The Affordable Care Act just wrapped up the most successful annual open enrollment period in its history. More than 16.3 million people enrolled for coverage, a 13% spike from last year. That includes 3.6 million individuals who are new to the ACA.
But success does not mean that insurers can rest on their laurels. In fact, they should be gearing up for significant changes that the Centers for Medicare and Medicaid Services has in store for the 2024 plan year. While those changes are still taking shape, the proposed Notice of Benefit and Payment Parameters for 2024 offers a glimpse into the agency’s thinking. The proposal was released in mid-December, and a final rule is expected sometime in the second quarter after the agency finishes reviewing public comments.
The final rule will impact insurers in several ways, especially those operating in the 33 states on the federal exchange. This article analyzes three major areas that will be impacted and looks at how insurers can start planning now to make necessary strategic and operational adjustments.
Simplifying choice and improving the consumer experience
Standardized plan design requirements: CMS first mandated standardized plans — those with defined actuarial value levels for each metal tier and standardized cost-sharing requirements — be offered on the federal exchange in 2023. Now referred to as “Easy Pricing” plans, state-based exchanges are exempt from these requirements, although eight states have their own standardized plan parameters. The PY2024 proposed rule continues a mandate that issuers have a standardized plan at every product network type, every metal level, and throughout every service area in which non-standardized qualified health plan options are offered, with the exception that issuers would no longer be required to offer a standardized plan in the non-expanded Bronze metal tier. Given that the maximum actuarial value level for non-expanded Bronze plans is 62%, CMS concluded that it cannot define a standardized plan for the tier that includes any pre-deductible coverage. CMS noted that few issuers offered non-expanded Bronze standardized plan options in PY 2023. This includes issuers that entered new markets, like Aetna, which launched in four new states without non-expanded Bronze plans, and Molina, which has been discontinuing non-expanded Bronze plans from its marketplace offerings since last year. This change would increase portfolio flexibility in the non-expanded Bronze AV range. Consumers would benefit from streamlined plan selection, with more plans in this range offering pre-deductible coverage.
Streamlined consumer plan choices: While standardized plan and cost-sharing requirements helped simplify options for consumers, they’ve done little to stem the rapid growth in the number of available plans. The average number of plans available to consumers ballooned to 113.6 in PY2023, up from 38.5 in 2020.
Consumers Seeing More Choices on ACA Exchange
The number of qualified health plans available to the average Exchange consumer has spiked since 2020
To combat this trend and reduce choice overload facing consumers, CMS outlined two potential policy shifts:
1. Limiting insurers to offering two non-standard plans at each metal level, product type, and service area. CMS estimates that implementing this policy would reduce the number of non-standard plans by two-thirds
2. Reinstating previous meaningful difference standards for plan offerings, with updated parameters that would group plans by Issuer ID, metal level, network type, and deductible integration type, and evaluate within each grouping whether plans are meaningfully different based on deductible amounts. Deductibles would need to differ by more than $1,000 for a plan to count as meaningfully different under the proposed standard. CMS estimates this policy would reduce the total number of on-Exchange plans by half
In either scenario, more than 25% of enrollees are currently in a plan that might not exist in PY2024. Incumbents should start thinking about how they would communicate these changes with consumers and how they’d handle shifting them to different plans. Upstart issuers, on the other hand, would have an opening to market to members enrolled in sunsetting plans. These changes may also incentivize issuers to increase the number of plan network types they offer to sidestep the new requirements, increasing the proportion of PPO plan offerings.
Revised standardized plan formulary requirements: CMS proposed modifying standardized plan formulary design parameters to discourage discriminatory benefit designs and reduce access barriers for prescription drugs. CMS sought comment on whether to allow more than four tiers, which would provide additional formulary design flexibility. In addition, CMS seeks to discourage standardized plan issuers from placing drugs in higher cost-sharing tiers than is clinically appropriate for the purpose of maximizing cost-sharing revenue. CMS proposed that issuers will be required to place all covered generic drugs in the generic drug cost-sharing tier and brand name drugs in either the preferred brand or non-preferred brand tiers, with placement in the specialty tier possible only if an appropriate and non-discriminatory basis can be established.
Strengthened Exchange marketing standards: CMS proposed reviewing plan marketing names as a component of certification. This change is meant to combat a trend of issuers using misleading, inaccurate, or deceptive marketing names. CMS noted numerous consumer complaints around plans with names that do not match actual plan benefits, such as using HSA in a name but not offering health savings accounts. Plan names would be reviewed and approved as part of the annual QHP certification process, requiring issuers to review their portfolios and potentially re-name existing plans. Issuers should ensure that all details included in plan names clearly match information reflected in their plan documentation and regulatory filings.
Reduced barriers to enrollment and financial assistance
Special Enrollment Periods: The Biden administration continues to explore methods of broadening access to Special Enrollment Periods. The proposed rule lays out a fix to provide earlier effective coverage dates for consumers attesting to a future loss of minimum essential benefits, preventing coverage gaps for consumers who lose coverage mid-month. In addition, the proposal would allow Exchanges to implement protections for people losing Medicaid or CHIP coverage. Beneficiaries would have 60 days before or 90 days after their losing coverage to select an Exchange plan through a SEP. Exchanges could implement this change at their discretion. CMS also proposed expanding the eligible errors to include cost sharing and allowing other parties such as issuers or state regulators to raise errors on behalf of the consumer. And the agency wants to expand the definition of material errors to include display errors in plan benefits, service areas, or premiums. CMS is considering if consumers should be eligible for a SEP if providers leave their network mid-year.
Revised plan re-enrollment hierarchy rules: CMS proposed that Exchanges have the option to modify re-enrollment rules to guide members eligible for cost-sharing reduction assistance from a Bronze plan into a more affordable Silver plan. While Silver plans are higher AV and more expensive for non-CSR eligible consumers, CSR assistance, which reduces out-of-pocket costs like copays and deductibles when members utilize their coverage, is only available in Silver plans. Under the proposed rule, a CSR-eligible enrollee who would otherwise be automatically re-enrolled in a Bronze plan would instead be automatically enrolled in a Silver plan from the same issuer, provided that the plan has the same network type and a lower or equivalent premium following tax credits. CMS wondered if such issues as net premium and out-of-pocket costs should be considered when passively re-enrolling consumers. A proposal to use these factors to potentially re-direct members into a higher metal level plan is also under consideration. Issuers should model the impact of this shift when designing and pricing their PY2024 portfolios.
Improving care accessibility and availability
Enhanced Essential Community Provider requirements: CMS proposed adding mental health facilities and substance use disorder treatment centers to the existing list of six ECPs. Rural Emergency Hospitals would also be added as an “Other ECP Providers” category provider type. More significantly, CMS proposed requiring plans to contract with at least 35% of available federally qualified health centers and family planning providers within their service area. Previously, the 35% standard had been applied to all ECP categories combined, not individually. Issuers may need to reassess their networks and prioritize outreach to these providers.
Network availability standard implementation: CMS reminded insurers that appointment wait time standards come into effect in 2024. Issuers need to engage their provider networks to collect data on member wait times, determine if standards are being met, and implement an action plan if there are deficiencies. Collecting data and demonstrating compliance may pose a significant challenge, as networks are made up of disparate provider organizations with differing administrative support, electronic health records, and patient panels.
Gearing Up for 2024
As we highlighted in a previous article, there are a lot of forces reshaping the ACA — from ongoing regulatory changes to intense competition. Insurers can’t afford to hold steady; they need to constantly assess their strategy and operations against what is coming down the pike. Gearing up for the looming changes to the 2024 plan should start now. We will have an updated analysis once the final rule is published. In the meantime, be sure to check out Oliver Wyman Actuarial’s analysis as well.