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CMS, Office of Strategic Operations and Regulatory Affairs
Fax Number: 202-395-6974 VII. Regulatory Impact Analysis A. Summary This final rule addresses various requirements applicable to health insurance issuers, Exchanges, Navigators, non-Navigator assistance personnel, and other entities under the Affordable Care Act. Specifically, the rule establishes standards related to product discontinuation and renewal, quality reporting, non-discrimination standards, minimum certification standards and responsibilities of QHP issuers, the SHOP, and enforcement remedies in FFEs. It also provides a number of amendments relating to the premium stabilization programs, calculation of annual limit on cost sharing, the MLR program, certified application counselor programs, affordability exemptions, standards regarding how enrollees may request access to non-formulary drugs under exigent circumstances, and guaranteed availability and renewability of coverage requirements. Additionally, it establishes the grounds for imposing
improperly using or disclosing information; and modifies standards related to opt-out provisions for self-funded non-Federal governmental plans and individual market provisions under HIPAA.
CMS has crafted this rule to implement the protections intended by Congress in an economically efficient manner. We have examined the effects of this rule as required by Executive Order 12866 (58 FR 51735, September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). In accordance with OMB Circular A–4, CMS has quantified the benefits, costs and transfers where possible, and has also provided a qualitative discussion of some of the benefits, costs and transfers that may stem from this final rule.
B. Executive Orders 13563 and 12866 Executive Order 12866 (58 FR 51735) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Executive Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and reaffirms the principles, structures, and definitions governing regulatory review as established in Executive Order 12866.
Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action that is likely to result in a final rule--(1) having an annual effect on the economy of $100 million or more in any one year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal
serious inconsistency or otherwise interfering with an action taken or planned by another agency;
(3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year), and a “significant” regulatory action is subject to review by the OMB. HHS has concluded that this rule is likely to have economic impacts of $100 million or more in any one year, and therefore meets the definition of “significant rule” under Executive Order 12866. Therefore, HHS has provided an assessment of the potential costs, benefits, and transfers associated with this final regulation.
1. Need for Regulatory Action Starting in 2014, qualified individuals and qualified employers are able to obtain coverage provided through Exchanges. The provisions, amendments and clarifications in this final rule address stakeholder concerns and inquiries and help ensure smooth functioning of health insurance markets and Exchanges and ensure that individuals have access to high quality and affordable health insurance coverage. In addition, this rule amends the methodologies for calculating the MLR to address ICD-10 conversion costs, MLR and rebate calculations in States that require the individual and small group markets to be merged, and to accommodate the special circumstances of issuers affected by the transitional policy announced in the CMS letter dated November 14, 2013, and issuers participating in the State and Federal Exchanges.
In accordance with OMB Circular A-4, Table VII.1 below depicts an accounting statement summarizing CMS’s assessment of the benefits, costs, and transfers associated with this regulatory action. The period covered by the RIA is 2014 – 2018.
HHS anticipates that the provisions of this final rule will help ensure that all consumers have access to quality and affordable health care coverage and are able to make informed choices, ensure smooth operation of Exchanges, ensure that premium stabilization programs work as intended, provide flexibility to SHOPs and employers, and protect consumers from fraudulent and criminal activities and help to mitigate issuers’ unexpected administrative costs and uncertainties around operations and the risk pool, and to stabilize the market as it continues to transition to full compliance with Affordable Care Act requirements. Affected entities such as QHP issuers, Navigators and non-Navigator assistance personnel, designated certified application counselor organizations, certified application counselors, survey vendors, and States may incur costs to comply with the provisions in this final rule, including administrative costs related to notices, surveys, training, and recertification requirements. In accordance with Executive Order 12866, HHS believes that the benefits of this regulatory action justify the costs.
* Ensure access to affordable and quality health insurance coverage for all individuals * Minimize unnecessary terminations of coverage and ensure predictability and continuity for consumers * Allow consumers to make informed choices * Lower out-of-pocket costs for individuals who purchase fixed indemnity insurance * Possible reduction in cost sharing due to adjustment in methodology for calculating annual limitations on cost-sharing *Help ensure sufficiency of funds in the reinsurance payment pool * Ensure consumer protection and privacy and security of PII * Discourage fraudulent or criminal activity by consumer assistance personnel and entities * Provide additional flexibility to FF-SHOPs and employers and allow employers to select plans with updated rate information CMS-9949-F 339
1. Note: Approximately $13 million in costs are estimated in the RIA below and the remaining costs related to ICRs are estimated in section VI above.
3. Anticipated Benefits, Costs and Transfers The impacts of the existing regulations that are being amended and clarified in this final
includes the impacts of new provisions and any changes to previous estimates as a result of amendments to existing provisions.
Benefits Provisions of this final rule will help ensure that all individuals have access to affordable and quality health insurance coverage and the necessary information to make informed choices.
Making quality rating and ESS information available to consumers will allow them to make informed choices and provide issuers with an incentive to improve quality of care and consumer experience. The results from the Marketplace survey will drive quality improvement in Exchanges by collecting information on the consumer experience with the Exchange. In addition, the quality rating and ESS information will also provide regulators and stakeholders with information to use for monitoring and oversight purposes. The amendments to special enrollment periods will ensure that individuals who experience loss of coverage or exceptional circumstances have continued access to healthcare. The provisions regarding the formulary exceptions process will ensure that enrollees will have continued access to necessary prescription drugs.
The provisions of this final rule also establish minimum Federal standards that determine whether coverage modifications constitute continuance of an existing product in a market within a State for products offered both through and outside of an Exchange in the individual and small group markets. This will minimize unnecessary terminations of coverage and ensure predictability and continuity for consumers, while providing issuers the flexibility to make the necessary adjustments to coverage. The notices of product discontinuance and renewal will ensure that consumers have necessary information regarding their choices and the changes in
The amendments for fixed indemnity insurance will allow such plans to be sold as secondary to other health insurance coverage that meets the definition of minimum essential coverage. Such plans may also be sold to individuals who are deemed to have minimum essential coverage based on their status as bona fide residents of U.S. territories. This will allow individuals that buy such coverage to lower their out-of-pocket costs.
The adjustments to the transitional reinsurance program will help ensure that the reinsurance payment pool is sufficient to provide the premium stabilization benefits intended by the statute. This policy may lower premiums by reducing the uncertainty associated with reinsurance payments to individual market plans eligible for reinsurance payments. The adjustments to the risk corridors formula for the 2015 benefit year will help to mitigate issuers’ unexpected administrative costs and uncertainties around operations and the risk pool, and to stabilize the market as it continues to transition to full compliance with Affordable Care Act requirements.
The provisions in this final rule will ensure that non-Federal requirements do not prevent Navigators, non-Navigator assistance personnel, certified application counselors and organizations from providing information and assisting individuals to make informed choices and obtain health insurance coverage. The provisions in this rule also specify some of the standards for Navigator and certified application counselor conduct that will ensure consumer protection and ensure that Navigators provide information and services concerning enrollment in QHPs in a fair and impartial manner and that certified application counselors act in consumers’ best interests. The rule will also provide HHS with the authority to impose CMPs on Navigators, non-Navigator assistance personnel, certified application counselors, and certified application
This will ensure that consumers interacting with the Exchange receive high-quality assistance and robust consumer protections. The provisions to impose CMPs for provision of false or fraudulent information, and improper use or disclosure of information will also ensure privacy and security of consumers’ PII.
Aligning the start of annual employer election periods in the FF-SHOPs with the start of open enrollment in the corresponding individual market Exchange will benefit issuers. A uniform QHP filing and review timeline for both markets for 2015 will reduce confusion and provide efficiencies to scale in review, providing potential resource savings to QHP issuers.
Removing the required minimum lengths of both the employer election period and the employee open enrollment period will provide additional flexibility to State-based SHOPs and employers and allow employers to select plans with the most up-to-date rate information.
The amendment to provide a one-year transition policy under which a SHOP will be permitted to not implement employee choice in 2015 will alleviate State and issuer concerns that employee choice would cause issuers to price their products and plans higher in 2015 due to issuers’ beliefs about adverse selection. Allowing for this transitional policy in 2015 will provide minimal disruption to small group markets.
The amendment to our methodology for calculating the annual limitation on cost sharing may reduce cost sharing paid by some enrollees in the individual market.
The amendments to the MLR methodology in States that require the small group market and individual market to be merged will improve the consistency of MLR calculations among issuers in those States and improve the accuracy of rebate payments.
The methodology for determining the required contribution percentage will provide that
over the rate of income growth. We do not anticipate that this approach will significantly alter the number of individuals who are expected to enroll in health insurance plans or make shared responsibility payments.
Costs Affected entities will incur costs to comply with the provisions of this final rule. Costs related to ICRs subject to PRA are discussed in detail in section VI and include administrative costs incurred by survey vendors to appeal application denials; costs to QHP issuers related to data submissions for QRS, ESS administration; costs related to notice and disclosure requirements for certified application counselor recertification, consumer authorization for Navigators and non-Navigator assistance personnel; costs to States to submit a recommendation for a 2015 transition to employee choice; and a reduction in costs for issuers in the individual market due to discontinuation of certification of creditable coverage. In this section, we discuss other costs related to the provisions of this rule.