Biden Administration’s First Marketplace Rule Promotes Coverage And Reverses Trump-Era Changes

On June 28, 2021, the Centers for Medicare and Medicaid Services (CMS) and the Treasury Department issued a proposed rule to bolster access to marketplace coverage and reverse several Trump-era regulatory changes under the Affordable Care Act (ACA). This is the Biden administration’s first proposed rule on the marketplaces and provides additional insight into priorities for the marketplaces and the ACA more broadly. The rule was accompanied by a press release and fact sheet.

The proposed rule touches on a range of topics and is technically the third installment of the annual payment notice for 2022. But it is more akin to the Trump administration’s “market stabilization” rule, which was issued early in 2017 to reverse Obama-era changes and adopt policies that applied that year and for 2018. Because the references to the various Obama- and Trump-era rules can get confusing quickly, this post refers to the current proposed rule as the “market modernization” rule.

This market modernization rule was expected. In finalizing the remainder of the 2022 notice of benefit and payment parameters rule in April 2021, CMS made clear that future rulemaking would address, at a minimum, the subset of policies that the Trump administration finalized before inauguration day, such as allowing states to transition away from HealthCare.gov. Because those changes were already finalized, CMS had to undertake additional notice-and-comment rulemaking to undo those changes. That process was begun in this proposed market modernization rule.

Beyond undoing these changes, CMS proposes additional marketplace policies. Some would reverse other Trump-era regulations that, for instance, set the duration of the annual open enrollment period (OEP) to only 45 days or required “double billing” for certain abortion services. Others are new policies—such as a monthly special enrollment period (SEP) for certain low-income consumers—that would expand access to marketplace coverage and help ensure that the millions of uninsured people who currently qualify but are not enrolled could enroll in free or nearly-free platinum-equivalent coverage. Many of the proposed changes outlined in the new rule were identified as priorities for the Biden-Harris presidential transition team by a broad range of health care stakeholders.

In proposing these changes, CMS invokes President Biden’s executive orders on the ACA and racial equity, as well as the administration’s goals of providing greater access to coverage, improving affordability, and reducing the burdens faced by consumers and insurers. The preamble also emphasizes that expanded access to coverage and affordability is critical to advancing health equity. Half of the nation’s 30 million uninsured people are people of color and even people with health insurance face barriers to care because of affordability, health literacy, and a lack of in-network providers. These challenges, CMS notes, have been underscored during the pandemic, which has disproportionately affected people of color.

Comments are due by July 28. This is 30 days after the rule was filed for public inspection (June 28) as opposed to the date of publication in the Federal Register, which is scheduled for July 1.

Reversing Policies In The 2022 Payment Notice

Much of the 198-page proposed market modernization rule is dedicated to reversing some of the more controversial ACA policies adopted by the Trump administration at the very end of the term. Those changes were adopted in a rule published in the Federal Register on January 19 (the January rule), which meant that federal officials must use a new round of notice-and-comment rulemaking to amend them.

There was some urgency for the Biden administration to address these changes in new rulemaking, in part because many of the changes—especially the user fee—apply for the 2022 plan year and must be built into 2022 rates. This is among the reasons why the Biden administration previewed its intended approach when finalizing the remainder of the 2022 payment notice in late April (the April rule).

Increasing The User Fee For 2022

Consistent with the April rule, CMS proposes adjusted user fees for the 2022 plan year. These user fees would be set at 2.75 percent for federally facilitated exchanges (FFE) (up from 2.25 percent in the January rule) and 2.25 percent for state-based exchanges that use the federal platform (SBE-FP) (up from 1.75 percent in the January rule). The proposed user fee levels would result in an increase of about $200 million in user fees for 2022. Even with this increase from the January rule, the proposed user fee for 2022 would remain lower than 2021, when it was 3.0 percent for FFEs and 2.5 percent for SBE-FPs.

In proposing higher user fee rates, CMS cites internal projections of federal costs, increased funding for consumer outreach and navigators, some state transitions to state-based exchanges (SBEs) or SBE-FPs, and the Biden administration’s priorities. CMS believes that the user fee rates need to be increased to sustain essential exchange-related activities.

No More State Exchange Direct Enrollment Option

The January rule adopted a new Exchange Direct Enrollment (Exchange DE) option that would allow states to transition away from a single, centralized exchange (e.g., HealthCare.gov) to enrollment via private sector entities (insurers, web-brokers, and agents and brokers). The exchange—whether the FFE, SBE-FP, or an SBE—would link its back-end eligibility system to the private DE entities. These private entities would then operate the enrollment pathways where consumers would shop, select a plan, and enroll in coverage. This option was inspired by Georgia’s approved Section 1332 waiver, which allows Georgia to eliminate the use of HealthCare.gov and replace it with a decentralized enrollment system of web-brokers and insurers. The January rule extended this option to other states without the need for a Section 1332 waiver.

The Exchange DE option became available for SBE states beginning with the 2022 plan year and FFE or SBE-FP states beginning with the 2023 plan year. For 2023, states with the FFE and SBE-FP that pursued this option would pay a user fee of 1.5 percent. Even under the Trump administration, CMS did not expect any current SBEs to take advantage of this option for 2022.

In the proposed market modernization rule, CMS would repeal the Exchange DE option and the corresponding user fee. The Exchange DE option is inconsistent with President Biden’s executive order, which directs agencies to identify and review policies that undermine the marketplaces or present unnecessary barriers to Medicaid or ACA coverage. In addition, no state has expressed an interest in pursuing this model and DE itself remains an option. As such, repeal of the Exchange DE option should have a minimal impact on states and other interested parties.

CMS also cites new operational priorities for the marketplaces, such as continued implementation of the American Rescue Plan Act, the broad COVID-19 SEP, and enforcement of new federal and state requirements under the No Surprises Act (a new federal law to protect consumers from surprise out-of-network bills). “All available resources” are needed to meet these new federal obligations, and allowing Exchange DE options would detract from those efforts. CMS is also concerned about the complexity of Exchange DE options implementing the temporary subsidy changes under the American Rescue Plan Act.

Finally, CMS cites concerns raised in prior public comments that shifting from a centralized marketplace such as HealthCare.gov would harm consumers by “unnecessarily fracturing enrollment processes among the Exchange.” Indeed, the preamble to the January rule acknowledged that “nearly all commenters” on the proposed 2022 payment notice “cautioned about potential harmful impacts to consumers from the introduction of the Exchange DE option.” A shift away from HealthCare.gov now would be especially harmful given that more than 1 million consumers successfully enrolled during the broad COVID-19 SEP. Other concerns about the Exchange DE option include consumer confusion, the potential for steering to non-comprehensive plan options, a lack of coordination with state Medicaid and CHIP programs, and coverage disruption.

A Revised Interpretation Of Section 1332

Section 1332 allows states, with federal approval, to waive certain ACA requirements if a state demonstrates that their proposal meets certain statutory procedural and substantive “guardrails.” These statutory guardrails prohibit approval of a waiver unless it will:

• “Provide coverage that is at least as comprehensive as the coverage defined in Section 1302(b) and offered through Exchanges;”
• “Provide coverage and cost sharing protections against excessive out-of-pocket spending that are at least as affordable as the provisions of this title would provide;”
• “Provide coverage to at least a comparable number of its residents as the provisions of this title would provide;” and
• “Not increase the federal deficit.”

CMS and Treasury adopted prior regulations to implement Section 1332’s procedural requirements but not the statute’s substantive guardrails, which remained in guidance only. Guidance on the substantive guardrails was issued by the Obama administration in 2015 and then rescinded and replaced by the Trump administration in 2018. To date, only Georgia has been approved for a broad waiver under the 2018 guidance. Georgia’s waiver has since been challenged in court and is being reviewed by federal officials in light of recent changes to federal law and policy. Of the other 15 states with a Section 1332 waiver, all but one is for a state-based reinsurance program.

Citing the need to give states certainty about the future of Section 1332 waivers, the January rule codified the 2018 guidance’s guardrail interpretations into regulations. As a result, for each substantive guardrail under the Section 1332 statute, the regulations reflect the Trump administration’s much-criticized interpretation. In the 2018 guidance, the agencies concluded that Section 1332 waivers could be approved even if only some coverage under a waiver is as comprehensive, as affordable, and as available as coverage provided under the ACA.

The agencies justified this conclusion by noting that the phrase “to at least a comparable number of its residents” appears in the coverage guardrail but not the comprehensiveness and affordability guardrails. They took this to mean that the comprehensiveness and affordability guardrails need not apply to all coverage approved under the waiver: So long as some of the coverage under a state’s waiver proposal satisfies these two guardrails and is available to consumers, the proposal met those criteria.

The January rule also explicitly defined coverage in a way that included short-term limited duration insurance (which allows medical underwriting and does not have to comply with ACA requirements), allowed flexibility in identifying state legal authority for a waiver, focused on only aggregate effects of a waiver (meaning some residents could be worse off so long as the waiver improved comprehensiveness and affordability as a whole), and changed the standards for monitoring and compliance and periodic evaluation to require the Secretaries to assess compliance on bases that include any interpretive guidance.

New Interpretation Looks Back To 2015

In the proposed market modernization rule, the Biden administration announces its new priorities for assessing Section 1332 waivers and would rescind the 2018 guidance, eliminate any references to or incorporation of the 2018 guidance, and replace the Trump-era interpretations with an approach that generally tracks the 2015 guidance. In doing so, the Biden administration notes new priorities, further consideration of prior comments, and concerns that the current interpretation could allow waivers that do not satisfy the statute’s guardrails. Among other concerns, the current interpretation fails to satisfy the Biden administration’s goal of ensuring that individuals are actually enrolled in affordable, comprehensive coverage.

CMS and Treasury note that a “majority” of commenters did not support either the 2018 guidance or its incorporation into federal regulations. Those commenters expressed concern about the guidance’s legality regarding its interpretation of Section 1332’s substantive guardrails. Others criticized the expansive view of “coverage” to include options that allow underwriting. Some urged the agencies to rescind and abandon the 2018 guidance itself. CMS and Treasury responded to these comments in the preamble to the January rule but declined to change any of substantive policies or interpretations in the 2018 guidance, even though only “a few” commenters expressed their support for the guidance and its incorporation into regulations. 

The Biden administration’s new interpretation of the guardrails, which is incorporated throughout the proposed market modernization rule, largely reverts to the interpretation included in the Obama-era guidance from 2015. In particular, the agencies propose that “coverage” be interpreted the same way for all parts of Section 1332(b), including the coverage, comprehensiveness, and affordability guardrails. So, to be approved, a waiver must be expected to provide coverage that is at least as comprehensive and affordable as would have been provided absent the waiver and to the same number of residents. These guardrails are incorporated into proposed regulatory text.

In the preamble, the agencies renew their commitment to accounting for the effects of a waiver across different groups of state residents and, in particular, vulnerable residents (such as those who are elderly, low-income, or with serious health issues as well as people of color and other historically marginalized communities). As under the 2015 guidance, even if a waiver meets the comprehensiveness or affordability guardrails in aggregate, it would fail if it reduced the comprehensiveness of coverage for vulnerable populations. States are also encouraged to analyze whether the waiver would increase health equity, consistent with President Biden’s executive order on racial equity.

Comprehensiveness Guardrail

The comprehensiveness guardrail would be evaluated based on whether the waiver satisfies essential health benefits requirements or, if appropriate, Medicaid or CHIP standards. The agencies will consider the impact of a waiver on the comprehensiveness of coverage for all state residents regardless of the type of coverage they would have absent the waiver. A waiver would not meet this guardrail if it reduces the number of people with coverage that meets the state’s benchmark in all 10 essential health benefits categories, for any one category of essential health benefits, or for the full set of services covered under Medicaid or CHIP. Agency review would prioritize the waiver’s effects on benefits provided to vulnerable and underserved residents.

Affordability Guardrail

The affordability guardrail would be evaluated based on whether the waiver provides coverage that is at least as affordable overall for residents of the state as coverage absent the waiver. Affordability would be based on the ability to pay for health care relative to income and would account for total out-of-pocket spending—including premiums, cost-sharing, and any costs associated with non-covered services—for all residents. Again, the agencies would assess how the waiver affects affordability for vulnerable and underserved residents and those with high health spending burdens.

Waiver proposals that reduce the number of individuals with a minimum level of cost-sharing protection would also be rejected. This includes waivers that would reduce the number of people with coverage with an actuarial value of 60 percent or more and an out-of-pocket limit under the ACA, as well as any waiver that reduces the number of people with coverage that meets Medicaid affordability requirements. Waiver applications would have to analyze the effect of the waiver on premiums and out-of-pocket costs by income, health expenses, health insurance status, and age, and describe any anticipated changes in employer contributions or wages.

Coverage Guardrail

The coverage guardrail would be evaluated based on whether the waiver would provide coverage to a comparable number of state residents absent the waiver. Here, the emphasis would be on the number of people that would actually have coverage under the waiver (as opposed to the number that would have access to this coverage). The agencies would also clarify that “coverage” means minimum essential coverage under the ACA, eliminating the reference to “health insurance coverage” that includes short-term plans.

The agencies would consider the impact of a waiver on coverage losses for all state residents, and state analysis should account for whether the waiver would sufficiently prevent gaps in or discontinuations of coverage. Consistent with the other guardrails, the agencies would consider any effects on vulnerable and underserved residents, and states would have to analyze the waiver’s coverage effects by income, health expenses, health insurance status, and age.

Deficit Neutrality Guardrail And Pass-Through Funding

The agencies propose no modifications to the deficit neutrality guardrail, which prevents the Secretaries from granting a waiver if doing so would increase the federal deficit. This unchanged approach is unsurprising since the 2018 guidance largely maintained the 2015 guidance’s approach. Overall, projected federal spending under the waiver could be no greater than projected federal spending in the absence of the waiver. Federal spending would include all changes in tax revenue and other forms of revenue (including user fees) that result from a waiver. Waivers would also account for direct federal spending, such as changes in Medicaid spending and administrative costs to the federal government.

A state’s 10-year budget plan should project changes in federal spending and revenues for each of the 10 years. In one change from the 2018 guidance, the agencies suggested that a waiver application that increases the deficit in any given year would be less likely to meet the deficit neutrality requirement.

The proposed market modernization rule would also newly codify prior interpretations related to federal pass-through funding. The regulatory text generally tracks the statutory text in Section 1332(a)(3) while noting that the amount of pass-through funding can be updated to reflect changes in federal or state law. The amount of pass-through funding is calculated annually, and these funds must be used solely for purposes of implementing the approved waiver. States would need to outline how federal savings would result from the waiver and how the state intends to use the pass-through funding to implement its waiver plan.

Standards for Waiver Extensions and Amendments

The proposed market modernization rule would establish processes for states to request extensions of or amendments to approved waivers. Section 1332 contemplates waiver extensions, which have been requested by Alaska, Colorado, Hawaii, and Oregon. Under Section 1332, state continuation requests are deemed granted unless federal officials, within 90 days, deny the request or solicit additional information. The statute does not explicitly mention waiver amendments, but federal officials have been asked to entertain them by states such as Maine. The proposed requirements for both extensions and amendments are consistent with the processes included in the terms and conditions of recently approved state waivers.

A waiver amendment would be defined as a change to an approved waiver plan that is not otherwise allowable under the waiver’s terms and conditions, that could impact compliance with the guardrails, or that could impact program design for an approved waiver. A waiver extension would be limited to extending the existing terms of an approved waiver plan (and would not allow substantive changes to the underlying approved waiver). If a state asked for substantive changes in its extension request, the request might be treated as an amendment request.

For both types of requests, states would have been required to submit a letter of intent with a description of intended changes and implementation plans. For waiver extensions, states would have to do so at least one year prior to the waiver’s current end date. For waiver amendments, states would have to do so no later than 9 months (and ideally at least 15 months) prior to the proposed implementation date. The agencies would respond within about 30 days to confirm that the change qualifies as an extension or amendment and identify the information that states must submit. The content of waiver amendment proposals would generally track information needed to assess a new waiver application. (The same may not be true of waiver extension requests; the agencies might request an updated economic or actuarial analysis, but a full analysis might not be needed.)

State proposals would be subject to existing state and federal public comment requirements but could be combined with an annual state-level public forum for the approved waiver. The full program—the existing waiver plan and the amendment or extension request—would be analyzed together and would have to continue to meet Section 1332 requirements. Pass-through funding would also be provided collectively, not separately.

Application Procedures And Other Changes

In other areas, CMS and Treasury discuss existing policies in the preamble but do not propose changes to existing Section 1332 requirements. This is true for the coordinated waiver process, the timing of applications, actuarial and economic analyses, implementation timelines, public input processes for waivers, compliance and monitoring, or evaluation. Those issues are not discussed at length here.

The agencies continue to caution that HealthCare.gov cannot accommodate different rules for different states. Thus, states that wanted to adopt 1332 waivers to make significant changes have generally had to establish an SBE. While the 2018 guidance touted enhanced DE as an option to get around this issue, the preamble to the proposed market modernization rule maintains that the Internal Revenue Service is unable to administer most state-specific tax rules and could only accommodate small adjustments that are already consistent with federal programs. Where states are interested in modifying ACA tax provisions, they may want to waive the provision entirely and create a state-administered subsidy program as part of a Section 1332 waiver.

The agencies also propose extending more flexible public notice requirements that were adopted during the pandemic to apply equally during future emergencies (e.g., natural disasters, public health emergencies, or other emergent situations that threaten access to coverage, care, or life). Those flexible requirements were adopted in an interim final rule issued in late 2020 and allow states to ask to waive or modify certain requirements regarding hearings and public comment periods. The agencies also propose to broaden the Secretaries’ authority to modify public notice procedures to expedite a decision on a proposed Section 1332 waiver during an emergent situation when a delay would undermine or compromise the request and be contrary to consumer interests. The same would apply to post-award public notice requirements for approved waivers.

As the agencies have in prior rules and guidance, the preamble emphasizes that the Secretaries reserve the right to further evaluate an approved waiver and suspend or terminate an approved waiver (in whole or in part) at any time if the state materially failed to comply with the terms and conditions of the waiver, Section 1332’s requirements, and other federal laws. This provision has come up as CMS and Treasury revisit Georgia’s approved waiver and request additional information from state officials to assess ongoing compliance with Section 1332’s guardrails.

Reversals Of Other Trump-Era Policies

The proposed market modernization rule includes reversals of additional Trump-era rules. The Biden administration proposes to extend the annual OEP by 30 days relative to recent years, reverse some restrictions on navigators, and eliminate the “double billing” rule for certain abortion services. Consistent with the preamble to the April rule, CMS also discusses its intended approach for standardized plans and network adequacy in response to a recent district court decision known as Columbus v. Cochran that vacated several Trump-era changes adopted in the 2019 payment rule.

Extending The Annual Open Enrollment Period

The annual OEP for individual market coverage has extended for 45 days—from November 1 to December 15—since the 2018 plan year. However, this has not always been true: the initial OEP for 2014 lasted 180 days, and the OEPs for 2015, 2016, and 2017 lasted 90 days. The 2018 OEP was set for 90 days but later halved by the Trump administration, which set a permanent 45-day open enrollment period via the market stabilization rule. The shortened OEP—combined with funding cuts for outreach and education—likely contributed to stagnant enrollment through HealthCare.gov during most of the Trump era.

The proposed market modernization rule would establish an annual OEP of 75 days—from November 1 to January 15—beginning with the 2022 plan year. This would apply for all exchanges, including SBEs (although most SBEs already allowed extended enrollment through January). While consumers have generally grown accustomed to the December 15 deadline, CMS believes a one-month extension of the OEP is warranted to give consumers additional time to assess their plan options and understand their premium liability.

An extended OEP could be especially valuable for those who qualify for marketplace subsidies and are auto-reenrolled into coverage but receive a lower subsidy than the prior year (because the cost of their benchmark plan has dropped). This means that the enrollee may have to contribute a higher level of premium towards coverage. Because these consumers are auto-reenrolled, they may not be aware of their higher premium contribution until they receive a bill in early January. If the OEP extended through January 15, these consumers could change plans and select a more affordable option. Assisters—navigators, certified application counselors, and agents and brokers—have also raised concerns that the current 45-day OEP does not provide enough time to assist all potential consumers. And consumers in underserved communities that may need more assistance or time to enroll (such as those with limited English proficiency) may also benefit from an extended enrollment period.

CMS solicits comment on the January 15 end date for the OEP and whether the proposed 75-day period would provide consumers with sufficient time to enroll while also mitigating adverse selection, consumer confusion, and operational burdens. CMS does not anticipate a significant impact on the risk pool as a result of this proposal and is interested in whether consumers who need coverage that starts on January 1 would still enroll by December 15.

Beyond these issues, CMS generally asks for comment on “alternative approaches to extending open enrollment to address coverage gaps or enrollment challenges facing consumers and stakeholders.” This could include new SEPs, enhanced notices, or targeted outreach. Comment is also sought on ways to improve communications and consumer engagement to promote active reenrollment each year, as well as whether improved education and outreach during the coverage year (to raise awareness of existing SEP opportunities) could help serve those who do not enroll or do not change plans during the OEP.

Reinstating Certain Requirements For Navigators

The Trump administration made many changes to the navigator program. Beyond significant funding cuts that will soon be more-than-reversed by the Biden administration beginning with the 2022 plan year, the Trump administration eliminated the need for each marketplace to have at least two navigator entities (one of which must be a community and consumer-focused nonprofit group), eliminated a requirement that navigators maintain a physical presence in the marketplace service area, and made post-enrollment assistance activities optional (instead of mandatory). These changes were made in the 2019 payment rule and the 2020 payment rule.

The proposed market modernization rule would reverse one of these changes by reinstating the requirement that navigators in the FFE provide information and assist consumers with certain enrollment issues. In particular, navigators would be required to help consumers:

• File an appeal of an exchange eligibility determination;
• Apply for an exemption to the requirement to maintain minimum essential coverage from the exchange (which is only relevant for those who may qualify to enroll in catastrophic coverage now that Congress set the penalty to $0);
• Reconcile premium tax credits with the exchange (such as helping consumers obtain and use Form 1095-A, addressing the consequences of failing to reconcile premium tax credits, and directing consumers to the IRS for additional assistance with tax-specific issues);
• Understand basic concepts of health coverage to increase health insurance literacy (such as helping consumers understand key terms like deductibles and coinsurance, the different costs associated with primary care visits versus an emergency department visit, and how to identify in-network providers); and
• Make referrals to appropriate tax preparers.

These activities would be mandatory, rather than optional (although most existing navigator grantees continue to report on these activities). The requirement would go into effect beginning with the next round of navigator grants awarded after the rule’s effective date; new navigator grantees are expected to be announced in late August 2021. If this requirement is finalized, CMS intends to make training materials and other educational resources available to navigators.

CMS believes that post-enrollment assistance requirements are consistent with Section 1311 of the ACA, which expressly requires navigators to provide some post-enrollment assistance by referring consumers with complaints, questions, or grievances to state agencies. The proposed market modernization rule would simply clarify additional topics of post-enrollment assistance. CMS further reasons that the requirements related to health literacy will help improve health equity and that navigators can play an expanded role because they will have substantially increased funding for the 2022 plan year (and presumably beyond, depending on the availability of funding). CMS also clarifies in the preamble that navigators are expected to help consumers get help with claims denials, update their applications (by, say, reporting life changes that affect eligibility), and conduct public education activities.

It is not clear why CMS did not address the other navigator-related policy changes put in place by the Trump administration, but perhaps the agency will do so in future rulemaking.

Eliminating The Double Billing Rule For Non-Hyde Abortion Services

Section 1303 prohibits insurers from using exchange subsidies to pay for non-Hyde abortion services. It also requires insurers that cover non-Hyde abortions to separately collect and segregate funds for non-Hyde abortion services in a separate account specifically designated for abortion. The estimated premium attributable to the coverage of non-Hyde abortion services cannot be less than $1 per enrollee per month. All services for non-Hyde abortions must be funded from the separate account.

In implementing Section 1303, CMS initially took the position that consumers could use a single transaction (such as paying with a single check) to pay premiums for both these abortion services and all other services. But CMS outlined other options for insurers to comply with Section 1303 as well and did not specify the method that an insurer must use to comply with the separate payment requirement. This was followed by additional guidance from the Trump administration on its approach to Section 1303, which was generally consistent with prior rules. To my knowledge, this prior interpretation had never been challenged in court.

Then, in 2019, the Trump administration shifted its interpretation by issuing the “double billing” rule, which requires insurers to send (and consumers to pay) two separate bills: one for the coverage of non-Hyde abortion services and one for the coverage of all other services. CMS asserted its new belief that Section 1303 requires two separate payments (i.e., two distinct transactions) rather than two separate amounts. Consumers who fail to pay both bills could have their coverage terminated, and the rule was generally viewed as an effort to discourage insurers from covering non-Hyde abortion services (even though doing so is allowed under the ACA and several states mandate this coverage).

The double billing rule was quickly challenged in court by state attorneys general in California (on behalf of six other Democratic attorneys general) and Washington, as well as Planned Parenthood of Maryland. All three of those lawsuits were successful at the district court level where courts in California, Maryland, and Washington set aside the rule. The ruling in Washington was limited to Washington State and decided on preemption grounds. The rulings in California and Maryland vacated the rule under the APA, setting aside the rule on a nationwide basis. The government appealed those decisions to the Ninth Circuit (for the California and Washington cases) and to the Fourth Circuit (for the Maryland case), but all of the appeals have been put on hold in response to requests from the Biden administration. Between the litigation and the pandemic, the double billing rule has never gone into effect.

CMS would repeal the separate billing requirement in the proposed market modernization rule. In light of the court decisions and reconsideration of the policy, CMS no longer believes that it is justified in light of consumer confusion and potential coverage losses, as well as the burdens that the rule would impose on insurers, states, exchanges, and consumers. The Trump administration had estimated that the projected burden to insurers, states, SBEs, FFEs, and consumers would be $546.1 million in 2020, $232.1 million in 2021, $230.7 million in 2022, and $229.3 million annually in 2023 and beyond (in addition to higher premiums to account for these costs and lower enrollment that would result). CMS also recognizes the risk that insurers might stop covering non-Hyde abortion services to avoid these costs, leading to higher out-of-pocket costs for consumers who need these services. Further, because the litigation vacated the rule ahead of its extended effective date, CMS is not aware of any insurer or SBE that moved forward and incurred costs to implement the double billing rule.

Insurers would still have to comply with Section 1303 by collecting a payment of at least $1, treating that portion of premium as a separate payment, and segregating funds for non-Hyde abortion services. But insurers could choose the method of doing so and would not have to burden consumers with two separate bills and payments. In particular, CMS would codify prior guidance from the preamble to the 2016 payment rule that gave insurers flexibility in complying with Section 1303. These options include sending an enrollee 1) a single monthly bill that separately itemizes the premium amount for the coverage of non-Hyde abortion services; 2) a separate monthly bill; or 3) a notice around enrollment time that a monthly bill will include a separate specified charge for these services. Enrollees can make the payment for all services—non-Hyde abortion services and all other services—in a single transaction.

CMS does not believe that insurers are likely to use a separate bill for non-Hyde abortion services. But, if an insurer opts to do so, insurers are encouraged to do so in a manner that would minimize consumer confusion and promote continuity of coverage (such as including both bills in the same mailing and explaining that enrollees can make a payment in a single transaction). Any premium nonpayment, including for non-Hyde abortion services, is subject to state and federal grace period requirements.

The proposed rule also eliminates a nonenforcement policy included in the double billing rule that would let enrollees who object to the coverage of non-Hyde abortion services for religious or moral reasons opt out of that coverage by not paying the separate bill. To the extent that all qualified health plan options in a state include this coverage—because of, say, a state mandate—this is an issue under state law and is permitted under Section 1303. Allowing individuals to opt out of certain services covered by marketplace coverage would violate Section 1303 and other ACA requirements.

Issues To Watch For The 2023 Payment Rule

In Columbus v. Cochran, a federal district court for the district of Maryland vacated four changes made under the 2019 payment rule related to network adequacy, standardized plans, income verification, and medical loss ratio (MLR) calculations. These parts of the rule were vacated, and most were remanded back to CMS for further action. In the April rule, CMS announced its plan to implement the decision as soon as possible for the income verification and MLR provisions but could not do so for network adequacy review and standardized plan options in time for the 2022 plan year.

Given the time needed to create a new federal network adequacy review process and design new standardized options (and for insurers, the FFE and SBEs, and regulators to adjust to these requirements), CMS will defer those changes to the 2023 plan year. The preamble to the market modernization rule maintains this stance, noting that both changes will take time to develop and will not be proposed until the 2023 payment notice.

CMS also suggests that it may revisit a policy that allows insurers to refuse to enroll an applicant in a new plan if the consumer fails to pay outstanding premium debt from the prior year. Under this interpretation (adopted in the market stabilization rule in 2017), insurers can lock consumers out of coverage that would otherwise be available during open and SEPs if they cannot pay past-due premiums. This was a shift from prior rules, where the ACA’s guaranteed issue requirement was interpreted to bar an insurer from requiring payment for past-due premiums before effectuating new coverage in a different product. Insurers could pursue collection for past-due premiums but could not condition new coverage on payment of the amount due. In the preamble to the proposed market modernization rule, CMS suggests that it is reviewing this policy in light of President Biden’s executive order and intends to address this in the 2023 payment notice.

New Low-Income SEP To Expand Access To Marketplace Coverage

The proposed market modernization rule would expand access to marketplace coverage for low-income consumers. CMS proposes a new monthly SEP for individuals and dependents who are eligible for advance premium tax credits and whose household income is under 150 percent of the federal poverty level (FPL). These individuals qualify for maximum ACA subsidies, including a $0 or very-low premium silver plan (at least until 2023, under the American Rescue Plan Act) and cost-sharing reductions that would boost their plan’s actuarial value to 94 percent (i.e., platinum-equivalent coverage).

CMS is proposing this SEP to help bring in many of the estimated 1.3 million uninsured people who already qualify for a free platinum-equivalent plan but are not enrolled in coverage. CMS also notes that 20 percent of the uninsured in 2018 had an income under 150 percent FPL, that most uninsured people report being uninsured because the cost of coverage is too high, and that many uninsured people are chronically uninsured. Data from the Kaiser Family Foundation suggests that about half of the uninsured people who could qualify are young people between the ages of 19 and 34. This policy could also help advance health equity by extending coverage to Latino people, who make up 41 percent of those eligible; 46 percent of those eligible speak a language other than English at home.

The low-income SEP would be unique relative to existing SEPs because it would not be time-limited based on a change in an applicant’s status or an external qualifying event. Instead, an individual or family meeting the requirements above could enroll at any time during the year based on their income or upon learning of their eligibility. Because consumers could enroll at any time during the year (including after a health issue arises), CMS believes there is some risk of adverse selection and estimates that insurers might increase premiums by 0.5 to 2 percent at a cost of about $250 million to $1 billion (while the American Rescue Plan Act provisions are in effect).

But it is not clear that there will be adverse selection as a result of this policy. CMS may need to look no further than its broad COVID-19 SEP, under which more than 1 million people have enrolled as of May 31. While this broad SEP is being used to account for those who have experienced coverage disruptions as a result of the pandemic, it also shows how many people may need to enroll in ACA coverage mid-year but do not know to do so. Further, those eligible for the low-income SEP would be more motivated to enroll in coverage because of generous subsidies, rather than a health need. Indeed, it seems more likely that individuals would be enrolled in this free coverage if they were aware of this option and would not attempt to “game the system” to enroll in very low-premium coverage to cover a health need, only to drop it later. Even if eligible individuals enrolled because of a health need, there would be little incentive for them to end their free or very low-cost coverage (that is paid directly to their insurer). And, as noted above, the remaining uninsured are disproportionately young, meaning this SEP could increase enrollment of younger consumers thereby improving the health of the overall risk pool.

CMS asks for comment generally on its approach and the risk of adverse selection. In particular, federal officials ask whether there would be adverse selection if a consumer does not have access to a $0-premium silver plan. This might be the case if, say, a state requires benefits that exceed EHB (since additional benefits are not paid for by federal subsidies), or if the household includes someone that uses tobacco (since the tobacco surcharge is not accounted for in the benchmark plan). If a consumer must make a small premium contribution, CMS asks whether there is a greater risk that a consumer might enroll using the monthly SEP and then drop coverage after receiving treatment for a health need.

There are other strong policy reasons that CMS cites in proposing the low-income SEP. This policy could, for instance, help ensure that those who lose Medicaid coverage regain access to health insurance. Although these individuals would already qualify for a SEP, CMS acknowledges that marketplace enrollment can be challenging for consumers who may not be aware of or understand their coverage options or an OEP. This SEP could be especially important at the end of the COVID-19 public health emergency, which would trigger an end to maintenance of effort requirements for state Medicaid programs and lead to Medicaid disenrollment of many consumers who may find themselves newly eligible for marketplace coverage. A monthly SEP based on income would help maximize the number of people—who are already eligible for heavily subsidized marketplace coverage—who successfully transition to the exchange and enroll in coverage.

The Details

The low-income SEP would be available only through the exchanges (not for off-exchange coverage in the broader individual market) and only at the option of the exchanges, so SBEs could choose to implement, or not implement, the proposed SEP. Exchanges that adopt the low-income SEP could require consumers to submit documentation to confirm their eligibility; HealthCare.gov would determine eligibility based on attested household income, and post-enrollment income verification requirements would continue to apply. Exchanges could choose the coverage effective date policy to either be the first day of the month following plan selection or to align with existing rules.

Qualifying individuals would be limited to enrolling in a silver plan during this SEP (and could not, for instance, switch to a gold plan mid-year and then back to a silver plan). However, enrollees could change to a different silver plan using this SEP, including a more expensive silver plan than the one they were previously enrolled in (meaning they may choose to contribute some premium). This could allow individuals to move from silver plan to silver plan based on a different provider network or prescription drug formulary. But CMS believes that consumers would be sufficiently disincentivized from doing so because they would lose progress towards deductibles and other accumulators.

Eligibility for premium tax credits varies based on income but, under the ACA, was generally limited to those whose income is between 100 and 400 percent FPL (pre-American Rescue Plan Act). In Medicaid expansion states, eligibility is limited to those whose income is between 138 and 400 percent FPL (since those whose income is below 138 percent FPL qualify for Medicaid). But, in Medicaid non-expansion states, individuals whose income is below 100 percent FPL are ineligible for premium tax credits under the ACA and do not have Medicaid as an option; these individuals fall into what is referred to as the Medicaid coverage gap. The ACA included some limited exceptions for lawfully present immigrants whose income is below 100 percent FPL and who are ineligible for Medicaid due to immigration status. CMS confirms that this SEP would apply equally to those individuals who otherwise qualify for advance premium tax credits.

CMS asks for comment on how quickly the proposed low-income SEP could be implemented, including whether it could be available for the 2022 plan year and whether insurers would need to (and, if so, have time to) adjust any rate filings. CMS also asks for comment on effective outreach and education options, how to mitigate potential stakeholder confusion, and whether the policy should be permanent or time-limited (to, say, phase out as the American Rescue Plan Act subsidies phase out).

Other Policies

CMS proposes a technical change to confirm that individuals must qualify for some amount of advance premium tax credit above $0 to use SEPs based on being newly eligible or ineligible for subsidies. Individuals might be technically eligible for advance premium tax credit of $0, but those who are would be considered ineligible for advance premium tax credits for purposes of existing SEPs. CMS believes the clarification is important in light of the American Rescue Plan Act’s subsidies, which increased financial help up the income scale and mean that many more people may be technically eligible for $0 subsidies. The proposed rule would clarify that individuals qualify for relevant SEPs only when a change (to, say, income or household size) makes them newly eligible for advance premium tax credits of more than $0.

The proposed market modernization rule would also make a technical change regarding the coverage of essential health benefits. The rule would confirm that insurers must comply with the Mental Health Parity and Addiction Equity Act (MHPAEA) when satisfying the requirement to cover mental health and substance use disorder services (including behavioral health treatment services) as an essential health benefit. The current rule cross-references only implementing regulations for MHPAEA, and CMS instead proposes to reference the MHPAEA statute and implementing regulations. Doing so would make clear that plans must comply with all MHPAEA requirements, including changes adopted in the December 2020 budget bill regarding non-quantitative treatment limits.