Stakeholders React to HHS’s Notice of Benefit and Payment Parameters for 2020. Part 2: State Insurance Departments and Marketplaces

In January, the Department of Health and Human Services (HHS) issued its Notice of Benefit and Payment Parameters for Plan Year 2020. The proposed rule, issued annually, makes changes to the Affordable Care Act (ACA) marketplaces and updates various insurance rules for the upcoming plan year.

In the 2020 NBPP, HHS proposed changes and sought comment on an array of policies, including modifications to prescription drug coverage, potential changes to marketplace enrollment and eligibility standards, the latest HealthCare.gov user fee, updating risk adjustment and data validation proposals, and new methodologies for calculating premium growth. You can read our summary of the rule’s proposals here.

After a 30-day comment period, the federal agency received over 26,000 comments on the proposed rule. CHIR reviewed a selection of comments from insurers, state-based marketplaces, insurance departments, and consumer advocates to gauge stakeholder reactions. For the second blog of this series, we looked at a sample of comments from state insurance departments (DOIs) and state-based marketplaces:

Silver Loading Seen as a Necessity by Most States

After the Trump administration cut off federal funding for cost-sharing reductions (CSRs), insurers were still left with a legal obligation to provide the reduced cost-sharing plans to low-income people. Most states allowed insurers to raise premiums on silver-level plans to account for the expense rather than spreading the cost across all plans, a practice known as “silver loading.” This practice insulates most unsubsidized individual market consumers from rate hikes due to way that federal premium subsidies are structured. It also boosts the available subsidies for eligible enrollees, as the amount of premium tax credit rises dollar-for-dollar with the cost of the benchmark silver-level plan in the market. The 2020 NBPP requested comments on how to address silver loading, suggesting that HHS might prohibit the practice in future plan years.

Commenters universally urged that silver loading continue to be allowed. The Idaho DOI asked for the continuation of silver loading “until a legislative solution is reached.”  The California DOI warned that interfering with states’ ability to allow silver loading would cause higher premiums or a dearth of insurers on the individual market. The Massachusetts marketplace agreed with HHS that the preferable solution would be for Congress to appropriate CSR funding, but recommended continued state flexibility to load the cost onto premiums until Congress acts.

States Generally Oppose Changes to Automatic Re-enrollment

In the proposed NBPP, HHS requested comment on automatic re-enrollment, the process by which individuals can keep their coverage without actively selecting the plan during open enrollment. This year, almost 3.4 million consumers obtained coverage through automatic re-enrollment, including about 1.8 million on the federal platform. While the proposed rules don’t seek any immediate changes to this process, HHS indicated that they are considering eliminating auto re-enrollment and asked for comments on potential changes to enrollment operations in 2021 or beyond that would reduce eligibility errors and “government misspending.”

The majority of states in our sample commented on automatic re-enrollment, and all who commented expressed support for continuing the practice. The state-based marketplace coalition dedicated over half of its comment letter to discussing the pitfalls of curtailing automatic re-enrollment, arguing that eliminating the process would have dire consequences for the individual market, including an increase in the number of uninsured and lower carrier participation. The Minnesota marketplace offered support for initiatives to educate enrollees about their options but advocated for continuing automatic re-enrollment. The Rhode Island DOI and marketplace asked for continued sate flexibility, noting that allowing consumers to automatically re-enroll is “key to achieving the goals of the ACA and continuing to keep Rhode Islanders covered.”

States Concerned About Proposed Changes to Calculating Premium Growth

A number of states commented on proposed changes to the methodology behind the premium adjustment percentage, a growth factor used to calculate required premium contributions for subsidized enrollees, as well as annual cost sharing limits and the parameters of the employer mandate. In the proposed rule, HHS projects that these changes will increase premiums for at least 7.3 million enrollees by reducing their tax credits and increase the cap on annual out-of-pocket costs by $400 per family.

The five states that commented on this proposal opposed it. The Oregon DOI pointed to the increase in premiums since the marketplaces launched, arguing that it is “unfair” to ask consumers to pay higher premiums with lower premium assistance. The Massachusetts marketplace pointed to a series of federal actions that have reduced market stability, from changes to risk corridor payments in the early years of the ACA to the “substantial delay” of the 2020 NBPP; because the volatility of the individual market was the predominant reason for excluding this segment of premium growth in the first place, in light of these federal actions, they recommended against methodological changes to the calculation.

States Ask for Oversight on Enrollment through Web Brokers

In a continued push to expand direct enrollment, HHS proposed a variety of new standards for web brokers facilitating marketplace enrollment, including a formal definition of such entities, display requirements, and increased flexibility for consumer assisters to use web brokers instead of HealthCare.gov.

In their comments, insurance departments and marketplaces were wary of some of the proposed standards, and asked for greater oversight of the direct enrollment process. The Oregon DOI voiced general opposition to expanding non-exchange direct enrollment for marketplace plans, noting concerns about the lack of transparency and oversight of these entities. The New York marketplace asked for state flexibility over whether to permit brokers, insurers, or third parties to assist consumers in enrolling in marketplace plans, or to prohibit assisters from using the websites of web brokers. The Colorado DOI seemed open to the expansion of web brokers, but urged that states maintain regulatory oversight of these companies.

States Had Varied Reactions to Proposed Changes to Prescription Drug Coverage

Mid-Year Formulary Modifications

To encourage the use of generic drugs, the NBPP proposes to permit insurers to update their formularies mid-year if a generic drug becomes available to replace the brand name drug.  Insurers would be required to provide enrollees with at least a 60-day notice.

States had mixed views about this provision. The Colorado DOI pointed out that such a change would come at a significant cost to the Colorado marketplace, which would have to incorporate the mid-year changes into its system. They requested that such changes not be allowed, or allowed in narrowly defined circumstances. The Idaho DOI, on the other hand, applauded the proposed change, even asking for additional flexibility, as long as benchmark formulary requirements are met. The Oregon DOI also supported mid-year formulary changes that give consumers greater access to generic alternatives, but opposed the provision allowing insurers to remove brand-name drugs from the formulary, noting that the decreased coverage and higher out-of-pocket costs may harm consumers.

Changes Impacting Benefit and Cost Sharing Limitations

Essential Health Benefits: HHS also seeks to promote generic drugs by allowing the exclusion of brand name drugs as Essential Health Benefits (EHB), if the plan covers a generic equivalent. If insurers opt for this, they could impose annual and lifetime limits on coverage of brand name drugs, and consumers’ cost sharing for brand name drugs would not count towards their yearly maximum for out-of-pocket spending. As part of the proposal, HHS asked for comment on whether the policy should preempt state law that conflicts with its application.

Again, states disagreed on whether to implement this proposal. The California DOI opposed it, asserting that the change would undermine the ACA’s prohibition on dollar limits on the EHB and lead to “excessive disruption and confusion” for both consumers and regulators. The Colorado DOI focused on the impact of permitting carriers to only count generic drug cost sharing towards annual out-of-pocket maximums, noting that savings from the proposed policy would be “on the backs of consumers,” who would face higher out-of-pocket costs. The Idaho DOI supported this proposal, at the option of insurers, so long as state law is not preempted.

Drug Coupons: Another proposal would impact cost sharing for prescription drugs by allowing insurers to omit coupons for brand name drugs from a consumer’s annual limit on out-of-pocket spending. HHS is also seeking comment on whether to preempt state law with this proposal.

Some comment letters asked that decisions on how to treat drug coupons remain at the state level, including the New York marketplace. The Rhode Island DOI and marketplace echoed this sentiment, and noted that any requirements should apply across all markets. The Idaho DOI approved of the proposal, commenting that it “will encourage wiser spending on the part of consumers,” even calling for expanding the provision to all manufacturer coupons, or at least giving states the flexibility to set alternative standards for how insurers treat other manufacturer coupons.

Take Away

Ultimately, many of the proposals in the 2020 NBPP involve changes at the state level, requiring insurance departments and marketplaces to implement and operationalize the new standards. While the lengthy proposed rule elicited a range of responses from state officials, there was general agreement that state oversight and flexibility was key to ensuring market stability, and that modifications to save money should not come at the expense of consumers’ financial protections afforded under the ACA.

A Note on Our Methodology

This blog is intended to provide a summary of comments submitted by specific stakeholder groups: state marketplaces and insurance departments. 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. Additionally, a portion of submitted comments were not available for our review at the time of publication. For more stakeholder comments, visit http://regulations.gov.

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