The Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted March 23, 2010, and the Health Care and Education Reconciliation Act of 2012 (Pub. L. 111-152) enacted March 30, 2010, collectively referred to as the Affordable Care Act (“ACA”), dramatically changed the health care economic and operational landscape. Starting on October 1, 2013, qualified individuals and employers will be eligible to purchase Qualified Health Plans (“QHP” or “QHPs”), which are private health insurance plans certified as meeting certain standards, in competitive market places referred to as “Exchanges.” The Exchanges may be facilitated either by the state government (referred to as a “State Exchange”) or by the federal government (referred to as a “Federally-facilitated Exchange” or “FFE”). If a state partners with the federal government to create an Exchange (sometimes referred to as a “State Partnership Exchange”), the Exchange must adhere to the rules established for an FFE.

On June 14, the Department of Health and Human Services (“HHS”) and the Centers for Medicare and Medicaid Services (“CMS”) issued the proposed rule Program Integrity Guidelines for Exchanges, the Small Business Health Options Program (“SHOP”), Premium Stabilization Programs and Market Standards. CMS published a press release and a fact sheet/FAQ on their website providing additional details. The proposed rule provides standards and amends existing regulations impacting the ACA by establishing oversight and standards for Exchanges, QHPs, risk adjustment and reinsurance programs, special enrollment periods, survey of vendors conducting enrollee satisfaction surveys and the role of agents and brokers in the insurance Exchanges. Comments to the proposed rule are due July 19 by 5:00 p.m. Eastern Standard Time.

Exchanges

In the proposed rules, HHS reiterated that health insurers offering non-grandfathered plans on the Exchanges to individuals and small groups may only limit variation in premiums based on family size, age, tobacco use and geographic rating area. The proposed rule clarifies that the geographic rating area for the small group market is determined using the principal address of the group policyholder. For the individual market, the address of the primary policyholder will be used to determine the geographic rating area, regardless of the location of other individuals covered under that policy. Furthermore, HHS clarified that the guaranteed availability and renewability requirements only apply within the applicable segments. In other words, the health insurance issuer must offer all the approved products for a large group in the large group market, but the issuer does not have to offer those insurance products in the small group markets. For the individual market and for those markets that merge the individual and small group segments together, the proposed rule would require a calendar plan year beginning January 1, 2015, for all plans that are not grandfathered. This is meant to align coverage under such plans with coverage in the Exchanges. The proposed rule also seeks to clarify the definition of a “contributing entity” in the ACA so that a self-insured health plan includes a group health plan that is partially self-insured and partially insured only if the insured coverage does not constitute major medical coverage. This amendment would clarify that if a group health plan has a self-insured major medical coverage benefit, then the group health plan would be liable for reinsurance contributions. If, however, the group plan has an insured major medical coverage benefit, then the issuer of that insurance would be liable for the reinsurance contribution.

  1. Reinsurance and Risk Adjustment Programs

State-Operated Reinsurance Programs: These programs are designed to alleviate the need to build into premiums the unknown costs that may occur when enrolling individuals with high medical costs by stabilizing the premiums for coverage in the individual market from 2014 through 2016. The following requirements apply to state-operated reinsurance programs:

  • Maintenance of Records: State must maintain documents and records (paper, electronic or other format) for each benefit year for at least 10 years and make them available upon request by HHS, the Office of Inspector General (“OIG”) and the Comptroller General.
  • For each benefit year, a state is required to maintain the following records:
    • All reinsurance funds received from HHS for reinsurance payments and administrative expenses.
    • All claims for reinsurance payments received from issuers of reinsurance eligible plans.
    • All reinsurance payments made to issuers of reinsurance eligible plans.
    • All administrative expenses incurred for the state’s reinsurance program.
  • In a manner and timeframe specified by HHS, each state that establishes an Exchange must submit and publish a summary report on the state’s reinsurance program operations for each benefit year.
  • Each state that establishes the reinsurance program will be required to engage an independent and qualified auditing entity and will be required to provide HHS a copy of the audit.
  • Use of funds for administrative costs will be limited based on circumstances, and the proposed rule outlines certain circumstances in which funds may not be used for administrative costs (e.g., staff retreats, promotional giveaways).

State-Operated Risk Adjustment Programs: These are permanent programs, offered within and outside of the Exchanges, that transfer funds from lower-risk, non-grandfathered plans to higher-risk, non-grandfathered plans in both individual and small group markets. A state must be approved by HHS to operate an Exchange in order to establish a risk adjustment program. Alternatively, HHS may operate one on the state’s behalf. The following requirements apply to such programs:

  • Maintenance of Records: State must maintain documents and records (paper, electronic or other format) for each benefit year for at least 10 years and make them available upon request by HHS, the OIG and the Comptroller General.
  • The state must provide HHS an interim report in the first year of operation that provides a detailed summary of its risk adjustment activities for the first 10 months of the benefit year, which is due no later than December 31 of the benefit year.
  • In order to obtain recertification after the third benefit year, the state must submit to HHS and make available to the public a detailed summary of the program and operations.
  • The state must maintain an accounting of risk adjustment-related functions and activities for each benefit year.

Multiple Policy Reinsurance Plans: Certain reinsurance requirements apply to group health plans that provide benefits through more than one policy to the same covered lives, where each policy alone does not constitute major medical coverage but where their combined benefits meet the definition of “major medical coverage” (e.g., Policy A provides benefits for hospitalization and Policy B provides benefits for outpatient treatment and prescription drugs).

  • A health insurance issuer providing coverage under a group health plan would make reinsurance contributions if:
    • Group health plans provide health insurance coverage for the same membership if the combination of policies would constitute major medical coverage;
    • The membership is not covered by self-insured coverage; and
    • The health insurance coverage represents a greater percentage of the total coverage than any other plan offered in the policy.
  • Maintenance of Records: State must maintains documents and records (paper, electronic or other format) for each benefit year for at least 10 years and make them available upon request by HHS, the OIG and the Comptroller General.

Miscellaneous Provisions:

  • Stand-alone dental plans will not be subjected to the risk corridors program since they will not be subjected to rate setting uncertainty and are excluded from the premium stabilization programs (reinsurance and risk adjustment).
  • Issuers that offer risk adjustment covered plans must maintain documents and records (paper, electronic or other format) and make them available upon request by HHS, the OIG and the Comptroller General.

Civil Monetary Penalties (“CMP”):  In states where HHS operates the reinsurance or risk adjustment programs, HHS may impose CMPs to an issuer if it fails to:

  • Establish a secured, dedicated distributed data environment;
  • Provide HHS with access to enrollee information;
  • Comply with legal requirements;
  • Submit property data; or
  • Adhere to the appropriate data submission and storage requirements.
  1. Exchange Establishment Standards

The ACA provides states with the opportunity to establish and operate an Exchange that both facilitates the purchase of QHPs and provides for the establishment of a SHOP. Originally, HHS interpreted this to mean that a state must elect to carry out both of these functions in order to establish an Exchange. However, in the proposed rule, HHS has revised this interpretation so that a state may now elect to just establish a SHOP, in which case HHS will establish and operate an individual market Exchange. HHS reiterated that (1) a state may not elect to establish and operate just an individual market Exchange with no corresponding SHOP, and (2) a stateoperating only a SHOP must establish an Exchange entity to perform only the SHOP functions. Further, regarding QHPs, HHS clarified that for a plan that is offered outside the Exchange to be considered as one certified as a QHP and offered in the Exchange, the two offerings must be identical (e.g., benefits package, provider network, service areas, cost sharing). 

Exchange Standards:

  • States only electing to operate a SHOP must establish an Exchange entity to perform only SHOP related functions.
  • A state that has submitted a proposal for certification to HHS to operate an Exchange in 2014 may amend its proposal to exclude the operation of the individual market Exchange.
  • For the states that have yet to receive conditional approval for the establishment of the Exchanges but would like to only operate a SHOP, HHS will consider submissions for the 2015 year.
  • States that elect to only establish a SHOP need not follow provisions of the ACA that expressly apply only to an individual market Exchange. 
  • A state may establish subsidiary SHOP Exchanges and can partner with other states to form regional Exchanges. It should be noted that any regional or subsidiary SHOP Exchanges must serve the same geographic area as the individual market Exchange.

Functions of the Exchange:

  • The proposed rule requires a state operating a SHOP to perform the minimum functions outlined in the ACA, but HHS exempts itself from having the burden of this requirement if HHS establishes a SHOP Exchange. 
  • Agents and Brokers may assist qualified individuals, employers or qualified employees enrolling in QHPs but must follow certain requirements:
    • Register with CMS before they can assist qualified individuals enrolling in an individual market coverage in an FFE.
    • Registration process includes: CMS identifying proofing, completing an FFE training course and signing an agreement with CMS.
  • If the agent or broker is classified as a “web-broker,” then it must adhere to additional disclosure requirements:
    • HHS is considering banning web-brokers who allow other agents or brokers to utilize their website to enroll individuals. 
    • However, in the alternative, HHS may allow this practice if the web-broker requires the other agent or broker to be contractually obligated to the same conditions HHS imposes and if the web-broker provides HHS with a list of persons who have access to the web-broker’s website. 
  • The agent or broker must establish policies and procedures designed to protect the privacy and security of individuals purchasing QHPs on an FFE.
  • Termination of agent or broker status with HHS:
    • The agent or broker must provide HHS with 30 days advance written notice of intent to terminate.
    • HHS may terminate for cause if the agent or broker is not complaint with the established provisions. The agent or broker would have thirty 30 days to cure the noncompliance (e.g., failure to follow certification, violation of state or federal laws).
    • After termination, the agent or broker would be unable to assist individuals with enrolling in QHPs and could not transact data with HHS.
    • If HHS terminates the relationships, the agent or broker would have 30 days to request reconsideration of the termination decision.
  • HHS would require that any non-exchange entity associated with the Exchanges must:
    • Develop policies and procedures for reporting breaches and incidents;
    • Report all privacy and security incidents and breaches to HHS; and
    • Report all privacy and security incidents and breaches to the State Exchange in which the non-exchange entity is associated.

Individual Market Exchange Functions:

  • If an applicant for the individual market does not provide sufficient information on an application, the Exchange will inform the individual of the information that is missing.  The Exchange must provide at least 15 but not more than 90 days for the applicant to provide the information. The Exchange will not proceed with determining the applicant’s eligibility until the application is complete, unless enough information is provided to move forward with QHP eligibility determination.
  • If the Exchange does not reduce the enrollee’s premium by the amount of the advanced payment or tax credit, the Exchange must either refund the difference or reduce the subsequent month’s premium by the surplus. The Exchange would have 30 days to notify the enrollee after discovering the incident.
  • Every quarter, the Exchange must provide to HHS a report detailing any improper application of an advancement payment or premium tax credit. This required report will begin with the 2015 calendar year.

Enrollment in Qualified Health Plans:

  • If permissible under state law, the Exchange may allow insurance issuer’s customer service representatives who are not agents or brokers to assist qualified individuals to:
    • Apply for eligibility determination;
    • Apply for insurance affordability programs; and
    • Facilitate in the selection of QHPs offered by the insurance issuer.
  • Special enrollment periods may be permitted when:
    • An Exchange determines an individual has been inappropriately enrolled in coverage due to misconduct by a non-Exchange entity; or
    • Exceptional circumstances outlined by statute.

Functions of a SHOP:

  • QHP issuers may only make changes to rates at a uniform time and not more than once a quarter.
  • For states in which the federal government operates both the individual and SHOP Exchanges, the SHOP would provide data regarding the eligibility and enrollment of a qualified employee to the individual Exchange.
  • The proposed rule amends the application filing standard to relieve the SHOP from being required to accept paper applications or applications by telephone. 
  • The SHOP would be required to establish uniform termination standards for coverage in a QHP.
    • Employer-requested termination would be effective on the last day of the month so long as notice was received by the 15th of the month.
    • For non-payment of premiums, the SHOP would be required to develop policies to include grace periods, reinstatement and termination.
    • For Federally-facilitated SHOP (“FF-SHOP”), payment for group coverage would be due on the first day of each coverage month. The employer would be given a 31 day grace period for non-payment of the premium. Should the FF-SHOP terminate the group, the group would have 30 days to request reinstatement to the previous coverage. However, the group would have to pay all outstanding premiums and the next month’s premium before reinstatement.  
  • State Exchanges must submit to HHS financial reports demonstrating financial integrity.
  • State Exchanges must also provide documents demonstrating transparency of State Exchange activities (e.g. non-discrimination, fraud and abuse accessibility of information).
  • State Exchanges will be required to undergo audits by independent, qualified entities.
  • State Exchanges, contractors, subcontractors and its agents must maintain records and documentation for 10 years.
  1. Health Insurance Issuer Standards

The proposed rule outlines requirements that issuers of health insurance policies must follow. Organizations issuing policies in the individual market or in markets where the individual and small group risk pools are combined are only permitted to make changes to their market-wide adjustment index rate and plan specific pricing annually. For the small group market, insurance issuers are permitted to make changes on a quarterly basis starting the third quarter of 2014 for new and renewing business for the plan year. 

FF-Exchange QHP Issuer Standards:

  • If the issuer of a QHP changes ownership, notice must be provided to HHS to include: legal name, Taxpayer Identification Number of the new owner and the effective date (must be 30 days prior to date of change). Also, the new owner must agree to adhere to all applicable standards and regulations.
  • If a QHP issuer delegates responsibility or has a downstream relationship with an entity, the QHP issuer is responsible for those entities maintaining the necessary standards and compliance. HHS proposes that the contracts between these organizations must require language acknowledging this provision and allow for revocation by the QHP issuer.
  • These requirements must be in place by January 1, 2015.

Advance Payments and Cost-Sharing Responsibilities of the Health Insurance Issuer:

  • The QHP issuer is responsible for assigning the individual to the proper plan.
  • The QHP issuer is responsible for ensuring the cost-sharing reduction is properly applied. The proposed rule specifically states that enrollees and providers should be held harmless if the QHP issuer causes an error.
  • If the QHP issuer errs in assessing the cost-sharing reduction, it must notify the enrollee within 30 days and refund the money to the person who paid the excess of the cost-sharing, either the enrollee or the provider.
  • If the QHP issuer discovers that the individual is assigned to the improper plan, the entity has 30 days to reassign the enrollee to the proper plan. If the reassignment requires the enrollee to move from a more generous plan to a less generous plan, the QHP issuer may not recoup the previous cost-sharing differential. Should the opposite occur and the enrollee moves to a more generous plan, the QHP issuer must calculate the cost differential for past claims and refund the enrollee or the provider, no later than 30 days after discovery of the incorrect assignment.
  • For the benefit year starting in 2015, each quarter, a QHP issuer must provide HHS and the Exchange a report detailing any improper applications of cost-sharing reductions and refund / reimbursement violations. 

Failure to Reduce Premiums:

  • If a QHP issuer fails to reduce the portion of the premium charged to an enrollee by the amount of an advance payment, it must refund the excess premium and notify the enrollee within 30 days after the discovery of the improper assignment.
  • After each quarter starting in 2015, a QHP issuer must provide to HHS a detailed report of each incident.

HHS Oversight and QHP Issuer Compliance:

  • HHS proposes to have the authority to oversee QHP issuer compliance with regards to cost-sharing reductions and advance payments of the premium tax credit, regardless of whether the QHP is offered by a State Exchange or the FFE.
  • QHP issuers will be required to maintain records as previously outlined, regardless if they only offer in the individual market on a State Exchange, and the entity must ensure that delegated or downstream entities comply with those requirements.
  • QHP issuers offering a QHP in the individual market in either a State Exchange or FFE must provide an annual report to HHS that summarizes statistics pertaining to the administration of cost-sharing reductions and advance payments of the premium tax credit.
  • HHS or an appointed entity will have the authority to audit and to assess compliance with the reporting requirements.

Financial Integrity Requirements in an FFE:

  • A QHP issuer participating in an FFE must maintain all documents and records that HHS deems necessary to conduct activities to ensure the integrity of the FFE. These activities may include periodic auditing and compliance reviews.
  • These records must be maintained and be made available to HHS, the OIG, the Comptroller General and any other designee.
  • QHP issuers will be selected for review using a risk-based approach.
  • The scope of the compliance review will include any information reasonably necessary to:
    • Evaluate compliance with the FFE;
    • Verify the QHP issuer is performing its required duties; and
    • Assess the likelihood of fraud and abuse.
  • If selected for review, HHS will, at its discretion, conduct either an onsite or desk review.  If HHS determines that it is necessary to conduct an onsite review, the QHP issuer will be required to make available to HHS their premise, physical facilities and equipment. 
  • Reviews can be conducted for up to 10 years from the last day of that plan benefit year or 10 years from the last day of the QHP when it was offered if no longer certified for the FFE.

Enforcement Rules:

  • HHS would reserve the right to decertify a QHP from an FFE under specific circumstances, such as:
    • Failure to comply with federal standards;
    • Hampers the efficiency of the FFE;
    • Fraud and abuse; and
    • Failure to maintain or meet the criteria for certification.
  • Two processes will be utilized for decertification:
    • Standard Process – This process would be used where the basis for decertification does not put enrollees’ ability to access necessary medical items and services at risk. The effective date of decertification would be not earlier than 30 days from the date of notification, and the QHP would be able to appeal the decertification while remaining certified.
    • Expedited Process – This process would be used where the basis for decertification would put at risk enrollees’ access to necessary medical items and services. Under the expedited process, the decertification could be immediate, though the QHP would have rights to appeal the decertification after the fact.
  • HHS would be able to impose CMPs on a QHP issuer in specific circumstances, such as:
    • Misconduct resulting in substantial non-compliance;
    • Previous and ongoing record of compliance; and
    • Aggravating or mitigating circumstances;
  • The maximum CMP imposed would be $100 per day for each QHP issuer for each individual adversely affected by the non-compliance. For violations in which the number of impacted individuals cannot be assessed, HHS requests the authority to estimate the number of individuals likely impacted.

Quality Standards:

  • HHS would approve and oversee enrollee satisfaction vendors who would administer surveys on behalf of the QHP issuer.
  • Vendors are anticipated to be approved by mid-2014 to assess the 2014 benefit year.
  • The satisfaction survey should be modeled after the CAHPS Health Plan survey. 
  • Vendors wishing to provide this service must submit annual applications to HHS demonstrating they meet the application and approval requirements. 
  • Vendor experience requirements:
    • Have at least two years of experience in survey administration;
    • Possess appropriate staffing and experience; and
    • Meet minimum facility requirements.

QHP Issuer Responsibilities:

  • Either confirm the accuracy or correct any deficiencies of the payment and collection report sent by HHS within 15 calendar days.
  • If the Exchange allows, an applicant may enroll directly with a QHP issuer so long as the proper enrollment process is followed.
  • QHP issuer must provide applicants with certain data elements.
  • If an Exchange allows for a QHP issuer to enroll individuals through the QHP issuer’s website, the website must clearly distinguish to the individual the QHPs in which they are eligible to enroll.
  • A QHP issuer must notify qualified individuals of other QHP products offered through the Exchange as opposed to what the QHP issuer can directly offer.
  • If the Exchange allows, QHP issuer customer service representatives, under certain circumstances, may assist in facilitating in qualified individuals enrollment in a QHP.
  • If a QHP issuer identifies an error in the amount charged to a qualified individual after its certification, they must retroactively correct that error no later than 30 calendar days after the discovery.
  • For qualified individuals who do not have bank accounts or credit cards, the QHP issuer must accept a variety of alternative payment formats.