A Kinda, Sorta Deep Dive into the 2020 NBPP!

From January:

via Dave Anderson of Balloon-Juice:

The Notice for Benefit and Payment Parameters (NBPP) is an annual rule that the Center for Medicare and Medicaid Services (CMS) puts out. NBPP is the operational rule book for the Affordable Care Act. It determines what types of plans can be offered, how pricing is determined, when do things need to be approved, and whether or not Silver Loading is allowed or a Broad Load is required. This is all big stuff for the ACA markets.

The annual NBPP is supposed to be released sometime in November. Last year it wasn't released until December. This year it's mid-January and still no NBPP, although it's supposedly trudging along slowly

I went on to explain that they did finally release the 2020 NBPP...sort of. At the time it was just the proposed rule(s), not the final ones; CMS is still required to offer them up for public comment and the like...and believe it or not, even the Trump administration sometimes does make changes based on the feedback (not often, but sometimes).

Anyway, today CMS issued the final rules for the 2020 Open Enrollment Period. Some of the items which caused a lot of concern at the time ended up (thankfully) being given the kibosh, while others remain in place, and others still are harder to get a read on yet. Let's take a look!

Federally-facilitated Exchange (FFE) and State-based Exchanges on the Federal Platform (SBE-FP)

User Fees For the 2020 benefit year, we finalized lowering the user fee rate for qualified health plans (QHPs) sold on the Federally-facilitated Exchanges (FFEs) from 3.5 percent to 3.0 percent of premium, and lowering the user fee rate for QHPs sold on State-based Exchanges that used the Federal platform (SBE-FPs) from 3.0 percent to 2.5 percent of premiums.

This is actually good news...if way overdue. HealthCare.Gov, the federal ACA exchange which hosts the enrollment platform for 39 states, currently charges a percent-of-premium user fee paid by carriers which utilize the website to cover their operational (and marketing, I should note) expenses...which is of course passed along to the enrollees. The fee has been 3.5% of premiums for most states since the exchange launched in 2014, although there are five states which only pay 3.0% since they technically operate their own exchange and are only "piggybacking" on top of HealthCare.Gov.

The thing is, as I noted over a year ago, this means that HC.gov's operational budget has continued to increase by leaps and bounds as unsubsidized premiums have increased since 2014. Average premiums (as the Trump administration loves to point out) have more than doubled, while average monthly on-exchange enrollment has increased roughly 66%. That means that total HC.gov should be bringing in something like 3.3x as much revenue this year as they did in 2014.

This wouldn't necessarily be a terrible thing if they were using that additional money to provide additional services, outreach and so on...except instead they've infamously slashed HC.gov's marketing budget by 90% (from $100 million to $10 million per year) and the navigator program budget down by around 80% as well...so where the hell is the extra money actually going?

Well, back in January, it seems like New Sheriffs in Town Reps Frank Pallone, Bobby Scott and Richard Neal had the same questions I did, because they announced that they plan on auditing HealthCare.Gov to see just how that money is being spent.

I don't know what the status is of that, but I do know that the excessive fees are the main reason why the state of Nevada, which is one of the five states I referenced above paying 3.0% in fees, decided to break away from HC.gov starting this fall to take another shot at running their own full exchange...with New Mexico and New Jersey both following suit in 2021 for similar reasons.

Anyway, I don't know for sure that the heat of an audit is behind this move by CMS, but for whatever reason, they're finally lowering the user fees by half a point: From 3.5 to 3.0% for most states, and from 3.0 to 2.5% for the "piggyback" states.

In practical terms, this should amount to an effective savings of perhaps $3 per month per enrollee, or around $36/year apiece. Not much, but every little bit helps, I suppose.

Prescription Drug Provisions

In furtherance of the Administration’s priority to reduce prescription drug costs and to align with the President’s American Patients First blueprint, we finalized a change to the prescription drug benefit, to the extent permitted by applicable state law, which is designed to encourage enrollees’ use of lower cost generic drugs. Beginning in 2020, we will allow individual market, small group, large group and selfinsured group health plans to except from the maximum out-of-pocket limit cost sharing amounts paid using drug manufacturer coupons for specific prescription brand drugs that have an available and medically appropriate generic equivalent.

OK, I think I've figured out what this is about, with an assist from Matthew Martin, who noted:

I think the goal here is to erode drug companies' pricing power. Coupons are often structured to coerce customers into higher priced drugs as a way to extract money from insurers

— Matthew Martin (@hyperplanes) April 19, 2019

So I think this is what he means:

  • Let's say a brand-name drug list price is $200, while a generic alternative is only $100
  • The brand-name manufacturer might offer a $150 "coupon" to undercut the generic to get the enrollee to choose it over the generic
  • Right now, the full $200 gets counted towards the enrollee's maximum out-of-pocket total, which means once they hit it, their insurer has to pay for everything beyond that
  • Starting in 2020, only the first $50 would count towards the enrollee's MOOP, making them more likely to still choose the generic anyway, where the full $100 would count
  • This means the brand-name manufacturer can still keep offering coupons, but it takes away some of their ability to manipulate prices

I could still be misunderstanding, but that seems to be the gist.

Silver Loading

We summarized comments on ways in which HHS might address silver loading in the absence of Congressional action appropriating funds to pay issuers for cost-sharing reductions (CSRs). As we did not propose any changes to silver loading in the proposed rule, we are not finalizing a policy related to silver loading, and will take the comments received into consideration in future policymaking.

The fate of silver loading was the first of two major issues which I and other healthcare wonks were sweating over back in January. Again, the short version is:

  • Trump cut off CSR reimbursement payments to insurance carriers
  • The carriers are still legally obliged to provide CSR assistance to enrollees (to the tune of ~$12 billion/year)
  • As a workaround, the carriers jacked up premiums to cover their CSR losses
  • However, instead of simply spreading those premiums across all policies ("broad loading"), they limited them to Silver plans
  • This causes Silver premiums to go up dramatically...but also caused subsidies to go up dramatically, since those are based on Silver plans
  • CMS was considering banning Silver loading and forcing carriers to broad load instead...which would hurt millions of people
  • Instead, it looks like they've decided to take a pass for another year. Hooray!

Automatic Re-enrollment

We summarized the comments on the automatic re-enrollment processes and capabilities as well as additional policies or program measures that would reduce eligibility errors and potential government misspending. We are not making any changes with respect to these processes in this rule.

This was the other big concern that healthcare wonks and enrollee advocates had...that they'd scrap auto-renewals. Fortunately, it looks like they thought better of that as well. Hooray!


Risk Adjustment

To continue our efforts to use data from issuers’ individual and small group populations that more closely reflects the relative risk differences in these markets and also maintain stability in factors yearover-year, we finalized recalibrating the risk adjustment models for the 2020 benefit year using a blended average from 2015 MarketScan® data and 2016 and 2017 enrollee-level EDGE data. This is consistent with prior years’ recalibrations, as it uses a consecutive three years of data. It also continues our efforts to recalibrate the risk adjustment models using actual data from issuers’ individual and small group populations and our transition away from the MarketScan® commercial database that approximates individual and small group market populations.

Risk Adjustment State Flexibility

The final rule announces HHS’ approval of Alabama’s request to reduce risk adjustment transfers for the small group market for the 2020 benefit year by 50 percent.

Risk Adjustment Data Validation (RADV)

RADV audits are performed to validate the accuracy of the diagnosis codes submitted by issuers for the risk adjustment transfer calculation. In this rule, we finalized a number of provisions to improve the audits and provide issuers with more certainty. We finalized incorporating prescription drugs into RADV as a method of discovering materially incorrect EDGE data submissions and will pilot the process of including prescription drugs into RADV for the 2018 benefit year. We also codified the existing exemptions to RADV for issuers under the materiality threshold as defined by HHS (currently, $15 million in total annual premiums in the state) and for issuers with under 500 billable member months on a statewide basis. We finalized a new exemption from RADV for issuers in liquidation if certain criteria are met. We finalized policies related to the application of issuer risk score error rates when an issuer exits all markets in a state or joins a previously single-issuer market. Finally, we are not changing the RADV error estimation methodology for the 2017 or 2018 benefit years of RADV, but we are delaying the reporting, collection and payment of the RADV adjustments to risk adjustment transfers and the default data validation charges and allocations. Specifically, for the 2017 benefit year RADV, results will continue to apply to 2018 benefit year risk scores, but those results and the 2017 default data validation charges and allocations will not be published until August 1, 2019. In addition, we will not begin collection or distribution of 2017 RADV adjustments or default data validation charges until calendar year 2021. The purpose of the updated timeline is to provide issuers more options to account for RADV impacts in their rates, thus relieving issuers of the task of trying to estimate these transfers without sufficient information. Additionally, to provide more time for issuers in future years, we intend to seek comments on updates to the timeline for the initial and second validation audits to provide more time for medical records collection during the initial validation audit (IVA) and more time for the completion Final HHS Notice of Benefit and Payment Parameters for 2020 Fact Sheet 3 of the second validation audit. Additionally, we will operate the 2017 benefit year RADV as a pilot year for Massachusetts issuers, and as such there will be no adjustments to 2018 risk scores or risk adjustment transfers in Massachusetts based on the 2017 RADV.

RADV Initial Validation Audit Sample Size

HHS will not increase the IVA sample size at this time, but we intend to revisit these proposals after results from the first non-pilot year of RADV are available and following further consultation with stakeholders. However, we finalized allocating the 10th stratum of enrollees in the IVA sample using the Neyman allocation approach. We believe that this would effectively create an increase in the size of the sample actually available to validate the HCCs submitted to the EDGE servers. We also believe this would optimize issuers’ IVA, by making it more robust than the one-third/two-thirds approach currently used in the IVA sample.

Whew! OK, back to the stuff I know something about...

Premium Adjustment Percentage

The premium adjustment percentage is the percentage (if any) by which the average per capita premium for health insurance coverage for the preceding calendar year exceeds such average per capita premium for health insurance for 2013. We finalized the proposal to change the premium index for the 2020 benefit year to use CMS Office of the Actuary (OACT) estimates of projected private individual and group market health insurance premiums (excluding expenditures for Medigap and property and casualty insurance).

In the 2015 Payment Notice, we proposed a similarly comprehensive premium index, but finalized a premium index that reflected only employer-sponsored group market health insurance premiums because it reflected trends in health care costs without being skewed by individual market premium fluctuations due to the early implementation of the PPACA market reforms. As we are now past the initial years of implementation, we believe this change to the premium index reflects a more comprehensive and accurate measure of premium costs across the private market. Based on the proposed change in the premium index, we finalized a premium adjustment percentage of 1.2895211380, which is an increase in private individual and group market health insurance premiums of approximately 28.9 percent over the period from 2013 to 2019.

Careful readers may have noticed that the formula table for what percent of income subsidized enrollees have to pay for a benchmark Silver plan jumps around slightly from year to year. For instance, in 2019, it's 2.08% of income for those earning 100-133% FPL topping off at 9.86% of income for those earning 300-400% FPL. Howver, back in 2017, these were 2.04% and 9.69% respectively. Those percentages go up some years but also go down other years, and are based on a complex formula.

The bottom line is that they modified the formula, which in turn means that those percentages-of-income will increase a bit more for 2020 than they normally would...which means reducing subsidies and therefore increasing net premiums paid for subsidized enrollees.

How much more? Well, on page 333 (!), there's a footnote saying how much they project this will reduce subsidies:

Reductions in federal premium tax credit spending of approximately $980 million in 2020, $1.04 billion in 2021, $1.09 billion in 2022 and $1.15 billion in 2023, which is a transfer from consumers to the federal government, due to the change in the method of calculating the premium adjustment percentage.

Assuming an average monthly enrollment of around 9.1 million people, 7.8 million of whom are subsidized, that would amount to around $125 more per subsidized enrollee, or $10/month. So much for that $36/year savings I noted above...

Maximum Annual Limitation on Cost Sharing

Using the premium adjustment percentage of 1.2895211380 for 2020, and the 2014 maximum annual limitation on cost sharing of $6,350 for self-only coverage which was published by the IRS on May 2, 2013, we finalized a maximum annual limitation on cost sharing of $8,150 for self-only coverage and $16,300 for other than self-only coverage for the 2020 benefit year. This represents an approximately 3.16 percent increase above the 2019 parameters of $7,900 for self-only coverage and $15,800 for other than self-only coverage.

It sounds like the Maximum Out-of-Pocket costs are going up more than they otherwise would have as well. I'm not sure how much of a difference this means per enrollee.

Reduced Maximum Annual Limitation on Cost Sharing

The reduced maximum annual limitation on cost sharing is a PPACA-required annual calculation to reduce maximum out-of-pocket costs for individuals enrolled in the various cost sharing reduction (CSR) plan variations by the amount prescribed in statute. The 2020 benefit year reduced maximum annual limitation on cost sharing will be $2,700 for self-only coverage and $5,400 for other than self-only coverage for individuals with household incomes between 100-200 percent of the Federal poverty level (FPL), and $6,500 for self-only coverage and $13,000 for other than self-only coverage for individuals with household incomes between 200-250 percent FPL.

This is all about how much CSR financial assistance people earning 100-250% FPL enrolled in Silver plans qualify for...again, it's hard to tell how much of a difference these new limits are compared with what they'd be without the formula tweak.

In 2019, CSR enrollees are limited to $2,600/$5,200 if they earn between 100-200% FPL, and $6,300/$12,600 if they earn between 200-250% FPL, so this amounts to an increase of $100/$200 or $200/$400 next year.

Required Contribution Percentage

The required contribution percentage is used to determine whether individuals over the age of 30 qualify for an affordability exemption which would enable them to enroll in catastrophic coverage. For plan years after 2014, the required contribution percentage is the percentage determined by HHS that reflects the excess of the rate of premium growth between the preceding calendar year and 2013, over the rate of income growth for that period. The required contribution percentage for 2020 is 8.24 percent, a decrease of 0.07 percentage points from 2019 (8.23702 – 8.30358).

Only a tiny number of exchange enrollees (less than 1%) enroll in catastrophic plans total (98,000 in 2018), and of those I can't imagine more than 10,000 or so are over 30 years old, so this is has a pretty nominal impact one way or the other.

Navigator Program

We finalized providing more flexibility related to the duties and training requirements for Navigators operating in FFEs by streamlining 20 existing specific training topics into four broad categories and making certain types of assistance, including post-enrollment duties for FFE Navigators permissible, but not required.

Ugh. I believe this is what they're referring to:

Applicants will also be encouraged to demonstrate how they provide information to people who may be unaware of the range of available coverage options in addition to qualified health plans (QHPs), such as association health plans, short-term, limited-duration insurance, and health reimbursement arrangements (HRAs). Under the FOA, CMS will give priority to applications demonstrating innovative and cost-effective approaches in reaching enrollment goals.

Yeah, that's right: Under the Trump Administration, ACA navigators will be "encouraged" to try and enroll people in non-ACA compliant policies...including junk plans which don't have to cover pre-existing conditions or include the ACA's essential health beneifts.

The less said about this the better, I suppose.

Update: Ben D'Avanzo clarifies a bit:

I'd be interested in more of your thoughts on direct enrollment. The finalized navigator provision is about whether navigators are required to provide assistance outside of OE (not anymore) and whether exchanges have to provide training on those services (not anymore)

— Ben D'Avanzo (@BenDAvanzo) April 19, 2019

In other words, CMS is further weakening the ACA navigator program by reducing the amount of assistance navigators have to provide to people. That's just lovely.


We finalized an amendment to existing regulations to allow individuals to claim hardship exemptions described in §155.605(d)(1) through the tax filing process without having to obtain an exemption certificate number from an Exchange. This rule is effective only through the 2018 tax filing season.

This will be moot next year since the GOP repealed the ACA Individual Mandate Penalty effective January 2019...but the penalty was still in effect through the end of 2018, which means some people still had to pay the penalty when they filed their 2018 federal taxes. Of course, we're already past the tax filing deadline for most people, so this notice is showing up a bit late, but it was already on the 2018 IRS Form 1040 form.

Direct Enrollment

Direct enrollment (DE) is a mechanism for QHP issuers and web brokers (DE partners) to enroll QHP applicants through a non-Exchange website in a manner considered to be through the Exchange. DE was created to provide consumers with different options to shop for and enroll in QHPs offered through Exchanges. For plan year 2019, CMS implemented an enhanced DE pathway, which allows approved DE partners to host the Exchange eligibility application and enrollment service for QHP applicants on their non-Exchange websites without redirecting to HealthCare.gov. For the 2020 plan year, we finalized several updates to the DE regulations to better address the complex and evolving nature of DE and to accommodate innovation, promote fair competition, and ensure program integrity.

I have very mixed feelings about allowing Direct Enrollment partners in general. On the one hand, they do increase enrollment pathways, which I suppose means increased enrollment numbers. On the other hand, there are some real concerns about them, including issues like security, privacy and potential confusion for enrollees, which were laid out in this article at the Center for Budget & Policy Priorities last month.

I should note, for full disclosure: I'm friends with a couple of folks over at HealthSherpa, which is one of only two web brokers who have been authorized to utilize the new EDE (Enhanced Direct Enrollment) system. I should also note that HealthSherpa had a paid banner ad on ACASignups.net over the 2019 Open Enrollment Period. Having said that, HealthSherpa, at least, only sells ACA-compliant policies, period...no #ShortAssPlans, etc, and they're pretty scrupulous about transparency and sticking to the rules.

Special Enrollment Periods (SEPs)

Final HHS Notice of Benefit and Payment Parameters for 2020 Fact Sheet 5 We finalized the creation of a special enrollment period (SEP), available at the option of the Exchange, for persons enrolled in off-Exchange individual market coverage that qualifies as minimum essential coverage who experience a decrease in household income and are newly determined to be eligible for advance payments of the premium tax credit (APTC) by the Exchange.

This addresses the following scenario: Let's say you think you're going to earn 500% FPL next year, which is well above the 400% FPL threshold to qualify you for ACA subsidies. Since you won't be eligible for any financial assistance anyway, you decide to skip the ACA exchange and enroll directly through Blue Cross (or whoever), saving some time and hassle. Then, part way through the year, you realize that you're having a worse year than you thought, and your income is only going to come in at, say, 350% FPL...thus qualifying you for ACA subsidies if you had enrolled through the exchange.

Until now, you were pretty much stuck with the full-priced off-exchange policy through the end of the year. Apparently that will no longer be the case next year.

I'm not a big fan of expanding the number of SEPs available, since that kind of undermines the whole point of having a limited-time Open Enrollment Period in the first place...but the idea behind OEPs is to discourage people from gaming the system by refusing to enroll when they're healthy and only doing so when they become sick. In this situation, they're already paying their premiums for a fully ACA-compliant policy...they're just switching the portal through which they're enrolled in it.

I suppose to be totally fair about it CMS should require the enrollee to switch to a policy through the same insurance carrier, but that might be pushing the point. Anyway, it's an interesting change.

Segregation of Funds for Abortion Services

We continue to review the comments received on our proposal to require QHP issuers that provide coverage of non-Hyde abortion services in one or more QHPs to also provide at least one “mirror QHP” that omits coverage of non-Hyde abortion services throughout each service area in which it offers QHP coverage with non-Hyde abortion services through the Exchange, to the extent permissible under state law. We are not finalizing our proposal on this measure at this time.

(sigh) This is one of the more eye-rolling ideas they've proposed, and it ties in with the other completely insane lengths to which they're going in their obsession over making abortion coverage utterly unworkable under the ACA even when it isn't being paid for with federal dollars. Fortunately, it sounds like they're scrapping this one for 2020 as well.

So there you have it...kind of a mixed bag.