Stakeholder Perspectives on CMS’s 2022 Notice of Benefit and Payment Parameters. Part 2: State Insurance Departments and Marketplaces

This month, the outgoing Trump administration finalized some, but not all provisions of the Notice of Benefit and Payment Parameters for Plan Year 2022. The payment parameters provide an annual set of rules for the Affordable Care Act’s (ACA) marketplaces, governing marketplace enrollment, benefit requirements, and other health insurance standards. After a 30-day public comment period, the Centers for Medicare and Medicaid Services (CMS) published a portion of the final payment parameters one day before President Joe Biden’s inauguration. While CMS plans to publish a subsequent set of final rules addressing the remaining proposals, the agency appears to have sped through the review process, sending the first installment of final rules to the Office of Management and Budget roughly one week after the comment period ended.

The new administration may try to reverse some of the new policies. To understand the potential impact of the finalized rules, we reviewed a selection of comments that insurers, consumer advocates, and state insurance departments and marketplaces submitted in response to the proposed rule. We focused on reactions to the following proposals, which were ultimately finalized:

  • New “direct enrollment” marketplaces
  • Marketplace user fees
  • Codification of Section 1332 Waiver “state innovation” guidance

For the first blog in our series, we reviewed on comments from the health insurance industry.  In this second blog, we look at comments from state insurance departments (DOI) and state-based marketplaces (SBM):

Note: Our review of comments publicly posted to date did not find any submitted from DOIs or marketplaces in states with a political leadership that has been historically opposed to the ACA.

New Direct Enrollment Marketplace Option Panned by States

The ACA requires every state to establish marketplaces facilitating the sale of comprehensive health insurance. Currently, a majority of states rely on the federal marketplace platform (HealthCare.gov) to perform eligibility and enrollment functions for all marketplace customers, while some states operate their own exchange and online platform. One of the finalized policies in the 2022 payment parameters allows states to effectively eliminate the use of HealthCare.gov or a state-run alternative and instead operate an Exchange Direct Enrollment (DE) option, using private entities including web brokers and insurers to perform enrollment functions. This marked shift in marketplace enrollment resembles Georgia’s recently approved Section 1332 waiver – the subject of ongoing litigation – and builds on previous policies from the Trump administration allowing for direct enrollment in marketplace plans through private companies. The final rule goes significantly further than previous policies by allowing states to essentially replace, rather than supplement, HealthCare.gov or its state counterparts without a Section 1332 waiver.

State insurance departments and marketplaces overwhelmingly opposed the Exchange DE option. Several comments asserted that running marketplace enrollment entirely through private entities undermined the ACA’s goals, with the California marketplace calling it “directly at odds” with the ACA. Nearly all state comments pointed out that DE interrupts what is meant to be a single application that determines eligibility for multiple coverage programs, and several expressed concerns that consumers who qualify for marketplace subsidies, Medicaid or other public programs may be routed to less generous or more expensive coverage. Comments also highlighted the potential for the Exchange DE option to reduce consumer protections, allowing for promotion of less comprehensive products that do not have to comply with the ACA’s requirements, which the Michigan and Colorado insurance departments noted may siphon healthier consumers away from the ACA-compliant risk pool and prompt higher premiums.

States also pointed out that HealthCare.gov and state marketplace websites provide a single, reliable and unbiased source of information, assuring consumers that they are purchasing a legitimate marketplace plan. Many state commenters, including the DC marketplace, Massachusetts marketplace, and Oregon DOI argued that the Exchange DE option increased the risk of fraud and deceptive marketing practices, making it even more difficult for consumers to assess their options. Some commenters, including the Colorado insurance department, emphasized that financial incentives may encourage private entities to direct consumers towards less comprehensive products that offer higher commissions.

In general, the only positive feedback from states on this provision was support for state flexibility to not exercise this option; both the Minnesota and New York marketplace voiced support for allowing states to decide whether to adopt the Exchange DE option, with Minnesota noting its “serious concerns” about the DE pathway and New York urging CMS to improve oversight of DE entities.

Changes to Marketplace User Fees Raise Concerns Among States About Lack of Investment in Federal Marketplace

CMS finalized user fees for the 2022 plan year, reducing the portion of premium used to fund federal marketplace operations to 2.25 percent for states on the federally facilitated marketplace (FFM), down from 3 percent in 2021, and 1.75 percent for SBMs that rely on HealthCare.gov (SBM-FP), down from 2.5 percent in 2021. User fees fund marketplace operations including consumer assistance programs, marketing efforts, and technology enhancements.

Of the states in our sample that commented on this provision, all expressed concern about the reduced user fees. Notably, most of the states in our sample are SBMs that operate their own marketplace platform and are not subject to the user fees set by the payment parameters, but many still offered comments in opposition.

The Oregon DOI, a state subject to the reduced user fees, complained about the lack of transparency regarding how user fees are allocated. The Department voiced concern that the proposed Exchange DE option suggests the federal government plans to direct more of the user fee towards back-end technology to support DE applications, arguing that user fees will ultimately subsidize the transformation of HealthCare.gov to facilitate business for private DE entities, rather than supporting and enhancing the public system. Given the lack of transparency, the Oregon DOI suggests that CMS postpone setting the 2022 user fee until the agency provides additional information about how the costs of operating the federal marketplace is allocated to states, and then accept feedback to ensure adequate funding for operational costs and the restoration of robust outreach and marketing efforts.

Several states that operate their own marketplace suggested the reduced user fees would further deteriorate resources to maintain enrollment efforts through HealthCare.gov. California’s marketplace offered data showing the payoff of the state’s relatively higher user fee in the form of greater enrollment results compared to the FFM. The Colorado DOI noted that premium reduction from reduced user fees would likely pale in comparison to investment in policies and programs that increase enrollment, effectively calling the lower fees penny-wise and pound-foolish. Both the Massachusetts and Minnesota marketplaces cited the federal government’s already low investment in marketing and outreach, asserting that the dearth in federal spending on these efforts impacts SBMs that benefit from the national attention on enrollment.

States Oppose Codification of the Trump administration’s Section 1332 Waiver Guidance

In 2018, the Trump administration issued guidance on Section 1332 of the ACA, a provision of the law that allows states to waive certain parts of the ACA to foster innovative policies within certain parameters. Under the 2018 guidance, the administration loosened requirements in place to preserve the ACA’s coverage expansions and consumer protections (such as interpreting the requirement to cover a comparable number of residents as a measurement based on “access” to coverage, rather than actual enrollment). In the 2022 payment parameters, CMS proposed codifying the 2018 guidance by reference. The final rules incorporate the provisions through substantive language rather than reference.

While fewer states provided comment on this proposal, all comments regarding the codification of the 2018 guidance were in opposition. The DC marketplace asserted strong opposition to the proposal, calling the Trump administration’s guidance an “attempt to turn back the clock” and allow discriminatory practices outlawed by the ACA. New York’s marketplace noted that by increasing flexibility for non-ACA-compliant products, the loosened guardrails may raise costs for those with health conditions requiring more comprehensive plans. The Colorado DOI, while expressing interest in flexibility to meet Section 1332’s deficit neutrality requirement, pointed to the impact of the COVID-19 pandemic, noting that increased hospitalizations have highlighted the need for consumers to have more comprehensive coverage. Massachusetts’s marketplace also pointed to the impact of COVID-19, describing how the 2018 guidance burdens vulnerable populations by allowing states to ignore the disparate impact of proposals across different populations, and pointing out that these same consumers have already been disproportionately affected by the ongoing pandemic.

Takeaway

Policy changes provided in the annual payment parameters are felt at the state level, where insurance departments and marketplaces must implement and oversee the new requirements. The Biden administration may revise or reverse the proposals in the 2022 payment rule, and feedback from states – including opposition to the Exchange DE option, reduced user fees, and codification of the Trump administration’s 1332 guidance – offers perspective from those on the ground seeking to ensure market stability and robust consumer protections so that residents in their state have access to affordable, comprehensive coverage.

A Note on Our Methodology

This blog is intended to provide a summary of comments submitted by SBMs and state DOIs. This is not intended to be a comprehensive report of all comments on every element in the Notice of Benefit and Payment Parameters proposed rule, nor does it capture every component of the reviewed comments. For more stakeholder comments, visit http://regulations.gov.

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