NBPP 2024 Part 2: Standardized Plans & Meaningful Differences!

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The ACA includes a long list of codified instructions about what's required under the law, but many of the specific details are left up to the agency responsible for implementing it since the legal text itself can't possibly cover every conceivable detail involved. The major provisions of the ACA fall under the Department of Health & Human Services (HHS), and within that, the Centers for Medicare & Medicaid (CMS).

Each year, CMS issues a long, wonky document called the Notice of Benefit & Payment Parameters (NBPP) for the Affordable Care Act. This is basically a list of tweaks to some of the specifics of how the ACA is actually implemented.

Yesterday CMS released their proposed 2024 NBPP, which includes some important changes which, if included in the final version, will go into effect starting next fall (for calendar year 2024). The full proposed 2024 NBPP is actually 370 pages long; yesterday I posted the press release & Fact Sheet. Today I'm breaking it down into smaller chunks since there's a lot to talk about here:

Simplifying choice and improving the plan selection process

In response to public feedback, the rule includes proposals to make it easier for consumers to pick a health plan that best fits their needs and budget by updating designs for standardized plan options and limiting the number of non-standardized plan options offered by issuers of qualified health plans (QHPs) through the Federally-facilitated Marketplaces (FFMs) and State-based Marketplaces on the Federal Platform (SBM-FPs).

The average number of plans available to consumers on the Marketplace has increased from 25.9 in PY2019 to 113.6 in PY2023. Having too many plans to choose from can limit consumers’ ability to make a meaningful selection when comparing plan offerings. Streamlining the plan selection process would make it easier for consumers to evaluate plan choices available on the Marketplaces and to select a health plan that best fits their unique health needs.

I've posted a classic scene from the vastly underrated "Moscow on the Hudson" above, in which Robin Williams plays a Soviet-era Russian saxophone player who defects to the United States while touring New York with the Moscow Circus. He's buying groceries for the American family he's staying with and is overwhelmed by the sheer volume of different brands and options available.

A few years ago, "bare counties" were a real threat to the ACA markets, with the prospect of some parts of the U.S. not having any insurance carriers offering healthcare policies on the exchanges. Today, we have the opposite problem in many states: A glut of dozens or even hundreds of virtually-identical healthcare plans which clog the exchange listings, confuse the hell out of enrollees and make it nearly impossible to figure out which plan is the best one for their needs.

CMS proposes to make several minor updates with respect to standardized plan options. Specifically, CMS proposes to no longer include a standardized plan option for the non-expanded bronze metal level. Accordingly, CMS proposes that for PY2024 and subsequent PYs, issuers offering QHPs through the Federally-facilitated Marketplace (FFM) and state-based Marketplaces on the Federal platform (SBM-FP) must offer standardized QHP options designed by CMS at every product network type at every metal level except the non-expanded bronze level, and throughout every service area that they offer non-standardized QHP options. CMS believes maintaining the highest degree of continuity possible in designing these standardized plan options is critical to reduce the risk of disruption for consumers enrolled in these plans.

In addition, CMS proposes that issuers of standardized plan options must: (1) place all covered generic drugs in the standardized plan options’ generic drug cost-sharing tier, or the specialty drug tier if there is an appropriate and non-discriminatory basis; and, (2) place brand name drugs in either the standardized plan options’ preferred brand or non-preferred brand tiers, or specialty drug tier if there is an appropriate and non-discriminatory basis. CMS proposes this specification to reduce the risk of discriminatory benefit designs, to minimize barriers to access for prescription drugs, and to reduce the risk of consumer confusion for those enrolled in these plans.

CMS brought back standardized plans (aka "Easy Pricing" plans) for 2023, and it looks like they're gradually beefing up this program, which is a good thing. Easy pricing plans have the same deductibles, co-pays and maximum out of pocket costs within the same metal level to make it easier to compare. Eventually I'm hoping they'll require that all plans be standardized so that enrollees can focus purely on premiums, metal levels, provider networks and quality of service, but this is another important step.

CMS also proposes to limit the number of non-standardized plan options that issuers of QHPs can offer through Marketplaces on the Federal platform (including SBM-FPs) to two non-standardized plan options per product network type and metal level (excluding catastrophic plans), in any service area, for PY2024 and beyond, as a condition of QHP certification. The average number of plans available to consumers on the Marketplace has increased from 27.1 in 2019 to 131.4 in 2023. Such choice overload limits consumers’ ability to make a meaningful selection when comparing plan offerings.

Under this proposed requirement, an issuer would, for example, be limited to offering through a Marketplace two gold health maintenance organization (HMO) and two gold preferred provider organization (PPO) non-standardized plan options in any service area in PY2024 or any subsequent PY.

BOOM. This is something which healthcare wonks have been clamoring for for years. Some carriers offer dozens of plans within each metal level (Bronze, Silver, Gold, Platinum) which are virtually identical, making it next to impossible for prospective enrollees to wade through. They might be identical on 99 different criteria but have a $1 difference on a particular co-pay for a particular service and still be counted as a separate policy.

I first wrote about this problem way back in 2017, although it's actually my colleague David Anderson who has obsessed over and written about this the most before then:

The bottom line is that a carrier can effectively game the system by clustering a bunch of "different" (but virtually identical) Silver plans together on the market, messing with the "benchmark plan" formula to favor themselves while screwing other carriers. Again, it gets complicated, but Anderson's proposed solution is:

  • Allow carriers to offer only a single plan per network per plan type (HMO/PPO/EPO) per metal level or...

  • Carriers can offer as many plans as they want at each metal level as long as each plan is at least 5% different in price from any other plan offered at that level by that carrier

In other words, right now, a carrier might try to "Silver spam" an exchange by offering 20 "different" Silver plans which are only $5 apart pricing-wise with virtually identical features/coverage. In addition to messing with the benchmark formula, this also confuses the hell out of the prospective enrollees. Anderson is proposing only allowing a carrier to offer either a maximum of 3 Silver plans (1 PPO, 1 HMO, 1 EPO) or allowing as many Silver plans as they want...as long as they're priced at least 5% apart from each other to allow breathing room in between.

Similar to the approach taken with respect to standardized plan options in the 2023 Payment Notice and in this proposed rule, CMS proposes to not apply this requirement to issuers in State Marketplaces. Further, consistent with the approach taken with respect to standardized plan options in the 2023 Payment Notice and in this this proposed rule, since SBM-FPs use the same platform as the FFMs, CMS proposes to apply this requirement equally on FFMs and SBM-FPs. Finally, also in alignment with the approach taken with standardized plan options in the 2023 Payment Notice as well as the approach taken in this proposed rule, CMS proposes that this proposed requirement would not apply to plans offered through the SHOPs or to SADPs.

As an alternative to limiting the number of non-standardized plan options that issuers in FFMs and SBM-FPs can offer through the Marketplaces to reduce the risk of plan choice overload, CMS could also apply a meaningful difference standard in place of these limits. CMS seeks comment on an alternative to its proposal to limit the number of non-standardized plan options that an FFM or SBM-FP issuer may offer on the Marketplace, to impose a new meaningful difference standard for PY2024 and subsequent PYs.

Under such an alternative, CMS proposes grouping plans by issuer ID, county, metal level, product network type, and deductible integration type, and then evaluating whether plans within each group are “meaningfully different” based on differences in deductible amounts. With this proposed approach, two plans would need to have deductibles that differ by more than $1,000 to satisfy the new proposed meaningful difference standard.

Over five years later, CMS is finally proposing to do almost exactly what Anderson suggested way back then, with some modifications. Besides standardized plans, they can either be limited to no more than a maximum of 2 PPO/HMO/EPOs per metal level (which I believe would be a potential maximum of 2 x 3 x 4 = 24 plans total) in any given area or they can offer as many policies as they want as long as their deductibles are at least $1,000 apart from each other...which would also have the effect of severely limiting how many plans they offer, since the deductibles can only go so high (I believe the maximum out-of-pocket cost for ACA plans is capped at no more than $9,100 for 2023; assuming it hits $10K in 2024, that would still only allow for up to 10 plans at most per carrier if I'm reading this correctly).

In fact, even the 24 plans in the first option is probably a lot higher than what would actually happen; many carriers don't offer Platinum plans at all, and I don't think EPOs are very widely used, though I could be wrong. I'd imagine most wouldn't offer more than a dozen plans under this scenario, which is kind of the point. Louise Norris reminds me that there's also POS (Point of Service) plans, though those are pretty rare.

In conjunction with the requirement for issuers to offer standardized plan options, having a more manageable number of plan choices for consumers to select from would further streamline the plan selection process and facilitate more meaningful evaluation of available plan choices, which would also allow consumers to more easily select a health plan that best fits their unique health needs.

Anderson has some further thoughts on CMS's proposal today:

In 2016, I proposed a similar-ish concept where instead of deductible, I proposed using premium as the key differentiator:

a plan offered by the same insurer is meaningfully different if the premiums vary by Z percent. That Z could be 3% or 5% or 7%. After that, CMS would not care how the difference is achieved? Is it a PPO instead of an EPO? Who cares? Is it a narrow network versus a broad network? Who cares? Is it HSA eligible or not HSA eligible? Who cares?

The insurance companies could then design products where there actually is a useful difference in the products instead of attempts to game/hack the subsidy formula for business strategy reasons.

I’m not sure which of these three variants of distinction-making I like the best. I think there is a good argument to have more than one plan per insurer per metal level, and a very strong argument about a hard cap (realistically no more than 9 due to the $1000 deductible gap requirement) as people readily get confused. I’m not sure if the optimal is 3 or 4 or 5 — but reasonably confident-ish it is neither 1 nor 9 nor 22.

Regardless of which route CMS ultimately takes, as long as it's similar to the proposal laid out here, it would dramatically reduce confusion and clutter on the federal ACA exchange.