Final regulations required for October 1, 2013 open enrollment are largely unchanged from the proposed rule.
On August 30, the Centers for Medicare & Medicaid Services (CMS) of the Department of Health and Human Services (HHS) published a final rule titled "Program Integrity: Exchange, SHOP, and Eligibility Appeals."1 The proposed rule was published in the Federal Register on June 19, 2013, with comments due by July 19, 2013.2 Although CMS received 99 public comments to the proposed rule from various stakeholders, the policies in the final rule remain largely unchanged from those initially proposed. To the extent that CMS elected not to adopt certain provisions, it was, in many instances, only because its objectives would be achieved by agreement and not because it had reconsidered its policy.
The final rule only finalizes those provisions that must be in effect when open enrollment for Qualified Health Plans (QHPs) begins on October 1, 2013. Those provisions serve to establish oversight and consumer protection policies relating to the implementation of Affordable Insurance Exchanges (Exchanges) under the Affordable Care Act (ACA), through which qualified individuals and qualified employers will be able to purchase private health insurance coverage. Coverage for those who enroll in plans during fall 2013 will commence on January 1, 2014.
In addition, the final rule finalizes components of another proposed rule that relate to appeals processes. That proposed rule, which was published in the Federal Register on January 22, 2013, is titled "Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange Eligibility Appeals and Other Provisions Related to Eligibility and Enrollment for Exchanges, Medicaid and CHIP, and Medicaid Premiums and Cost Sharing."3
Below, we summarize the significant substantive provisions of the final rule.
Requirements for Group and Individual Exchanges
Fair Insurance Premiums—Geographic Rating Areas
Under the ACA, premiums for nongrandfathered individual and small group market plans may vary only with respect to family size, age, tobacco use, and geographic rating area. Like the proposed rule, the final rule provides that the geographic rating area will be based on the address of the primary policyholder for individual plans and on the principal business address of the group policyholder (i.e., the employer) for small group market plans. However, unlike the proposed rule, the final rule allows certain issuers to continue to base small group market premiums on the employee's place of residence until the first plan year beginning on or after January 1, 2015 if the issuer relied, in good faith, on different guidance from a state insurance regulator before the rule was issued. The transition period applies only to state-run Small Business Health Insurance Options Programs (SHOPs). For all federally facilitated SHOPs, the geographic rating area for small group market plans will be based on the employer's location effective 2014.
Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment
Non-Exchange Plan Participation in Risk Corridors Program
The Risk Corridors Program is a temporary (three-year) program intended to provide protection for issuers against uncertainty in initial rate setting by sharing risk (gains and losses) between HHS and QHPs. A plan offered outside of an Exchange that is "substantially similar" to a QHP may participate in the Risk Corridors Program, provided the non-Exchange plan differs from the QHP only as a result of state or federal requirements or prohibitions on the coverage of benefits that apply differently to plans depending on whether they are offered through an Exchange. Any other deviations in service area, benefits, cost-sharing structure, premium rate, or provider network will disqualify the plan offered outside the Exchange from the Risk Corridors Program. Notably, this concept of substantial similarity is irrelevant to the same premium rule codified at 42 C.F.R. § 156.255(b) (which requires a QHP issuer to charge the same premium rates for the same QHP, irrespective of whether it is offered through an Exchange or directly from the issuer or agent).
Exchange Establishment Standards and Other Related Standards Under the ACA
Flexibility to Establish SHOPs Only
Under the final rule, states may establish and operate only a SHOP, leaving the responsibility of administering the individual market Exchange to the federal government. States may not, however, elect to operate just an individual market Exchange. The opportunity to establish and operate only a SHOP is available to those states that provide reasonable assurances to CMS, through the Exchange Blueprint and/or amendment process, that they will be in a position to establish and operate just the SHOP in 2013. The final rule also establishes provisions related to the operation of regional or subsidiary SHOPs.
Training for Brokers and Agents
While the proposed rule contemplated mandatory training programs related to privacy and security standards for agents and brokers, CMS ultimately decided that contractual obligations pertaining to privacy and security standards under separate agreements with federally facilitated Exchanges (FFEs) would suffice to ensure appropriate and responsible use of personally identifiable information (PII).
Web-Based Brokers' Representations and Content on Websites
Under the final rule, Web-based brokers, which operate websites that make QHP information available to consumers, are required to disclose and display all QHP information provided by an Exchange or directly by a QHP issuer. Where only incomplete information is available, the Web-based broker must prominently display a standardized HHS disclaimer stating that the information required to be displayed for the QHP is available on the Exchange website and must provide a link to the Exchange website.
In addition, the final rule requires Web-based brokers to display a standardized disclaimer for FFEs notifying the consumer that (1) the website is not operated by the Exchange; (2) the website may not contain all QHP data that is available on the Exchange website; (3) the Web-based broker is required to comply with certain regulatory requirements governing enrollment by, and qualifications of, agents and brokers;4 and (4) the Web-based broker is subject to privacy and security standards established by HHS.
Web-Based Brokers' Obligations to Ensure Compliance of Their Website Users
A Web-based broker may permit another broker or agent, by contract or agreement, to use its website to enroll qualified individuals in QHPs offered through an FFE. Where a Web-based broker permits such use by another broker or agent, the broker or agent must be listed as the agent of record on the enrollment application.
The Web-based broker must maintain, and provide upon HHS's request, a list of brokers or agents with whom it contracts. The Web-based broker is responsible for verifying that the broker or agent has completed the requisite training, has properly registered with the state, and has executed the required agreements with the FFE. If the Web-based broker determines that the broker or agent is noncompliant with the terms of its agreement or the regulations applicable to the conduct of agents or brokers, the Web-based broker must terminate the broker's or agent's access to its website and report the matter to HHS and the relevant state's Department of Insurance. Further, in the event of a privacy or security breach, HHS may terminate the Web-based broker's access to HHS systems to provide HHS with the ability to conduct an investigation and remedy the breach.
Notably, the proposed rule would have required Web-based brokers to assume responsibility for the noncompliance of the agents and brokers accessing their websites. However, CMS modified the final rule after commenters expressed concern that the misconduct of a single agent or broker could jeopardize a Web-based broker's access to an Exchange altogether. While CMS modified the final rule in response to this concern, it emphasized that Web-based brokers must cooperate with HHS in a compliance action taken against a noncompliant agent or broker with whom it contracts.
Termination of or by Agents or Brokers
An agent or broker must provide HHS with written notice of its intent to terminate its agreement 30 days in advance of doing so and must inform clients of its intended date of termination. HHS may terminate an agent or broker from an FFE for cause with 30 days' notice. An agent or broker whose agreement is terminated for cause may request reconsideration within 30 days of receiving such notice. HHS will then issue a final decision within 30 days of receiving the request.
Electronic Information Standards
In order to provide ongoing flexibility, the final rule provides that Exchanges that perform electronic transactions with an entity covered by the Health Insurance Portability and Accountability Act (HIPAA) must comply with requirements established by HHS. At this time, HHS has adopted the Accredited Standards Committee (ASC) HIX 820 transaction and has identified NACHA's CCD with Addenda Record (CCD+) as the HIPAA healthcare electronic funds transfer standard.
Oversight and Monitoring of Privacy and Security Requirements
The final rule authorizes HHS to conduct audits, investigations, inspections, and any other reasonable activities necessary to monitor compliance with the privacy and security standards established under 45 C.F.R. § 155.260, which govern the privacy and security of PII used by FFEs, state-run Exchanges, and certain non-Exchange entities. CMS did not finalize oversight provisions that would have required FFEs to report "incidents" and "breaches," as defined by the Office of Management and Budget, to HHS within one hour of discovery because the one-hour incident response requirement and related definitions are already included in all data-sharing agreements required under the ACA. Accordingly, the regulatory provisions would have been unnecessary because their policy objectives may be achieved by contract.
Eligibility Determinations for Exchange Participation and Insurance Affordability Programs
The final rule provides an applicant with an opportunity to cure an otherwise incomplete application. The Exchange must notify the applicant, identify the missing information, and provide the applicant between 10 and 90 days to produce the information required by the Exchange to complete an eligibility determination. Upon receiving sufficient information, the Exchange must make an eligibility determination. The final rule expressly provides that an Exchange may disclose protected health information under HIPAA to HHS for purposes of verification of an applicant's eligibility for minimal essential coverage as part of the eligibility determination process for advance payments of the premium tax credit or cost-sharing reductions. Information that is not necessary to such a determination (e.g., clinical or other health records) may not be disclosed. An Exchange may permit "issuer application assisters" (i.e., employees, contractors, or agents of a QHP issuer who are not licensed agents, brokers, or producers) to assist individuals in the individual markets in applying for a determination or redetermination of an adverse decision, provided that the "issuer application assister" has (1) received appropriate training on QHPs, (2) complies with applicable security and privacy requirements, and (3) complies with state law related to health insurance markets.
Appeals of Exchange Eligibility Determinations
Individual Eligibility Determinations
The final rule establishes an appeals process that dovetails with the current Medicaid "fair hearing" processes. While states have some flexibility in implementing their own appeal procedures, including choice of deadlines and appeal methods, the appeals process will generally be federally guided and will be available to participants in the individual market. Substantially unchanged from the proposed rule, the final rule implements standards including appeal notices and requests, informal resolution provisions, procedural due process rights, hearing operations, and appeal decisions.
After an initial unfavorable eligibility determination, an individual will first have an opportunity for an "informal resolution," where an appeals entity will review the appellant's case and determine whether he or she meets the requirements to participate in an Exchange. The "informal resolution" process is intended to be expeditious and consumer focused and will allow those individuals who would otherwise qualify for an Exchange, absent some minutiae or technicality, a second chance at explaining their unique circumstances. Despite its informal nature, the "informal resolution" will be binding on an Exchange and on agencies administering insurance affordability programs if the appellant is satisfied with the outcome at this level. If the appellant remains dissatisfied, he or she retains the right to further levels of appeal.
The final rule explains that applicants and enrollees must be afforded the right to appeal both an initial determination of eligibility and a redetermination of eligibility, including those determinations related to the amount of advance payment of the premium tax credit and cost-sharing reduction levels. The final rule mandates judicial review as well, allowing appellants who are dissatisfied throughout the process to seek review of HHS's determination. Like the Medicare Part A and Part B appeals process, appellants will have multiple opportunities, likely through several adjudicatory bodies, to have their eligibility determination concerns heard. Unlike Medicare's process, however, the final rule provides for special guidance to appellants to help them exercise these appeal rights, including acceptance of an appeal verbally in person or by telephone and electronically over the Internet and sharing of appeal documents among adjudicatory entities, thereby relieving the appellant of producing more than one set of documents through the levels of appeals and in coordinated appeals.
Appeal request time frames are at the discretion of the state but may be either 90 days from the date of notice of an eligibility determination or within a time frame consistent with the state's Medicaid fair hearing time frame, but, in no case may the time frame be less than 30 days. Finally, appellants of eligibility determinations remain eligible for enrollment in a QHP, advance payment of premium tax credits, and any applicable cost-sharing reductions through the Exchange so long as their appeal remains pending.
In those marketplaces that are not facilitated by the federal government, known as State-Based Marketplaces (SBMs), the states have the option of implementing a process akin to the "informal resolution." Regardless of whether the SBM exercises this option, appellants in the SBM appeals process retain the option to escalate their appeals to the federal process once they have exhausted their state-based rights.
The most likely area of confusion with this rule involves the intersection of the Medicaid and Children's Health Insurance Program eligibility appeals process and the Exchange eligibility appeals process. However, coordination of these divergent appellate procedures appears to be a central goal of HHS. The difficulty of coordination lies not just in the potential differences in each type of procedure and the related burden on appellants of both but in the technological coordination of information about eligibility and determinations. Nevertheless, HHS has attempted to remedy this by allowing states, at their option, to delegate Medicaid eligibility appeals into an Exchange's eligibility review process, thereby providing a singular course for determining the benefits for which an individual might be eligible. It also requires coordination mechanisms to alert applicants and appellants when an unfavorable Medicaid eligibility determination has been made, thereby affording them appeal rights.
Employer Appeals in Individual Markets
Under the ACA, certain employers are required to provide health insurance coverage to their employees in the individual marketplaces that meet "minimum essential coverage" (MEC) provisions for quality and affordability. In the event of a determination that an employer's coverage fails to meet MEC standards and that the employer is therefore liable for a "shared responsibility payment," the final rule affords these employers a process to contest the determination. These processes may be different from state to state based on each SBM's implementation, but, in the event that a state does not create an employer appeal program or does not separately operate an SBM, HHS will implement a similar process to afford employers similar rights. However, if a state does have such a mechanism, the employer may not elevate the appeal to the federal process if it remains dissatisfied after state appeals.
Particularly troubling for larger employer organizations is that states have various options with regard to employer MEC appeal procedures, which could result in complex appeal mechanics and potentially disparate outcomes at the state level for an employer's health plan. While these concerns were raised during the notice and comment period for the proposed rule, HHS determined that, because appeal adjudication standards are supposed to be consistently applied by states and HHS, the administrative efficiencies and integrity of having the initial determination entity hear an appeal of such determination outweighs any burden for large employers.
SHOP Eligibility Appeals
If an employer or employee applies to a SHOP for coverage and is denied on the basis of eligibility, that entity or individual may appeal the determination under the standards set out in the final rule. While states can provide specific eligibility criteria for their SHOPs, they must also implement an appeals process if they implement a SHOP. Like employer appeals, appellants in a state-operated appeal mechanism may not elevate a SHOP eligibility appeal to HHS.
Perhaps cognizant of the contentious position many states have taken with regard to implementation of the ACA, HHS appears committed to providing flexibility for each state to choose to implement—or not to implement—the standards it has set out in the final rule, to the point where no two states may have the same appeals processes. While this may effectively undermine these standards, HHS will always maintain "catch all" appellate procedures for each type of determination, thereby preserving individual and employer due process rights.
Essential Elements of SHOP
Functioning of a SHOP
The final rule seeks to coordinate the functions of SHOPs with those of Exchanges by mandating that SHOPs share data with a state's individual Exchange regarding eligibility and enrollment of certain employees in the SHOP. The final rule also sets out the duties and limitations of so-called "navigators," who facilitate enrollment in QHPs, provide public education and outreach, and assist enrollees with grievances, complaints, or questions by connecting them to the appropriate administrative entity or adjudicatory body.
Application Standards for SHOPs
While HHS had considered requiring SHOPs to accept applications on paper or via telephone, the final rule relieved SHOPs of this requirement. HHS notes that, because of the infrastructure of SHOP navigators and other agents and brokers (collectively, in-person assisters), paper or telephone applications would be superfluous and inefficient. Moreover, given the limitations of paper applications, such as the inability to provide quotes in real time or to complete enrollment simultaneously with the submission of an application, these types of applications will not be available.
Other Provisions of the Final Rule
Enforcement Remedies in FFEs
One of the most significant changes from the proposed rule to the final rule is the inclusion of a good faith compliance policy exception to threats of decertification or civil monetary penalties (CMPs) as initially proposed. As originally set out, the failure of QHP issuers to abide by applicable FFE standards could serve as a basis for HHS to impose CMPs and/or decertify the QHP, but many commenters sought a grace period or safe harbor for instances of failure notwithstanding good faith attempts at compliance. In consideration of this, if CMS now determines during the first plan year (2014) that a QHP issuer is making a good faith effort to comply with applicable Exchange standards, it will refrain from decertifying or imposing CMPs. It may, in the future, consider lengthening this period to 2015.
Bases for Enforcement
HHS received no comments regarding bases for the imposition of CMPs for violations of applicable FFE standards and therefore finalized the rule with only technical amendments. However, it received significant commentary on decertification of QHPs and the possible effects that such decertification could have on enrollees, particularly with regard to healthcare access. HHS will pursue certain decertification actions on an expedited basis, but it recognizes that expedited decertification must be reserved for only the most serious and harmful instances of noncompliance as decertification could have a negative impact on enrollees. Consequently, only those violations that risk enrollees' ability to access necessary healthcare items and services or that substantially compromise the integrity of the FFE will be subject to expedited decertification.