Market Stabilization Rule Update

April 27, 2017

I. Summary

On April 13, 2017, the Department of Health and Human Services (“HHS”) released a final rule to help stabilize the individual and small group markets. This rule amends standards relating to special enrollment periods, guaranteed availability, and the timing of the annual open enrollment period in the individual market for the 2018 plan year; standards related to network adequacy and essential community providers for qualified health plans; and the rules around actuarial value requirements.

The regulations are effective 60 days from the date the Rule is published in the Federal Register. The Rule should be published on or about April 18, 2017, which would make the Rule effective on or about June 19, 2017.

II. Key Provisions

  • The final rule sets the 2018 enrollment period from November 1 to December 15, 2017.
  • HHS is increasing pre-enrollment verification of all applicable individual market special enrollment periods for all States served by the HealthCare.gov platform from 50 to 100 percent of new consumers who seek to enroll in Exchange coverage through these special enrollment periods.
  • HHS is revising its interpretation of the Federal guaranteed availability requirement to allow issuers, subject to applicable State law, to apply a premium payment to an individual’s past debt owed for coverage from the same issuer or a different issuer in the same controlled group within the prior 12 months before applying the payment toward a new enrollment.
  • HHS is finalizing an increase in the de minimis variation in the actuarial values (AVs) used to determine metal levels of coverage for the 2018 plan year and beyond.
  • HHS is finalizing changes that will allow issuers to continue to use a write-in process to identify essential community providers (ECPs) who are not on the HHS list of available ECPs for the 2018 plan year; and will lower the ECP standard to 20 percent (rather than 30 percent) for the 2018 plan year, which HHS believes will make it easier for a QHP issuer to build provider networks that comply with the ECP standard.

III. Provisions of the Final Rule

     a. Health Insurance Reform Requirements for the Group and Individual Health

          i. Guaranteed Availability of Coverage

HHS is modifying its interpretation of the guaranteed availability rules with respect to non-payment of premiums. An issuer would not violate the guaranteed availability requirements if the issuer attributes payments from a consumer or employer reenrolling with the insurer to outstanding debt for coverage under any of its products during the previous 12 months. Assuming state law does not prohibit such action, this final rule allows, but does not require, issuers to collect past-due premiums before implementing new coverage. The issuer must implement its premium payment policy uniformly to all employers or individuals regardless of health status, and consistent with applicable nondiscrimination requirements. It applies during the open and special enrollment periods.

This would not prevent the individual or employer from enrolling in coverage with a different issuer, or affect the ability of any individual other than the person contractually responsible for the payment of premium to purchase coverage, whether from the same or different issuer.  The final rule goes beyond the proposed rule by also permitting insurers that are members of the same controlled group as the insurer owed the premium to deny coverage.

States and issuers have the flexibility to create exemptions for extenuating circumstances and the appeals processes by which individuals may demonstrate they qualify for these exemptions. This policy must be applied uniformly to individuals in similar circumstances and not be based on health status.

During any months of coverage for which past-due premiums are collected, issuers must pay all appropriate claims for services rendered to the enrollee.  For enrollees in the 3 consecutive month grace period, a qualified health plan (QHP) issuer must pay all appropriate claims for services rendered during the first month of the grace period, regardless of whether past-due premiums are paid. They must then notify providers of the possibility for denied claims when the enrollee is in the second and third months of the grace period.

In this final rule, HHS decided to not set a premium payment threshold that issuers must apply. Instead, issuers may set and apply a threshold to the extent permitted by applicable state law. The issue must apply this threshold uniformly for individuals and employers in similar circumstances, without regard to health status, and consistent with non-discrimination requirements. Issuers who adopt this premium plan policy must clearly describe the consequences of non-payment on future enrollment in any enrollment application materials and in any notice regarding non-payment of premiums.

     b. Exchange Establishment Standards and Other Related Standards under the Affordable Care Act

          i. Initial and annual open enrollment periods

HHS is amending the dates for the annual exchange open enrollment period in which qualified individuals and enrollees may apply for or change coverage in a QHP. In prior rulemaking, HHS established that the open enrollment period for the benefit year beginning on January 1, 2018 would start on November 1, 2017 and extend through January 31, 2018; and that the open enrollment period for benefit years beginning on January 1, 2019 and beyond would start on November 1 and extend through December 15 of the calendar year preceding the benefit year.

In this final rule, the open enrollment period for plan year 2018 will begin on November 1, 2017, and end on December 15, 2017. All consumers who select plans on or before December 15, 2017 will receive an enrollment effective date of January 1, 2018. The open enrollment period applies to all exchanges, but state-based exchanges have the discretion as to special enrollment periods (SEPs) and may choose to supplement the open enrollment period with an SEP.

          ii. Special enrollment periods

1. Pre-enrollment verification

HHS will increase the scope of pre-enrollment verification of SEPs to all applicable special enrollment periods, as outlined below, in order to ensure complete verification of eligibility. HHS will begin implementing this expanded pre-enrollment verification in June 2017.

HHS will conduct pre-enrollment verification of eligibility for Exchange coverage for all categories of SEPs for all new consumers in all states served by the HealthCare.gov platform, which includes federally-facilitated exchanges and state-based exchanges on the federal platform (SBE-FPs). Under pre-enrollment verification, HHS will verify eligibility for certain SEP categories for all new consumers who seek to enroll in exchange coverage through an SEP. Consumers will be able to submit their applications and select a plan and the start date of that coverage will be determined by the date of plan selection. However, the consumers’ enrollment will be “pended” until verification of SEP eligibility is completed. In this context, “pending” means holding the information regarding plan selection and coverage date at the FFE or SBE-FP until SEP eligibility is confirmed. Consumers will be given 30 days to provide documentation, and can upload documents into their account on HealthCare.gov or send their documents in the mail. Once approved, coverage will be retroactive to the date of plan selection. If verification takes two or more months, an enrollee may choose to not pay for coverage for the first month.

Where applicable, HHS intends to make every effort to verify an individual’s eligibility for the applicable SEP through automated electronic means instead of through documentation. For example, verifying a birth by confirming the baby’s existence through existing electronic verifications or verifying electronically that a consumer was denied Medicaid or CHIP coverage, where such information is available. Otherwise, HHS will seek documentation from the individual applying for the SEP.

In response to concerns whether verification of SEP eligibility will stabilize the risk pool, HHS plans on conducting trainings to ensure stakeholders understand verification requirements, expedite review to minimize delay, and exercise reasonable flexibility when consumers explain why documentation is unavailable. State-based exchanges that do not use HealthCare.gov will not be required to conduct pre-enrollment verification.

2. Metal-level coverage upgrades

HHS will limit the ability of existing exchange enrollees use of an SEP to change plan metal levels during the coverage year. This change would apply in the individual market outside the exchanges, but would not apply in the group market. This ensures that enrollees who qualify for an SEP or are on an application where an applicant qualifies for an SEP to newly enroll in coverage are not using this SEP to simply switch levels of coverage during the coverage year.

When an individual enrolled in coverage marries or has a child, the enrollee and new spouse or child qualify for an SEP. Under the final rule, if the enrollee and the new dependent wish to be in the same QHP, the enrollee will have to add the new dependent to the enrollee’s QHP. If that is not possible, then the enrollee will have to add him/her to another QHP in the same metal (or in an adjacent metal level if no QHP in the same metal level is available). The dependent may also enroll in a separate QHP at any metal level. Finally, if an enrollee or his or her dependent is not enrolled in a silver level QHP and becomes newly eligible for cost-sharing reductions and qualifies for the SEPs, the exchange may allow the enrollee and dependent to enroll in a silver level plan

Finally, the final rule prohibits enrollees from changing metal levels for most other SEPs. This does not apply to some SEPs where the qualifying event may have prevented the applicant from applying for his/her preferred plan, and it does not apply to Indians who qualify for an SEP. This prohibition does not concern the individual market outside the exchange or the group market.

Affected SEPs include SEPs for enrollees who lost minimum essential coverage through the exchange during the coverage year; demonstrated to the exchange that the QHP into which they have enrolled has violated a material provision of its contract; gained access to a new QHP due to a permanent move in accordance with paragraph; or were affected by a material plan or benefit display errors.

3. SEP coverage effective dates

In the 2018 Notice of Payment and Benefit Parameters, HHS allowed consumers to request a later coverage effective date than originally assigned if his or her enrollment was delayed due to eligibility verification and the consumer would be required to pay 2 or more months of retroactive premium in order to effectuate coverage or avoid coverage termination.

The final rule will instead allow consumers to start their coverage one month later than their effective date would ordinarily have been. These customers must pay retroactive premiums in order to avoid cancellation. In the case of a pended enrollment due to SEP eligibility verification, the consumer’s binder payment must consist of the premiums due for all months of retroactive coverage through the first prospective month of coverage consistent with the consumer’s coverage start date. The deadline set by the issuer for making this binder payment must be no earlier than 30 calendar days from the date that the issuer receives the enrollment transaction.

4. Restrictions on other SEPs

In this final rule, HHS took additional steps to strengthen and streamline the parameters of several existing SEPs and to ensure consumers are adhering to existing and new eligibility parameters. This is intended to further promote continuity of coverage and market stability.

First, to ensure that an SEP for loss of minimum essential coverage is not granted in cases where an individual was terminated for nonpayment of premium, FFE (and SBE-FPs) will permit the issuer to reject an enrollment where the applicant lost coverage for non-payment of premiums unless the applicant pays premiums due for previous coverage. If the consumer attempts to renew his or her exchange coverage more than 60 days after being terminated, the consumer would not be eligible for an SEP due to loss of minimum essential coverage.

HHS is considering collecting and storing information on terminations for non-payment to confirm that consumers who lose coverage for non-payment do not subsequently gain coverage through an SEP for loss for minimum essential coverage. Since this is not finalized in the rule, HHS will, for the time being, leave it to insurers to identify consumers in this situation.

Second, in response to concerns that consumers are opting not to enroll in QHP coverage during the annual open enrollment period and are instead newly enrolling in coverage during the coverage year through the SEP for marriage, HHS will add new requirements that, if consumers are newly enrolling in QHP coverage through the Exchange through the SEP for marriage, at least one spouse must demonstrate having had minimum essential coverage for 1 or more days during the 60 days preceding the date of marriage.

Third, HHS expanded the verification requirements related to the SEP for a permanent move. This SEP is only available to a qualified individual or enrollee who has gained access to new QHPs as a result of a permanent move and had coverage for 1 or more days in the 60 days preceding the move, unless he or she is moving to the U.S. from abroad or a U.S. territory. The applicant must submit documentation of both the previous and new addresses and of previous coverage. To ensure that consumers meet all the requirements for this SEP, HHS will require that new applicants applying for coverage through this SEP to submit the same documentation, if applicable, through the pre-enrollment verification process. By those living outside of the US, HHS means individuals living in a foreign country. The final rule exempts Indians from this requirement because the Indian Health Service has not been designated as minimum essential coverage.

Fourth, for the remainder of 2017 and for future plan years, HHS will significantly limit the use of the exceptional circumstances SEP. Instead, HHS will apply a more rigorous test for future uses of the exceptional circumstances SEP, including requiring supporting documentation where practicable. HHS would only grant this SEP if provided with sufficient evidence to conclude that the consumer’s situation was truly exceptional and in instances where it is verifiable that consumers were directly impacted by the circumstance, as practicable.

5. Continuous coverage

HHS believes it is especially important in this market to adopt policies that promote continuous enrollment in health coverage and to discourage individuals from waiting until illness occurs to enroll in coverage. In the proposed rule, HHS sought comments related to a longer “look back” period for prior coverage, and waiting periods or late enrollment penalties. In the final rule, HHS decided to not take action on a continuous coverage requirement at this point, but it will continue to explore possibilities.

          iii. Exchange functions: Certification of qualified health plans

HHS released the final key dates for 2017 and final Uniform Rate Review timing guideline. These do not make any changes to the list released in February 2017, but they do offer more details regarding reinsurance, risk corridor, and risk adjustment dates. The most important dates on the list are June 21, when QHP applications are due; September 27, by when final QHP agreements must be signed; August 1, the deadline for states to post proposed rate increases; and November 1, the deadline for posting final rate filings.

     c. Health Insurance Issuer Standards under the Affordable Care Act, Including Standards Related to Exchanges

          i. Levels of coverage (actuarial value)

HHS will amend the definition of de minimis to a variation of – 4/+2 percentage points, rather than +/- 2 percentage points, for all non-grandfathered individual and small group market plans that are required to comply with AV. This change will be implemented at the start of the 2018 plan year.

HHS believes the new de minimis amount would provide the necessary flexibility to issuers in designing plans while striking the right balance between ensuring comparability of plans within each metal level and allowing plans the flexibility to use convenient and competitive cost-sharing metrics. The final rule does not apply the new de minimis definition to the 73, 87, and 94 percent silver plan cost-sharing variations. The de minimis variation for a silver plan variation of a single percentage point would still apply.

Finally, HHS will maintain the bronze plan de minimis range policy finalized in the 2018 Payment Notice with one modification. The de minimis range for the expanded bronze plans will change from +5/-2 percentage points to +5/-4 percentage points to align with the policy in this final rule. Therefore, for those bronze plans that either cover and pay for at least one major service, other than preventive services, before the deductible or meet the requirements to be a high deductible health plan, the allowable variation in AV will be −4 percentage points and +5 percentage points.

          ii. Network adequacy

QHP issuers are required to maintain a network that is sufficient in number and types of providers, including providers that specialize in mental health and substance abuse services, to assure that all services will be accessible without unreasonable delay.

Beginning with the 2018 plan year, HHS will rely on state regulators to ensure network adequacy so long as the state has the authority to ensure reasonable access to providers and the means to assess network adequacy. In states where the state lacks authority or means to ensure network adequacy, HHS will depend on an insurer’s accreditation from an HHS-recognized accreditation body.

Unaccredited issuers will be required to submit an access plan as part of the QHP Application. To show that the QHP’s network meets the requirement, the access plan must demonstrate that an issuer has standards and procedures in place to maintain an adequate network consistent with the National Association of Insurance Commissioners’ Health Benefit Plan Network Access and Adequacy Model Act. This approach applies to both the federally facilitated and state-based exchanges.

          iii. Essential community providers

For certification for the 2018 plan year, the final rule requires plans to include only 20 percent of essential community providers (ECP) within their network rather than 30 percent. This is the percentage used in the 2014 plan year and is meant to reduce the regulatory burden on issuers while preserving adequate access to care provided by ECPs. The calculation methodology outlined in the 2018 Letter to Issuers in the Federally-facilitated Marketplaces and 2018 Payment Notice would remain unchanged.

The final rule permits insurers to write-in ECPs for plan year 2018, as long as the ECPs that are written in submit an ECP petition to HHS no later than the deadline for issuer submission of changes to the QHP application. For example, issuers may write in any providers that are currently eligible to participate in 340B programs that are not included on the HHS list, or not-for-profit or state-owned providers that would be entities described in section 340B but do not receive federal funding under the section of law referred to in section 340B, as long as the provider has submitted a timely ECP petition.

Insurers who cannot meet the 20 percent standard can still offer a narrative explanation describing how the issuer’s provider networks, as presently constituted, provide an adequate level of service for low-income and medically underserved individuals and how the issuer plans to increase ECP participation in the issuer’s provider networks in future years. At a minimum, such narrative justification would include the number of contracts offered to ECPs for the 2018 plan year, the number of additional contracts an issuer expects to offer and the timeframe of those planned negotiations, the names of the specific ECPs to which the issuer has offered contracts that are still pending, and contingency plans for how the issuer’s provider network, as currently designed, would provide adequate care to enrollees who might otherwise be cared for by relevant ECP types that are missing from the issue’s provider network.

Department of Health and Human Services (HHS)
45 CFR Parts 147, 155, and 156
Patient Protection and Affordable Care Act; Market Stabilization

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