CMS Releases Draft 2017 Letter To Issuers In The Federally Facilitated Marketplaces

Implementing Health Reform. On December 23, 2017, the Centers for Medicare and Medicaid Services (CMS) released its draft 2017 Letter to Issuers in the Federally Facilitated Marketplaces (FFMs). CMS also released a draft bulletin on the timing of rate filing submissions and rate filings for January 1, 2017 non-grandfathered individual and small group plans and a table of key dates for qualified health plan (QHP) certification, rate review, risk adjustment, and reinsurance for 2017.

The Draft Letter To Issuers

CMS issues a draft letter to FFM insurers (the “draft letter”) late each year following the release of its proposed benefit and payment parameters rule (the “proposed payment rule”). The letter to issuers is finalized early the following year, and it governs health plans in the federal marketplace for the next year, in this case 2017. This provides guidance for insurers as they formulate their health plans offerings.

Much of the letter to issuers is process oriented; it tells insurers what information they have to file where and when. Other sections of the letter largely repeat information found in the 2016 or 2015 letters to issuers as the operation of the marketplaces become more and more routine. But other sections of the letter lay out in greater detail new initiatives identified in the payment rule. In the case of the 2017 letter, provisions on network adequacy, discriminatory benefit design, and formulary review are of particular interest.

Application Of The Letter

The letter applies to insurers that offer qualified health plans (QHPs) and standalone dental plans (SADPs) in the FFM and federally facilitated Small Business Health Options Program (SHOP) exchange. It applies (although with some differences) in all states that use the FFM platform, including states in which the federal government enforces the Affordable Care Act directly; states in which the state enforces general ACA provisions but the federal government performs all marketplace functions; plan-management FFM states in which the state performs plan management functions and makes plan certification recommendations to CMS; and states in which the state-based marketplace uses the FFM platform for eligibility and enrollment functions.

In states other than direct enforcement states, CMS relies on state review of policy forms and rate filings for determining compliance with market-wide standards. States with effective rate review programs also bear primary responsibility for reviewing rates, while states with plan management authority must make timely recommendations as to QHP certification. Multistate plan insurers must also be approved by the Office of Personnel Management. The FFM will only offer QHPs and SADPs and will not display ancillary insurance products or plans that are not QHPs.

Qualified Health Plan Certification And Rate Filing Calendar

QHP insurers must submit applications and rate filings for 2017 certification between April 11 and May 11, 2016. Applications will not be accepted after this date. Information on rate filings must be posted on the website of a state with an effective rate review program and on the federal rate review website by May 25, 2016. CMS begins an exchange of correction notices and revised data with insurers on June 15. Final submission of all QHP data and permitted changes are due to CMS on August 23. After this date, insurers are only permitted to make limited data corrections.

States will send their final plan recommendations to CMS by September 9 and CMS will send certification notices to insurers on September 15 or 16 confirming all approved plans. Insurers must then submit signed certification agreements to CMS.

Final rates for 2017 will be posted no later than November 1, 2016, when open enrollment will begin. States can post rates earlier with 30 days notice to CMS and states with state-based exchanges can post proposed rates as late as August 31. The letter describes in detail how exchanges of information are to be handled. Insurers who miss deadlines or file inaccurate information can have their applications denied.

Insurers that seek recertification of 2016 plans for 2017 must follow the same process as is prescribed for new plans. Insurers must for 2017 (as they did for 2016) submit a crosswalk of their 2016 and 2017 QHPs and SADPs to help the FFM passively reenroll 2016 enrollees into similar plans if they do not return to the marketplace to actively reenroll for 2017.

Standardized Plans

CMS notes in the draft letter that it has proposed standardized plan options for 2017 in the proposed payment rule. CMS states that if this proposal is finalized, insurers would have the option of offering plans that have standardized in-network deductibles, cost-sharing limits, and copayments and coinsurance amounts for a key set of essential health benefits, as well as four tiers of drug benefits. If the proposal is finalized, QHP insurers would be “strongly encouraged,” although not required, to offer at least a standardized silver plan (including silver plan variations for cost-sharing reductions).

The draft letter provides that insurers may offer more than one standardized plan at a level of coverage if the plans are meaningfully different. It observes that an insurer could offer additional standardized plans with extra benefits or with varying networks or other features. This seems to allow more variation in standardized plans than the proposed payment rule did and raises the question as to how much standardized plans can vary and still be called standardized.

QHP Certification Requirements

To be qualified for certification, QHPs must be licensed and in good standing — that is, without outstanding state sanctions. QHPs must have a service area that covers at least a county, or group of counties, unless the FFM concludes that a smaller service area is necessary, nondiscriminatory, and in the best interest of marketplace enrollees.

Network Adequacy

The draft letter contains long and detailed provisions developing the network adequacy proposals made in the proposed payment rule. These will, of course, only go into effect if the payment rule is finalized as proposed.

Under the proposed payment rule, QHPs must meet quantifiable network adequacy standards. These can either be time and distance standards or minimum provider-to-covered person ratios for high utilization specialties. The FFM will rely on state network adequacy reviews in states that apply acceptable quantifiable standards. The draft letter acknowledges that the National Association of Insurance Commissioners has just completed drafting a network adequacy model act (which does not require quantifiable standards) and that state network adequacy standards are currently in flux. CMS will review state standards and release a list of states that have acceptable quantifiable standards on which the FFM can rely.

In states that do not have acceptable quantifiable standards, federal default standards, similar to those applied to Medicare Advantage plans, would apply. Under these default standards, QHP insurers would be required to ensure that a certain percentage of potential enrollees residing in a county have access to a minimum number of providers or facilities of certain types within established time and distance standards and that insurers have available specific minimum numbers of providers and facilities within specific geographic parameters.

Standards are provided for 14 specialties and facilities, such as endocrinology, mental health, pediatrics, hospitals, and inpatient psychiatric facilities. For each specialty or facility, standards are provided in terms of both minutes travel time and miles distance from a provider, which must apply to at least 90 percent of enrollees for five different locality categories ranging from metropolitan areas to CEACs (counties with extreme access considerations).

Thus an insurer would have to ensure that 90 percent of its enrollees were within 30 minutes or 15 miles of a gynecologist in a metro area and 90 minutes or 75 miles in a rural area. Insurers that cannot meet these default standards, or approved state quantifiable standards, because of local circumstances may submit a justification for their inability to meet the standard. CMS expects that insurers will be able to meet the standards at least 90 percent of the time and will not need to submit justifications more than 10 percent of the time.

The draft letter, like the proposed payment rule, provides that insurers should give regular patients at least 30 days notice of termination of provider. Patients in active treatment for life-threatening or serious acute conditions or in their second or third trimester of pregnancy, or for whom a treating physician attests that discontinuance of treatment by the provider would worsen the condition or interfere with anticipated outcomes, must be allowed to continue treatment by terminated providers for up to 90 days or until the treatment is complete.

The draft letter provides greater detail on CMS’s intended development of a network breadth label to guide shoppers on healthcare.gov, first mentioned in the proposed payment rule. This measure would focus on adult primary care, pediatric primary care, and hospitals, with separate classifications as to each as well as a composite classification. The classifications would be calculated by comparing the total number of providers available in each of the classifications in a plan’s network to the total number of that classification of providers available in all QHPs in a county. This number would be called the Provider Participation Rate, or PPR.

All networks within a standard deviation of the median PPR would be labeled as standard. Networks with a PPR more than a standard deviation above the mean would be labeled “broad” and those with a PPR more than a standard deviation below the mean would be labeled “narrow.” Based on 2016 data, CMS believes about 68 percent of all plans would be standard, with 16 percent broad and 16 percent narrow.

The draft letter also provides additional detail as to the CMS payment rule proposal for dealing with surprise out-of-network bills. Under this proposal, insurers could give notice to enrollees at least 10 business days before the enrollee received services from an in-network provider that services might be provided during the encounter by an out-of-network provider for which the insurer would not pay.

If the insurer failed to provide this notice, and essential health benefit services were received from an out-of-network provider (such as an anesthesiologist or pathologist) during the encounter, cost-sharing for the services would count against the plan’s annual in-network limit on cost sharing. The draft letter, like the proposed payment rule, does not clearly state whether this limitation applies to balance billing—charges imposed by an out-of-network provider above the allowed charge offered by the insurer—or whether it simply applies to copayments, coinsurance, or other standard forms of cost sharing. Balance bills can be very costly and the proposal would fail to really address the problem of surprise bills if they are not covered.

Essential Community Providers

The draft letter contains a lengthy section addressing coverage of essential community providers (ECP) — providers that serve low-income and medically underserved individuals. The 2017 ECP standards largely repeat those applied in 2016, although they are tightened a little. In general, insurers must have contracts with 30 percent of available ECPs in their service area, offer contracts in good faith to all Indian health providers in their service area, and offer contracts in good faith to at least one ECP in each of six categories of ECPs (family planning providers, federally qualified health centers, hospitals, Indian health care providers, Ryan White providers, and “other” ECPs). Multiple ECPs located at a single address will only count as one ECP for calculating the 30 percent ratio. Further provisions on contracting with Indian health providers are included later in the draft letter.

CMS will publish a list of ECPs early in 2016, which will include providers that petition to be included on the list and meet certain criteria. Insurers can “write in” providers that they wish to include as ECPs as in prior years, but “write-in” providers will only count toward satisfaction of the 30 percent standard for 2017 if the provider petitions to be listed as an ECP generally no later than August 22, 2016. Insurers that do not meet the 30 percent standard may submit a narrative justification explaining how they adequately meet the needs of their low-income and medically underserved enrollees and how they intend to increase ECP participation in the future. The draft letter describes in detail the information the narrative justification must include.

The draft letter also describes in detail alternative ECP standards that must be met by plans that provide services through employed or contracted medical groups or hospitals, such as staff model HMOs. It also provides that a SADP must offer good faith provider contracts to at least 30 percent of the dental ECPs in its service area and to all available Indian dental health care providers in its service area. As with health insurers, a SADP unable to satisfy the 30 percent requirement may offer a narrative justification meeting specified standards.

Accreditation And Quality Requirements

QHP insurers that will be in their fourth year of FFM participation in 2017 must be accredited based on local performance of their QHPs with respect to nine specific criteria. Insurers in their second and third year of FFM participation must at least be accredited for their commercial or Medicaid products, while insurers in their first year must have at least scheduled or planned to schedule an accreditation review.

QHP insurers must, under the draft letter and the proposed payment rule, verify that hospitals with more than 50 beds with which the insurer contracts have implemented a person-centered discharge program and use a patient safety evaluation system, including a contract with a patient safety organization or an alternative approach described in the letter.

QHP insurers must during 2016 collect and submit validated clinical quality measure data. They must contract with HHS-approved QHP enrollee survey vendors to collect and submit enrollee survey data on their behalf. CMS will use the quality and satisfaction survey data to calculate for the first time, for the 2017 open enrollment period, ratings on a five-star scale for each QHP insurer’s product type; these ratings will be displayed on the marketplace website. QHP insurers may also use their star ratings in their 2017 plan year marketing materials. State-based marketplaces are also required to display QHP quality rating information calculated by CMS for 2017.

Insurers with non-child-only QHP products covering more than 500 enrollees that offered marketplace coverage during 2014 and 2015 must implement a quality improvement strategy (QIS) in line with the QIS technical guidance issued in November of 2015. A QIS offers incentives to providers or enrollees to improve health care quality or outcomes. State Based Marketplaces (SBMs) as well as the FFM must ensure insurer compliance with QIS requirements.

Rate Review

Under the draft letter and the 2017 proposed payment rule, non-grandfathered plans in the individual and small group market must submit to CMS the Unified Rate Review Template for their current plans, even if they propose no rate change or a rate decrease. They must also submit the template for all new plans. Rate increases would be subject to review if the average rate increase for all enrollees, weighted by premium volume for any plan within a product, is 10 percent or more.

CMS does not intend to duplicate rate reviews carried out by states to enforce state law, but apparently will consider whether particular insurers should be excluded from the marketplace based on patterns and practices of unjustified rate increases. Information supporting all proposed rate increases, whether or not subject to review, will be posted on the CMS rate filing website, omitting trade secrets and confidential commercial or financial information.

Discriminatory Benefit Design

The draft letter to insurers contains extensive provisions regarding discriminatory benefit designs. It first clarifies that individuals under age 65 who have end-stage renal disease are not required to sign up for Medicare, and individuals who do not have Medicare Part A or Part B and who are otherwise eligible can sign up for QHP coverage.

Non-grandfathered health plans in the individual and small group market may not discriminate in the provision of essential heath benefits (EHB) on the basis of age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health condition. Age limits may be considered discriminatory if they are applied to EHB services found to be clinically effective at all ages. Discrimination requirements should not be circumvented by labeling a benefit clinically appropriate for adults as a pediatric service. Placing all drugs that cover a specific condition in the highest-cost formulary tier or refusing to cover a single-tablet or extended release drug product without adequate justification might be discriminatory.

Enforcement of the non-discrimination requirement with respect to EHB is largely the responsibility of state regulators. CMS will also, however, conduct cost-sharing outlier analysis of QHPs to identify outliers based on estimated out-of-pocket costs associated with standard treatment protocols; for 2017, this analysis will address bipolar disorder, diabetes, HIV, rheumatoid arthritis, and schizophrenia. CMS will also review plan benefit information, including information in the “exclusions” or “explanations” sections, to identify reductions in generosity of a benefit for some subsets of individuals that are not based on clinical guidelines, medical evidence, and reasonable medical management.

Drug Formularies

CMS will perform several reviews of drug formularies. First, CMS will perform an outlier analysis comparing plan formularies to formularies at both the state and national level to ensure that QHPs meet outlier threshold levels. QHPs that subject an unusually high number of drugs in a class or category to prior authorization or step therapy would be identified as outliers.

Second, CMS will review each QHP’s drug coverage to ensure the availability of drugs to treat—consistent with clinical guidelines—bipolar disorder, breast cancer, diabetes, hepatitis C, HIV, multiple sclerosis, prostate cancer, rheumatoid arthritis, and schizophrenia. It will also review cost-sharing for these drugs to determine whether high cost sharing is being used to discourage enrollees with these conditions. Finally, it will review formularies to identify “adverse tiering” in which drugs to treat certain chronic, high-cost conditions are assigned consistently to high cost-sharing tiers.

Meaningful Difference

Under the draft letter, CMS will continue to review plans to ensure that they are “meaningfully different” to support consumer choice. CMS will first group together plans that are of the same type, child-only-plan offering status, metal level, and service area. Within these groups, CMS will consider plans meaningfully different only if they have:

• Or do not have an integrated medical and drug maximum-out-of pocket limits,
• Or do not have an integrated medical and drug deductible,
• Multiple-in-network tiers instead of one,
• $200 or more difference in maximum out-of-pocket limits,
• $100 or more difference in deductibles,
• A different provider network with a different network ID,
• Differences in additional benefits that display on the healthcare.gov website, such as acupuncture or bariatric surgery.

Differences in formularies do not qualify as meaningful differences. If a plan is flagged as not meaningfully different, an insurer must modify it or provide a justification to CMS.

Third-Party Payments And Cost-Sharing Reductions

The draft letter notes that insurers offering QHPs or SADPs are required under the 2017 proposed payment rule to accept third-party payments for premiums or cost sharing from federal or state government programs, including Ryan White HIV/AIDs programs and from their grantees or sub-grantees. These payments might in some circumstances be made through an insurer’s downstream entity, such as a pharmacy benefit manager.

(In a related matter, on December 16, 2015, the HHS Office of Inspector General (OIG) issued a modification of an earlier advisory opinion. The modification states that OIG would not impose sanctions on a charity that helps financially needy patients with blood-related cancers with health insurance premiums or cost-sharing obligations if the charity did not 1) limit its funding to specific disease or treatment conditions other than the presence of a widely recognized disease state, 2) limit its assistance to any one drug or manufacturer’s drugs, and 3) limit its assistance to high-cost or specialty drugs. The draft letter does not address premium assistance from charities.)

The draft letter requires QHP insurers to provide plans meeting the standard reduced cost-sharing variations for low-income enrollees. The letter contains guidelines to ensure that reduced cost-sharing plans meet the prescribed actuarial value and maximum out-of-pocket limits, and that they under no circumstances provide less generous coverage than higher cost-sharing plan variations. It also describes the 2017 data integrity tool that plans must use and data integrity reviews CMS will conduct.

Decision Support Tools

Again for 2017, CMS will offer on the marketplace the provider lookup, formulary lookup, and out-of-pocket cost comparison consumer support tools that it premiered in 2015 for 2016 plans. The draft letter sets out the requirements that QHP insurers must meet to make their provider network directories and drug formularies accessible to consumers.

In the FFM, provider directories and formularies must be provided in machine-readable form to facilitate the provision of data for the lookup tools. QHP insurers must also provide the inputs necessary for the out-of-pocket cost calculator. QHP insurers will also be required to meet transparency reporting requirements once these are finalized.

Standalone Dental Plans

Standalone dental plans are only required to meet a subset of the requirements that apply to QHPs and their application requirements are truncated accordingly. The draft letter identifies the requirements that they must meet. In particular, it identifies the requirements that a SADP must meet to be identified as providing adult dental care.

Compliance Issues, Including Agent And Broker Oversight

The draft letter contains a substantial chapter dealing with oversight of QHPs and agents and brokers. CMS will continue to monitor compliance of QHP insurers with program requirements. The draft letter reiterates that the good faith compliance policy that applied during the first two years of the marketplaces ends at the conclusion of 2015, and while CMS will continue to help insurers understand program requirements, good faith is no longer a defense to noncompliance. CMS will conduct risk-based and targeted compliance reviews, which may be desk or on-site reviews.

QHP insurers are responsible for ensuring compliance by their downstream and delegated entities, including agents and brokers. To assist consumers in the FFM and FF-SHOP, agents and brokers must sign general and privacy and security agreements. CMS can terminate these agreements for sufficiently serious noncompliance or material breach. CMS has also proposed in the 2017 payment rule to authorize immediate suspension and subsequent termination for fraud or abusive conduct involving personally identifiable enrollee information.

The draft letter reiterates requirements that apply to web brokers, including oral interpretation requirements in 150 language, language taglines for the web-broker website, and critical documents for the top 15 languages spoken by limited English proficiency individuals in a relevant state, and translation of website content into any non-English language spoken by at least 10 percent of the population of a state. CMS will publish guidance identifying such languages in February of 2016.

The draft letter notes that agents and brokers must be paid the same compensation for the sale of QHPs in the marketplace or similar plans outside the marketplace and describes how similarity of plans will be judged. It also describes how brokers and agents are identified for passive reenrollments and the HHS-approved agent and broker vendor program.

CMS has authority to monitor QHP marketing practices, including ensuring that QHP insurers do not discriminate based on race, color, national origin, disability, age, sex, gender identity, or sexual orientation. Marketing materials and information provided by agents and brokers must also be accurate and not misleading. The use of the terms “exchange” or “marketplace” in websites might be considered misleading.

The Federally Facilitated SHOP

The draft letter examines in some detail how employer and employee renewals and non-renewals and enrollment reconciliations are handled in the FF-SHOP. This information will not be examined here. The letter notes that CMS will not have the operational capacity for 2017 to support calculating premiums based on average enrollee premium amounts. CMS is working on FF-SHOP IT system enhancements. Further information on this is forthcoming.

Consumer Support And Meaningful Access

The draft letter next deals with consumer support and related issues. It describes how “cases” involving consumer issues are handled in the FFM, as well as the responsibilities of QHP insurers for helping to resolve cases. The letter notes that although cases usually involve specific identified consumers, CMS intends to address complaints that it receives about machine readable provider or formulary data on an anonymous basis as the identity of the complaint is not relevant to resolving these issues.

The draft letter addresses meaningful access requirements for non-English speakers established by the 2016 payment rule. These include oral translation in 150 languages. Beginning as of the first day of open enrollment in the individual market for 2017, taglines must be provided on website content and on critical documents indicating the availability of language services in the top 15 languages spoken by people with limited English proficiency in the state. Website content must be translated into languages spoken by at least 10 percent of residents with limited English proficiency.

QHP insurers are required to provide summaries of benefits and coverage compliant with federal requirements. SBCs must include a web address where a copy of the individual coverage policy or group certificate of coverage may be found. QHP SBCs must disclose whether or not the QHP pays for abortions for which federal funding is not available. QHP insurers are required to make SBCs available that accurately reflect each cost-sharing plan variation. CMS is currently working on a revised SBC template that should be available for 2017 plans.

Finally, the draft letter concludes by discussing the responsibilities of the new state-based marketplaces using the FFM for certain functions. While the state-based marketplace retains primary responsibility for enforcing QHP requirements, the FFM can suppress plans in these states that do not comply with program requirements to ensure that consumers only have access to compliant plans.

Risk Adjustment Data Validation

In an unrelated matter, CMS has released at its regtap.info website a timeline and further information regarding its risk adjustment data validation program. During the winter and spring of 2015, individual and small group insurers subject to the risk adjustment program must select an Initial Validation Auditor and submit this entity to CMS for approval. The deadline for submission of 2015 risk adjustment data for validation is April 30, 2016. Through the summer and fall of 2016, CMS will generate a sample of enrollees and their medical claims and the initial validation audit will be completed. In the fall of 2016 and the winter of 2017 a second validation audit will be conducted. In the winter of 2017, pilot results and lessons learned will be released, including 2015 error rates.

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