exchange). To accommodate individuals without bank accounts or credit cards, HHS proposes to require QHP issuers to accept payments through a variety of formats (e.g., checks, money orders, and prepaid debit cards).