At the end of February 2016, the Department of Health and Human Services (HHS) released its final 2017 Benefit and Payment Parameters (BPP) Rule along with a fact sheet. Since 2012 HHS has published an annual BPP rule, which updates benefit plan parameters, payment parameters for the Affordable Care Act’s premium stabilization programs (risk adjustment, reinsurance and risk corridors), and also updates all HHS rules governing the ACA marketplaces and health insurance markets generally.
The rule is 538 pages and covers numerous topics. This summary does not cover most of the topics but instead highlights some that may be of particular interest to employers.
2017 Limits on Maximum Out of Pocket Costs
The maximum out-of-pocket (MOOP) limit for 2017 will be $7,150 for an individual and $14,300 for a family, up from $6,350 and $12,700 for 2014. This applies for group health plans other than high deductible health plans.
Individuals with household incomes below specified federal poverty levels who buy the lowest-cost silver plans in the Marketplace and receive a subsidy also qualify for reduced cost sharing, including lower MOOPs, co-pays and deductibles. Lower MOOPs that apply are:
For individuals/families with incomes: The MOOP will be:
-Below 200% of the federal poverty level $2,350 / $4,700
-Between 200 and 250 percent of the FPL $5,700 / $11,400
The final BPP rule also updates standalone dental plan dollar limits, based on the dental CPI.
Employer Size: “Small Employer” Cap can Remain at 50
This is one of the “clean up” items in the 2017 rule. It conforms the definition of “small” employer with the 50-cap definition in the PACE Act, which President Obama signed on October 7, 2015. (Protecting Affordable Coverage for Employees, H.R. 1624) The ACA would have, as of January 1, 2016, redefined employers with 51-100 employees as “small employers” for purposes of buying health insurance. The PACE Act continued the 50-employee cap, but allows a State to affirmatively elect to extend the definition to include employers who employed up to 100 employees during the preceding calendar year. (Note that this change to 51-100 relates only to small group insurance market reform issues, and not to the Employer Shared Responsibility provisions, so it would NOT have redefined “large employer” for purposes of the penalties under IRC section 4980H.)
For new employers, the determination of size is based on reasonable expectations as to the average number of employees. The rule also clarifies that a “plan year” may be less than twelve months but never more than twelve months.
Continuation of “No Minimum Participation” Enrollment Period for Small Employers
The final BPP rule does not change the Guaranteed Availability or Guaranteed Renewability rules that apply in the small group insurance market. Thus, it continues to require small group health insurers to offer a special one-month enrollment period each year from November 15 – December 15 and write new coverage for small employers who do not meet the insurer’s minimum participation requirements. It does not extend this requirement to renewals, although apparently insurers generally do apply this to renewals to avoid having to swap their current small groups with other insurers.
Transitional Reinsurance Fee Audits
In the final rule, HHS clarifies that third-party administrators (TPAs) who help self-funded employers with the TRF payment process will not be subject to audits. However, the employer must ensure that the TPA will cooperate if there is an audit.
Public Exchange Issues Affecting Employers
- Open Enrollment Period. Open enrollment periods for 2017 and 2018 will continue to be the same as the 2016 period, running from November 1 to January 31. Beginning in 2019, open enrollment will run each year from November 1 to December 15.
- Exchange Notices to Employers. Under the final rule, a public exchange will be required to notify an employer only if an employee actually enrolls in a qualified health plan through the exchange, not merely because an employee is determined to be eligible to do so, as is currently the case. Notification can be on an employee-by-employee basis or for groups of employees. The notice will inform the employer that it may be liable for the employer mandate penalty since its employee will receive a subsidy and also that retaliation against an employee who receives assistance under the ACA is prohibited by law.
- Employer Appeals. An employer who receives a notice from the exchange may appeal. If the employer establishes that its coverage meets ACA requirements, the employee(s) at issue are not eligible for a subsidy. In such case, the exchange must promptly re-determine eligibility and notify the affected individuals (that they need to report changes to the exchange).
Other Public Exchange Issues
- 2017 User Fee. Insurers currently must pay 3.5% of monthly premium to sell individual policies through the federally Facilitated Exchange (FFE). This rate continues unchanged for 2017.
- Network Adequacy Standards. The final rule addresses transparency of network size, continuity-of-care when a provider leaves the network, and treatment of certain out-of-network expenses as in-network.
- Standardized Plan Options in Individual Exchange. Standardized plans should make it easier for consumers to compare standard plans offered by different insurers. The final rule includes four silver, one bronze and one gold plan. The plans have standard deductible amounts, four-tier drug formularies, only one in-network provider tier, and some services are covered before the deductible is met (a fixed number of office visits, urgent care and generic drugs). Insurers will not be required to offer standard options and can offer additional options if they chose to do so.
- Changes to Federally Facilitated SHOP Exchanges. Currently, employers in the SHOP can pick a single plan or allow employee choice within a single tier of coverage. Under the final rule, beginning in 2017, employers in the FF-SHOP can permit their employees “vertical choice,” the option of picking all plans across all levels from a single insurer.
Individual Mandate Exemptions
Under the individual responsibility requirement, individuals must pay a tax unless they qualify for an exemption. One of the exemptions is a “hardship” exemption. The final rule provides that individuals who would have been eligible for Medicaid if their state had extended Medicaid to the under-65 adult population may qualify for a hardship exemption without applying for and being denied Medicaid. Such individuals may claim the exemption on their tax return beginning with the 2015 tax year.
Reinsurance and Risk Corridors
The controversial reinsurance and risk corridor programs end in 2016.
The final rule requires HHS to adjust the 2015 risk corridor payments or charge insurers for 2015 if they overestimated the cost-sharing reductions they offered in 2014. Insurers also must adjust their claims for 2015 and 2016 to account for inaccurate estimation of unpaid claims for 2014 and 2015.
Rating and Rate Review
- Rating: The rating area for determining health insurance rates for small businesses has changed. Under the prior rule, it was the area that contains the employer’s principal place of business. The final rule now defines the geographic rating area of a small business as the area where the greatest number of employees work or reside.
- Rate Review. Beginning in 2017, non-grandfathered coverage in the individual and small group market will be subject to rate review if the average increase for any plan within a product exceeds the “unreasonableness” threshold, presumably 10 percent. Rating factors are being added to prevent insurers from manipulating the premium increase threshold by changing the geographic rating area for a plan.
Student Health Coverage
The final rule requires student health plans to set rates based on actuarially justified factors and actual claims experience. It does not, however, require student health plans to comply with the single risk pool rating factors. Instead, insurers can create separate risk pools for separate educational institutions or multiple risk pools in a single institution for bona fide reasons, such as separating undergraduate and graduate students. Student health plans may also create separate risk pools for students and their dependents.
Student health plans may provide coverage at any actuarial value of at least 60%. They are not required to meet the specific metal tier requirements that other small group insured plans must meet (i.e., bronze 60% minimum value, silver 70%, gold 80%, platinum 90%). Plans must disclose their actuarial value, however, as well as the metal value or next lowest metal value, so students can compare these plans to others, such as their parent’s health plan. Student health plans may determine their actuarial value using the actuarial value calculator and do not need to have an actuarial certification, as had been proposed in the NPRM. These changes apply for plan years beginning after July 1, 2016.