HHS Proposes Rules On Premium Stabilization Programs, Exchange User Fees, SHOP Program, And MLR Under Health Reform

from Spencer’s Benefits Reports: The Department of Health and Human Services (HHS) has issued a proposed rule that provides further detail and parameters related to: the risk adjustment, reinsurance, and risk corridors programs (know as the premium stabilization programs); cost-sharing reductions; user fees for a federally-facilitated health insurance exchange; advance payments of the premium tax credit; a federally-facilitated Small Business Health Option Program (SHOP); and the medical loss ratio (MLR) program. All of these programs were created under the Patient Protection and Affordable Care Act (ACA). The proposed rule is scheduled to be published in the December 7 Federal Register.

Comments on the proposed rule are due by December 31 and may be submitted electronically via http://www.regulations.gov; or by mail to CMS, HHS, Attn: CMS-9964-P, P.O. Box 8016, Baltimore, MD 21244-8016. In commenting, refer to CMS-9964-P.

Premium Stabilization Programs. Beginning on Jan. 1, 2014, individuals and small businesses will be able to purchase health insurance through a health insurance exchange. The ACA created the premium stabilization programs—risk adjustment, reinsurance, and risk corridors—to protect against adverse selection among the individuals who newly purchase insurance in an exchange.

The transitional reinsurance program and the temporary risk corridors program, which begin in 2014, are designed to provide issuers with greater payment stability as insurance market reforms are implemented. The reinsurance program will reduce the uncertainty of insurance risk in the individual market by partially offsetting risk of high-cost enrollees. The risk corridors program, which is administered by the HHS, will protect against uncertainty in rates for qualified health plans by limiting the extent of issuer losses and gains. The HHS issued a final rule laying out the regulatory framework for these programs in March 2012. The new proposed rule provides specific payment parameters for these programs.

Cost-Sharing Reductions. The HHS has proposed standards for advanced payments of the premium tax credit and for cost-sharing reductions. These programs assist low- and moderate-income Americans in affording health insurance on an exchange. The ACA added IRC Sec. 36B, allowing an advance, refundable premium tax credit to help individuals and families afford health insurance coverage by reducing a taxpayer’s out-of-pocket premium cost.

Under the proposed rules, an exchange will make an advance determination of tax credit eligibility for individuals enrolling in coverage through the exchange and seeking financial assistance. Using information available at the time of enrollment, the exchange will determines: (1) whether the individual meets the income and other requirements for advance payments, and (2) the amount of the advance payments. Advance payments will be made monthly to the issuer of the qualified health plan (QHP) in which the individual is enrolled.

Exchange User Fees. The ACA considers that an exchange can charge assessments or user fees to participating issuers to generate funding to support its operations. As the operator of the federally-facilitated exchanges, the HHS has the authority to collect and spend such user fees. In the proposed rule, the HHS has established a user fee for issuers participating in a federally-facilitated exchange.

SHOP Exchange. The ACA directs each state that chooses to operate an exchange to also establish a SHOP exchange that provides health insurance options for small businesses. The HHS issued final rules with standards for the administration of SHOP exchanges in March 2012. These proposed rules clarify and expand upon the standards published in the final rule.

MLR program. The ACA requires health insurance issuers to submit an annual MLR report to the HHS and provide rebates to consumers if they do not achieve specified MLRs. The HHS proposes to amend the MLR regulations to specify how issuers are to account for payments or receipts for risk adjustment, reinsurance, and risk corridors, and to change the timing of the annual MLR report and distribution of rebates required of issuers to allow for accounting of the premium stabilization programs. The proposed rule also would amend the regulations to revise the treatment of community benefit expenditures in the MLR calculation for issuers exempt from federal income tax.

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