ACA Round-Up: SUNSET Rule Delayed, 2023 Materials, RADV, And More
Federal officials continued to issue guidance on the Affordable Care Act (ACA) in early 2022. This article summarizes the status of the so-called SUNSET rule, new materials for the 2023 plan year, Section 1332 waiver applications for Minnesota and Virginia, new risk adjustment data validation (RADV) results, and guidance from the Internal Revenue Service (IRS) and Centers for Medicare and Medicaid Services (CMS) on the ACA and the eventual unwinding the public health emergency.
SUNSET Rule Delayed Again
On March 4, 2022, the Department of Health and Human Services (HHS) further delayed the effective date of the SUNSET rule by six months. The SUNSET rule, adopted in January 2021 before President Biden’s inauguration, would add global expiration dates to most current HHS rules and could cause nearly 20,000 rules to expire automatically unless HHS took further action.
This rule has never taken effect. It was first challenged in court by Santa Clara County in March 2021. This litigation was then cited by HHS in a subsequent rule that delayed the rule’s original effective date by one year—to March 22, 2022. Then, in late October 2021, HHS proposed repealing the SUNSET rule in its entirety. HHS received only 80 comments on the proposed rule, but federal officials suggest that more time is needed to review those comments before issuing a final rule that will (presumably) eliminate the SUNSET rule. (HHS received 532 comments on the Trump-era proposed rule.)
As we await a final rule, HHS delayed again the effective date of the Trump-era SUNSET rule for six months from, March 22 to September 22, 2022, pending judicial review. HHS gives the same reasons as it did in its prior delay: federal officials need more time to review the rule in light of the claims filed in the litigation, the rulemaking will affect HHS’s position in the lawsuit, and HHS believes a court may agree with the plaintiffs at least in part. Extending the effective date of the SUNSET rule also maintains the status quo, meaning no parties will be harmed by this extension.
In the meantime, the litigation remains stayed. The parties filed a joint status report on March 7. Citing the most recent extension of the effective date, they asked the court to extend the stay through June 7.
Materials For The 2023 Plan Year
As we await a final 2023 payment rule, CMS issued some new materials ahead of the 2023 plan year. This includes a certification timeline for insurers in the federal marketplace (which generally tracks with prior years) and revised application materials. Separately, CMS posted an updated list of essential community providers for plan year 2023. Recall that CMS proposed requiring plans to contract with a higher proportion of essential community providers, beginning with the 2023 plan year.
Separately, CMS released the draft 2022 call letter for the quality rating system (QRS) and enrollee experience survey (QHP enrollee survey) with comments due on March 9 and a final letter expected in May 2022. The ACA required HHS to develop a quality rating for each marketplace product based on quality and price and a survey to assess enrollee satisfaction with marketplace plans. This data is intended to assist consumers in comparing plans but can also be used by HHS for oversight, and by insurers for quality improvement. After some delay and a pilot program, HHS has required display of a global rating and three summary indicator ratings for qualified health plans beginning with the 2020 plan year (although there have been some disruptions due to the pandemic).
The draft call letter for 2022 includes several proposed changes to program operations but does not make or call for changes to federal regulations. CMS would revise the QRS scoring methodology for 2022 and 2023, change the QRS measure set, impose new data collection and reporting requirements, and refine QRS and QHP enrollee survey information for 2024 and beyond. CMS intends to issue more guidance later this year, including further technical guidance for 2023.
In the draft letter, CMS first would retain a temporary rule to prevent plan ratings from decreasing by more than one star at the global and summary indicator levels from 2021 to 2022. This, federal officials believe, would provide stability in ratings as CMS transitions to a new scoring methodology. Other temporary changes made during the pandemic, such as using a policy-based distribution, would be discontinued.
Second, CMS would refine its requirements for the 2023 ratings year. This includes adding a measure on kidney health evaluation for patients with diabetes, refining the colorectal cancer screening measure (to include those aged 45 to 49), temporarily removing a measure on initiation and engagement of alcohol and other drug abuse or dependence treatment, incorporating optional data reporting, and requiring reporting of stratified data on race and ethnicity to advance health equity. Stratified race and ethnicity data would be collected for five specific measures—on colorectal cancer screening, high blood pressure, diabetes, prenatal and postpartum care, and child/adolescent well-care visits—using a phased-in approach. By the 2024 measurement year, plans would be required to submit directly collected enrollee data on race and ethnicity. Plans could use directly collected and imputed data until then.
Third, CMS discusses longer-term potential revisions to the QHP enrollee survey questionnaire. This might include cutting the length of the survey and adding new topics (such as access to mental health care and prescription drugs).
Latest On Section 1332 Waivers
Federal officials continue to consider state requests for new or amended Section 1332 waivers. In November 2021, Minnesota informed CMS and the Department of the Treasury of its intent to apply for an extension of its current Section 1332 waiver for a state-based reinsurance program through the end of 2027. Minnesota then submitted its waiver extension application in late December 2021.
This was followed by two letters from CMS. First, in a letter from mid-January 2022, CMS allowed Minnesota to proceed with its extension request and outlined the information that the state must include in its waiver extension application. Second, in a letter from late January 2022, CMS informed state officials that Minnesota’s application was incomplete, meaning additional information is needed before the application can be processed. In particular, state officials must submit evidence of legislative authority and the process used to solicit public input on the waiver extension application.
Virginia looks to be the next state that could have a newly approved waiver under Section 1332. On January 28, 2022, CMS informed Virginia that its application for a waiver for a state-based reinsurance program was complete. Comments were due on February 27, and CMS and the Department of Treasury will approve or deny the application within 180 days.
Virginia’s five-year reinsurance program would begin in the 2023 plan year; it is projected to reduce premiums by at least 15 percent each year (relative to what premiums would have been in the absence of the waiver). Enrollment in the individual market in 2023 could increase by as much as 3 percent.
The program was created by legislation signed by Governor Ralph Northam (D) in late March 2021. It would be administered by the Virginia State Corporation Commission, which houses the Commonwealth’s bureau of insurance. If approved, Virginia would have a $292.5 million reinsurance program for 2023. Of the overall $292.5 million program, the federal government would be expected to contribute about $223.9 million, and Virginia would contribute about $68.6 million. Virginia would fund its portion of the reinsurance program through an annual appropriation (as opposed to an assessment on insurers, which is how many states fund their reinsurance programs).
Like most states with reinsurance programs, Virginia chose to use an overall attachment point model with parameters to be set annually by the insurance bureau. For 2023, the program would be expected to reimburse insurers for 70 percent of claims between $40,000 and $155,000, although these parameters will be finalized later this spring. The reinsurance program would be complementary to Virginia’s efforts to establish a state-based marketplace that will be fully operational in 2024.
RADV Results For 2018 And 2019
The ACA’s risk adjustment program transfers funds from lower-risk, non-grandfathered plans in the individual and small group markets that end up with healthier populations to higher-risk, non-grandfathered plans that end up with more costly enrollees. To ensure that risk adjustment transfers are accurate, insurers submit risk adjustment data through the EDGE server and must participate in the RADV process. The goal of RADV is to assess the accuracy of each insurer’s risk adjustment data by identifying discrepancies between the insurer’s EDGE data and actual patient medical records.
On January 20, CMS issued an explanatory memo and updated summary of risk adjustment transfers due to the RADV process for the 2018 benefit year. The reissued RADV results will generally be used to adjust plan liability scores and thus risk adjustment transfer amounts for the 2019 benefit year. Both documents are technical and not discussed in detail here.
The original report for how RADV results impacted the 2018 risk adjustment transfers was issued in August 2020. Since then, an insurer successfully appealed the calculation of 2018 error rates. In response, CMS realigned the 2018 error rates with the methodology used in the 2019 payment rule. This did not change the states or risk pools that were affected or any outliers, but it did change the dollar amounts of 2018 RADV adjustments to 2019 risk adjustment transfers for all insurers with a transfer adjustment. The reissued changes will be invoiced to insurers in February 2022.
On February 25, CMS issued RADV results for the 2019 benefit year. RADV error rates for 2019 will be averaged with the error rates for 2020 and then jointly applied to 2020 plan liability risk scores and risk adjustment transfers. Given this approach, the combined 2019 and 2020 benefit year RADV adjustments to the 2020 risk adjustment transfers will not be available until summer 2022 (after error rates for 2020 are published). Though they are not summarized here, several key methodological changes for error rates are reflected in the data for the 2019 benefit year. CMS suggests that many states will have 2020 risk adjustment transfers affected by the 2019 RADV results. The results were accompanied by several appendices with more specific information that can be found here.
Other Federal Resources
Uninsured Rate
Federal officials issued two recent reports on the uninsured rate. On February 11, the Centers for Disease Control and Prevention (CDC) issued a new coverage report for 2020 based on data from the National Health Interview Survey. Overall, 9.7 percent of people of all ages (31.6 million people) were uninsured in 2020. Most—31.2 million people—were under the age of 65, including 27.5 million uninsured working-age adults and 3.7 million uninsured children. Many of the uninsured are chronically uninsured, meaning they have been uninsured for a year or more. CDC also breaks down the data by source of coverage, noting that among people under age 65, about two in five children and one in five adults had public health insurance—mainly through Medicaid or CHIP.
On February 22, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) issued a new report showing that the uninsured rate for Black Americans under age 65 dropped by 8 percentage points, from 20 percent in 2011 to 12 percent in 2019. While Black Americans remain disproportionately more likely to be uninsured than White Americans (with an uninsured rate of 12 percent versus 9 percent), the ACA has contributed to a significant decline in the uninsured rate for Black Americans. These gains would be even greater if all states expanded their Medicaid program as intended under the ACA; many of the states that have not yet expanded have large Black populations.
We do not yet have data for the 2022 open enrollment period. However, ASPE notes that, of those who enrolled in the marketplace during the Biden administration’s six-month COVID-19 special enrollment period in 2021, the share who are Black increased to 15 percent, up from 9 percent in 2021. Given enhanced marketplace subsidies under the American Rescue Plan Act, an estimated 76 percent of uninsured Black Americans can find a plan for less than $50/month; 66 percent could find a no-premium plan in 2021.
Internal Revenue Service Guidance
The IRS issued a notice of proposed rulemaking in December 2021 to clarify the definition of “minimum essential coverage” (MEC) and adopt new coverage reporting requirements. The changes are generally consistent with prior IRS notices and a history of extending reporting deadlines and waiving penalties, most recently in guidance from 2020. Comments were due on February 4.
First, the IRS would clarify that MEC under the ACA does not include Medicaid coverage that is limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act. As a result, those who are eligible for this limited type of Medicaid coverage are still eligible for premium tax credits through the marketplace. This is consistent with guidance issued in September 2020.
Second, insurers and plans would automatically have an additional 30 days past the January 31 deadline to provide coverage forms, such as Form 1095-B, to individuals. The proposed rule would also give more flexibility by allowing entities to simply post a clear and conspicuous notice on its website regarding the availability of these forms on request. This flexibility would be available only when there is no individual mandate penalty (which has been the case since 2019). Finally, good faith relief from penalties (which was available under prior notices) would no longer be available for tax year 2021 and subsequent years.
More recently, the IRS issued Notice 2021-36 which includes the applicable percentage table for 2022. This is not particularly noteworthy since the 2022 table is set by Congress under the American Rescue Plan Act. But the IRS confirmed that the required contribution percentage for 2022 is 9.61 percent. This means that individuals who are offered job-based coverage that is more than 9.61 percent of their household income can qualify for premium tax credits through the marketplace. For those whose premiums are lower than this percentage, they (and their family members) are likely barred from marketplace subsidies.
Medicaid/CHIP And Unwinding The Public Health Emergency
On March 3, CMS issued a range of guidance—including a state health official letter, an eligibility and enrollment planning tool, a toolkit, and a slide deck for managed care companies—on ways to promote continuity of coverage at the end of the declared public health emergency.
In the Families First Coronavirus Response Act, Congress provided a 6.2 percentage point increase in the federal match rate for state Medicaid programs so long as states provide continuous enrollment throughout the declared public health emergency. CMS previously provided guidance to states about how to process pending eligibility and enrollment actions at the end of the public health emergency and adopted a monthly special enrollment period for low-income individuals to help ensure that those who are churning off of Medicaid coverage can successfully transition to marketplace coverage.
The March 3 guidance is even more detailed. The 46-page state health official letter is not summarized in detail here, but the Center for Children and Families at Georgetown University released a helpful overview. The letter emphasizes the need to protect enrollees from churn and limit coverage losses, makes clear that states cannot terminate Medicaid coverage until the last day of the month when the public health emergency ends, and directs states to follow appropriate termination procedures even if they stop complying with the continuous enrollment requirement (and thus forego the increase in their federal match rate). CMS discusses additional flexibilities that states have to promote continuity of coverage and will require data reporting to ensure compliance. States are also encouraged not to initiate renewals for more than one-ninth of their caseload in a given month.
Separately, CMS issued a request for information on ways to develop and implement a comprehensive access strategy for Medicaid and CHIP. CMS’s goals in doing so are to improve health outcomes, advance health equity, and address disparities in access to coverage and care. Comments on this request are due on April 18 and will be considered alongside interviews with subject matter experts, stakeholder roundtables, and internal regulatory gap analyses.