3/1/13 CMS/HHS issued a final rule "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014." The final rule provides detail and guidance related to the premium stabilization policies such as the risk adjustment (§1343), reinsurance (§1341) and risk corridors programs (§1342). It also proposes key provisions governing advance payments of the premium tax credit (§1401), cost-sharing reductions (§1402), and user fees for Federally-facilitated Exchanges (§1311). Finally, it proposes a number of amendments relating to the SHOP (§1311(b)(1)(B)) and the medical loss ratio program (§10101).

The ACA established three risk-mitigation programs to stabilize premiums in the individual insurance market and minimize the effects of adverse selection that may occur as insurance reforms and the Exchanges launch in 2014. These programs include transitional reinsurance (§1341), temporary risk corridors programs (§1342), and a permanent risk adjustment program (§1343) to provide payments to health insurance issuers that cover higher-risk populations and to more evenly spread the financial risk borne by issuers. 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 a federally administered program, will protect against uncertainty in rates for qualified health plans by limiting the extent of issuer losses and gains.

The rule proposes standards for advanced payments of the premium tax credit and for cost-sharing reductions. The credit is designed to make purchasing a health plan on the Exchange affordable for low and moderate income Americans by reducing a taxpayer's out-of-pocket premium cost. ACA §1401 amended the tax code to allow an advance, refundable premium tax credit to help individuals and families afford health insurance coverage. To be eligible to receive the premium tax credit, individuals and families must have incomes between 100%- 400 % FPL (or between 0% - 400% FPL if lawfully present and ineligible for Medicaid) and be enrolled in a qualified health plan (QHP) through an exchange. The individual must also be ineligible for government sponsored insurance and not have access to employer sponsored insurance that meets definitions of affordability and minimum essential coverage as established by ACA §1401. The amount of the premium tax credit is tied to the amount of the premium. Advance payments are made monthly under ACA §1412 to the issuer of the QHP in which the individual enrolls. ACA §1402 provides for the reduction of cost sharing for certain individuals enrolled in QHPs offered through the Exchanges and §1412 provides for the advance payment of these reductions to issuers.

Beginning in 2014, as directed by ACA §1311(b), each state that operates an Exchange must establish a Small Business Health Options Program (SHOP) which will provide small employers with ways to offer employee health coverage and access to tax credits that make coverage more affordable. 

The rule also proposes to amend the regulations to revise the treatment of community benefit expenditures in the medical loss ratio (MLR) calculation for issuers exempt from federal income tax. The MLR rules established under ACA §10101 establish the minimum dollar percentage that health insurance companies must spend of consumers' health insurance premiums on medical care, and not on income, overhead or marketing. Beginning in 2011, the ACA requires insurance companies in the individual and small group markets to spend at least 80% of collected premium dollars on medical care and quality improvement activities; insurance companies in the large group market are required to spend at least 85%.

Read the proposed rule (which was published in the Federal Register on December 7, 2012) at: http://www.gpo.gov/fdsys/pkg/FR-2012-12-07/pdf/2012-29184.pdf

Read the final rule (which was published in the Federal Register on March 11, 2013) at: www.gpo.gov/fdsys/pkg/FR-2013-03-11/pdf/2013-04902.pdf

3/1/13 CMS/HHS issued an interim rule final rule "Patient Protection and Affordable Care Act: Amendments to the HHS Notice of Benefit and Payment Parameters for 2014."  The interim final rule amends "Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014" final rule, also published in the Federal Register on March 11, 2013. The amendment will adjust the risk corridors calculations to better align them with the single risk pool requirement established in the "Health Insurance Market Reforms; Rate Review" final rule (published February 27, 2013 in the Federal Register). The Market Reforms/ Rate Review final rule established standards to implement §1312(c), which directs an issuer to use a single risk pool for a market (the individual market, small group market, or merged individual and small group market) when developing rates and premiums for health insurance coverage effective beginning in 2014.

The amendment also sets standards permitting issuers of qualified health plans (QHPs) the option of using an alternate methodology for calculating the value of cost-sharing reductions provided for the purpose of reconciliation of advance payments of cost-sharing reductions. Premium tax credits are paid in advance directly to an insurer on a monthly basis on behalf of the taxpayer (who must claim it on their annual income tax return). However, final eligibility for the credit cannot be determined until the taxpayer files their annual return which has household income information for the year. A "reconciliation" then occurs between the tax credit already received by the consumer and the amount that the individual is deemed eligible to receive. Because household income can vary over the course of the year, the final tax credit may be greater or less than the amount already paid and a "reconciliation" occurs between the taxpayer and the government.

Comments due April 30, 2013. 
 

Read the interim rule final rule(which was published in the Federal Register on March 11, 2013) at:  http://www.gpo.gov/fdsys/pkg/FR-2013-03-11/pdf/2013-04904.pdf