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Final Payment Parameters Set Reinsurance Contributions for 2016, Along With Key Standards for Insurance Reforms and SHOP Administration

From the February 26, 2015 EBIA Weekly

[PPACA; HHS Notice of Benefit and Payment Parameters for 2016, Final Rule, 45 CFR Parts 144, 147, 153, 154, 155, 156, and 158, 80 Fed. Reg. 10750 (Feb. 27, 2015); Fact Sheet]


Fact Sheet

HHS has finalized regulations with 2016 payment parameters for health care reform’s premium stabilization programs and cost-sharing requirements, as well as additional standards related to numerous other insurance reforms and administration of the Exchanges and SHOPs. (See our article on the regulations as proposed.) Here are some highlights:

  • Reinsurance Contributions. The annual contribution amount for the transitional reinsurance program is set at $27 per enrollee for 2016 (compared to $44 per enrollee for 2015). The fees, which fund reinsurance in the individual market for 2014 through 2016, are generally assessed on all health insurers and self-insured group health plans (regardless of size) providing major medical coverage. For purposes of the exemption for certain self-insured plans that do not use an outside TPA for core administrative services (see our article), the final regulations incorporate the Code §§ 414(b) and (c) common ownership rules to determine when a TPA is considered to be under common ownership with a self-insured group health plan (or its sponsor). [EBIA Comment: Despite the clarification of the common ownership test, most self-insured health plans rely extensively on an unrelated TPA and will not be eligible for this exemption.] The final regulations also incorporate guidance on the reinsurance contribution submission process as proposed, and reiterate that contributions may be made in one or two payments, but annual enrollment counts still must be submitted and the payments scheduled by November 15, or the next business day (see ourarticle). In addition, the current exemption from reinsurance contributions for expatriate health coverage is extended to certain self-insured expatriate plans for 2015 and 2016, and future guidance consistent with recent legislation exempting certain expatriate plans from most health care reform provisions (see our article) is promised.
  • Other Premium Stabilization Parameters. The regulations finalize how the temporary risk corridors, which reallocate insurer gains and losses resulting from inaccurate rate setting for qualified health plans (QHPs), will be adjusted to account for higher-risk enrollees in states that implement the transition relief for noncompliant policies (see our article). HHS reiterates that in the unlikely event that risk corridor collections are insufficient to make risk corridor payments for the 2016 (final) program year, HHS will use other available sources of funding for the risk corridor payments. In addition, a user fee of $1.75 per enrollee for 2016 (compared to 96 cents per enrollee for 2015) will be collected from insurers for the permanent risk adjustment program. [EBIA Comment: Payments are adjusted and user fees are generally collected only for plans in the individual and small group markets. HHS attributes the large increase in the user fee to increased risk adjustment data validation costs.]
  • Cost-Sharing Parameters. The maximum annual limit on cost-sharing for 2016 will be $6,850 for self-only coverage and $13,700 for other than self-only coverage (compared to $6,600 and $13,200, respectively, for 2015). The reduced maximum annual limitation for 2016 for individuals earning up to 200% of FPL will be $2,250 for self-only coverage and $4,500 for other than self-only coverage (the same as for 2015) and for individuals earning between 200% and 250% of FPL, it will be $5,450 for self-only coverage and $10, 900 for other than self-only coverage (compared to $5,200 and $10,400, respectively, for 2015). [EBIA Comment: Based on comments indicating that small employer plans typically operate on a non-calendar-year basis but accumulate toward a calendar year annual limitation on cost-sharing, HHS chose not to finalize the proposed rules for non-calendar-year plans. Note that the “premium adjustment percentage” used to set the rate of increase for these cost-sharing limits is also used to adjust the employer shared responsibility penalty amounts under Code §§ 4980H(a) and (b).]
  • SHOPs and Individual Market Exchanges. The final regulations make clear that SHOP coverage may be offered to former employees (and their dependents), including retirees and COBRA qualified beneficiaries. Furthermore, SHOPs are permitted to collect premiums for COBRA coverage directly from COBRA enrollees and remit them to the insurer, and HHS is continuing to examine the feasibility of SHOPs taking on additional COBRA administration functions, including COBRA’s notice requirements. We note that HHS did not finalize a policy on accepting SHOP premium payments by credit card, so only checks and bank drafts will be accepted in federally facilitated SHOPs. Numerous standards for the individual market Exchanges were finalized. Among them is a change in the proposed Exchange open enrollment period for 2016, which will run from November 1, 2015 through January 31, 2106 (rather than October 1 through December 15 as proposed). [EBIA Comment: HHS received many comments about its proposed automatic re-enrollment strategy for federally facilitated Exchanges for 2016, but decided not to finalize proposed changes to the current enrollment hierarchies (used to select a default plan if an enrollee doesn’t act during open enrollment). Currently, an enrollee who remains eligible for Exchange coverage is to be re-enrolled in the same plan unless he or she elects to change, or the product is not available (when another hierarchy for mapping is applied).]
  • Minimum Value. Following recently published guidance (see our article), the final regulations provide that an employer-sponsored plan (including large group market and self-insured plans) must not only meet the quantitative test for minimum value (at least 60%), but also must provide a benefit package that reflects benefits historically provided under major medical employer coverage. Specifically, to satisfy the minimum value requirement that could help shield an employer from shared responsibility penalties under Code § 4980H(b), coverage must include substantial coverage of both inpatient hospital services and physician services. [EBIA Comment: This change, which reflects IRS Notice 2014-69 (see our article), generally applies immediately to employer-sponsored plans, including plans that are in the middle of a plan year—limited relief is provided for some plans adopted before November 4, 2014 with plan years beginning by March 1, 2015.]

EBIA Comment: These regulations, which are full of painstaking details that are primarily directed at insurers, have broad implications for employers that sponsor group health plans. But as wide-ranging as they are, they also foreshadow more rules to come, including, for instance, guidance on discriminatory benefit designs (such as those that use “drug tiering” to place most or all drugs for a certain condition on the highest-cost tier), which were also examined in the recently released Final 2016 Letter to Issuers). For more information, see EBIA’s Health Care Reform manual at Sections IX.B (“Cost-Sharing Limits”), XX (“Mechanisms to Allocate Risk”), XXI (“Exchanges, Qualified Health Plans (QHPs), and CO-OPs”), and XXXVI.I(“Required Contributions Toward Reinsurance Payments”); see also EBIA’s COBRAmanual at Section III.G.12 (“Health Insurance Exchanges”), and EBIA’s Self-Insured Health Plans manual at Section VI.H.4 (“Required Contributions Toward Reinsurance Payments”).

Contributing Editors: EBIA Staff.

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