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From Health Law Daily, December 19, 2016

Final rule updates ACA risk adjustment, cost sharing, and consumer choice

By Bryant Storm, J.D.

Updates to payment parameters and other provisions of the risk adjustment program of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) are designed to improve the ability of risk models to estimate risk for qualified health plan (QHP) issuers. In addition to taking steps to improve the risk adjustment program of the ACA, a new HHS Final rule makes adjustments to ACA cost-sharing parameters and makes amendments intended to increase consumer choice in the QHPs offered on ACA exchanges. The Final rule is set to be published in the Federal Register on December 22, 2016, and the regulations are effective January 17, 2017.

Risk. In order to stabilize premiums for the small group and individual markets, the Final rule makes several updates to the risk adjustment methodology. Specifically, for the 2017 benefit year, the Final rule alters how HHS estimates the actuarial risk associated with enrollees who are not enrolled for a full 12 months. HHS identified situations where plans with partial-year enrollment were experiencing higher than expected claims costs—risk that were not captured by the current risk adjustment. After reviewing actuarial risk for adults with shorter enrollment periods, HHS found that the risk tended to be slightly under-predicted. Thus, for 2017, HHS updated the risk adjustment model to include adjustment factors for partial year enrollees in risk adjustment covered plans. Additionally, beginning with the 2018 benefit year, the Final rule establishes new methodology to use prescription drug data to update the predictive ability of risk adjustment models.

Cost sharing. Adjustments to the cost sharing parameters under the Final rule include a finalization of the premium adjustment percentage for 2018, under Section 1302(c)(4) of the ACA. That adjustment is 16.17303196 percent. The Final rule also sets the maximum annual limitations on cost sharing for the 2018 benefit year for cost-sharing reduction plan variations. The maximum annual limitation on cost sharing is $7,350 for self-only coverage and $14,700 for other than self-only coverage. Those figures represent a 2.8 percent increase above the 2017 parameters.

Consumer choice. The Final rule’s provisions dedicated to improving consumer choice in QHP plan selection include a mandate that QHP issuers offer at least one QHP at the silver coverage level and at least one QHP at the gold coverage level throughout the service area in which a QHP issuer offers coverage. The new regulations require QHP issuers to make their QHPs available through the exchange for a full plan year, as a condition of QHP certification. The new regulations also include several updates to enhance the shopping experience on exchanges and to improve exchange oversight and security.

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