CMS proposed rule seeks to reduce exchange fees to lower premiums for plans using federal enrollment platform

Dec. 1, 2020

The Centers for Medicare & Medicaid Services (CMS) released the proposed annual Notice of Benefit and Payment Parameters for the 2022 benefit year (proposed 2022 Payment Notice). In particular, the proposals in this rule will continue CMS’ ongoing work to lower premiums and enhance the consumer experience.

“Thanks to our market-oriented policies, the Exchanges have stabilized: prices have gone down and insurers have returned,” said CMS Administrator Seema Verma. “The actions we are taking to reduce user fees will directly reduce premiums. The program is running better than ever before due to the actions we took to increase efficiency and reduce costs. The improvements our policies have made notwithstanding, we must never be satisfied when too many Americans still cannot afford coverage in the individual market.”

In the midst of the COVID-19 pandemic, affordable premiums for individual health insurance coverage   are especially important for people who may be losing their job-based coverage and for those who face reduced income. Therefore, CMS is once again proposing to lower the Exchange user fee that issuers must pay and allow issuers to then pass on the savings to consumers.

CMS is proposing to reduce the user fee for Federally-Facilitated Exchange (FFE) issuers from 3.0 percent to 2.25 percent of premium for the 2022 benefit year, which will add to the 0.5 percentage point reduction in the user fee rate included in the 2020 Payment Notice. CMS proposes to reduce the user fee for issuers offering plans through State-based Exchanges that use the federal platform to 1.75 percent of premium.

There are times outside the yearly Open Enrollment Period when consumers can sign up for health insurance based on certain qualifications like loss of health insurance or another life event like getting married. To lower premiums further while promoting program integrity, the rule also proposes to require State-based Exchanges (SBEs) to verify eligibility for special enrollment periods in closer alignment with the verification standards used on the Federally-facilitated Exchange (FFE) since 2018. The rule proposes to require all Exchanges to conduct Special Enrollment Period (SEP) verification for at least 75 percent of new enrollments for consumers not already enrolled in coverage through the relevant Exchange.  Tightening these standards on SEP eligibility verification is expected to protect the risk pool and, in turn, lower premiums by preventing people from waiting until they are sick to enroll.  

Another key factor in improving the stability of the market and increasing competition among issuers to deliver lower premiums is a well-functioning risk adjustment program. Risk adjustment takes into account the underlying health status and health spending of the enrollees in an insurance plan to reduce the financial incentive for plans to avoid enrolling consumers with pre-existing or chronic conditions. To improve the risk adjustment model’s prediction of costs for healthier individuals necessary for a stable risk pool, this rule proposes policies that update the risk adjustment model’s predictive power for both healthy and very sick individuals. In addition, the rule builds on flexibility provided in prior Payment Notices by proposing to allow states to reduce risk adjustment transfers by up to 50 percent on a multi-year basis for up to three years, if certain criteria are met.

This rule includes several proposals to improve the consumer experience by empowering states to innovate. CMS previously implemented the successful enhanced direct enrollment (EDE) pathways, which allow web brokers and issuers to directly facilitate the purchase of Qualified Health Plans (QHPs) without re-routing consumers to These pathways improve the consumer experience in shopping for, applying for, and enrolling in Exchange coverage through approved private, third-party partner websites by allowing consumers to interact directly with these private partners and complete all steps in the eligibility and enrollment process on a single website. To date, CMS has approved nine different private sector EDE partners and more than 30 direct enrollment (DE) entities that have helped enroll millions of Americans in FFE and SBE-FP states.

This rule proposes a new option for states to foster next-generation Exchanges. Under these options, states would be able to implement a private partner-based design using DE and EDE as an alternative to their state’s enrollment websites. This design would leverage web brokers and issuers to serve as the consumer-facing means to apply and enroll in individual market QHPs offered through the Exchange.  These platforms would enable a more curated, customized consumer experience designed to target diverse populations who need coverage. Under these proposed options, Exchanges would continue to be responsible for ensuring that participating web brokers and insurers meet all applicable consumer protections, including stringent privacy and security controls and business standards. Exchanges would remain responsible for making all eligibility determinations, performing required verifications of consumer application information, and meeting all of the statutory and regulatory requirements for the operation of an Exchange.

The rule also proposes to give states greater certainty as they work to provide consumers with a better experience through the development and implementation of a section 1332 waiver. These waivers provide states with an important opportunity to waive certain statutory requirements and develop their own state healthcare programs that meet the unique needs of their citizens.  The rule proposes to reference and incorporate section 1332 guidance published in 2018 in existing regulations, which will give states greater certainty over how the federal government will evaluate and monitor section 1332 waivers in the future.

To further improve the consumer experience and consistent with the agency’s efforts around transparency in health insurance coverage and prices, the rule also proposes to make full QHP Enrollee Experience Survey results across Exchanges publicly available in an annual public use file (PUF).Sub Finally, the rule proposes to create a new SEP to help enrollees in off-Exchange individual market coverage who become newly eligible for premium tax credits or cost-sharing reductions.

CMS has the release.