Robert Wood Johnson Foundation Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, Dec. 25 -- Richard E. Besser, president and CEO of the Robert Wood Johnson Foundation, Princeton, New Jersey, has issued a public comment on the Centers for Medicare and Medicaid Services proposed rule entitled "Patient Protection and Affordable Care Act: HHS Notice of Benefit and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards". The comment was written and posted on Dec. 23, 2020:

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Thank you for providing the opportunity to submit comments on the Notice of Benefit and Payment Parameters for 2022 (Payment Notice) to the Centers for Medicare and Medicaid Services (CMS). The Robert Wood Johnson Foundation (RWJF) is pleased to have the opportunity to respond to the request for comments.

RWJF is the nation's largest philanthropy dedicated to improving health and well-being in the United States. Since 1972, we have worked with public and private-sector partners to advance the science of disease prevention and health promotion; train the next generation of health leaders; and support the development and implementation of programs and policies to foster better health across the country--including high-quality health care coverage for all. We are working alongside others to build a Culture of Health that provides everyone in America a fair and just opportunity to live the healthiest life possible and to promote health equity.

We have a long-standing commitment to expanding health care coverage, and believe that the individual market is an important option for millions of Americans who do not have access to employment-based coverage, or insurance through a public program like Medicare or Medicaid. We support many activities related to increasing the effectiveness of the individual market. For instance, the State Health and Value Strategies program/i assists state agencies and officials in their efforts to transform health and health care systems to provide care that meets people's goals and needs, including by providing technical assistance to states seeking to expand access to coverage.

We also support a variety of other activities intended to increase transparency in insurance markets and support consumers--including providing technical assistance to navigators and other targeted enrollment activities; supporting consumer representatives at the National Association of Insurance Commissioners (NAIC); and funding an annual public use file of plan data./ii

The Payment Notice is issued annually and provides important rule-making related to the insurance exchanges, market reforms, and the risk adjustment program. The Payment Notice covers many topics, and in our comments we will focus on several proposed changes that we believe have the potential to significantly impact the functioning of the federal and state insurance exchanges.

It is frequently observed that insurance is a business "affected with the public interest."/iii

Nowhere is that more true than in health insurance, where the government uses insurance as a tool of public policy and is heavily involved in all market segments including Medicare, Medicaid, the employer market, and most recently, the individual market. There are many different ways that the public sector can partner with private entities to provide health insurance.

Here we take issue with some elements of the Payment Notice that propose to reduce the importance of public exchanges. Our position is that maximizing enrollment and maintaining the health of the individual market will be best achieved by a strong public exchange working with private entities. In the context of the current crisis, with its joint health and economic challenges and their inequitable impact, it is particularly important to support and strengthen our health insurance safety net and pathways to coverage.

Direct Enrollment Option

Perhaps the centerpiece of the Payment Notice is a proposed change, which would allow states to opt into an Exchange Direct Enrollment (Exchange DE) option,/iv in which they would transition from a public exchange to a system based on decentralized enrollment via insurers and web brokers. The exchange would implement a DE pathway by linking its eligibility system to private entities. Consumers would use these entities to shop, select a plan, and enroll in coverage.

This proposed change seems motivated by a desire to facilitate the adoption by other states of the recently approved Georgia 1332 waiver, in which the state proposed to abandon use of HealthCare.gov and transition to a decentralized system of private entities that can conduct enrollment. While Georgia received approval to make this change by submitting a 1332 waiver application, CMS now proposes that going forward, states, though still required to seek federal approval, should not have to submit a 1332 waiver application to make this transition. CMS proposes that states making this transition would still have to maintain a basic website that lists information about plans for comparison purposes, but that site would not perform enrollment. It would rather link to private entities for enrollment. Under this option, either the state or the DE partners would run the navigator program and helpline.

Direct Enrollment is an important tool that can boost enrollment in insurance exchanges. We recently released a report on technology in ACA insurance exchanges, which outlines the advantages of DE, and recommends that CMS should ensure that access to DE technology is possible in every state, regardless of the type of exchange./v

But it does not follow that DE should be the only enrollment option in any state.

From a logistical standpoint alone, this seems risky. According to CMS, DE pathways accounted for an estimated one third of enrollment in 2020 in states that used the Federally Facilitated Exchange (FFE) platform. While this reflects impressive growth, it also means that the majority of consumers in these states continue to enroll through HealthCare.gov. Given this, it seems unwise to close off the major enrollment pathway and entrust the entire process to private entities. Should they become unable or unwilling to process applications efficiently and accurately, access to coverage for millions is at stake.

Beyond this consideration, strong public exchanges are needed in the individual market. Exchanges play an important role in outreach and enrollment assistance. In fact, the desire to improve enrollment outreach is a primary motivation for states to create their own exchanges. The experience of Covered California illustrates the important role played by a state exchange in promoting overall enrollment in the public interest./vi

It will be difficult or impossible to perform this role effectively under a DE system. Public exchanges also have the potential to play a role as active purchasers, and are potentially able to impact plan characteristics related to quality and affordability. Minimizing their market power by diverting enrollment to private entities will undermine this role. Private entities will have incentives to promote enrollment in particular companies, rather than for the market as a whole. While the Georgia waiver does contain an anti-steering provision, it may not be sufficient to deter such behavior. Were DE entities to use data algorithms to identify more and less desirable applicants from the standpoint of insurer profitability, or target more affluent communities for sale of products, they may find ways to differentially handle potential leads, selecting out only the healthiest or most profitable. Despite the fact that there is a risk adjustment program to counteract insurer incentives toward selection, this tool is not perfect, and preventing against selection initially remains the best way to ensure equitable coverage. A strong public exchange is an important backstop against such tendencies.

The situation in the individual market is not the same as in Medicare, where take-up of coverage is essentially universal, traditional fee-for-service Medicare is a default, and advertising for and enrollment in Medicare Advantage plans can reasonably be carried out largely by private carriers. There are also no risks from noncompliant products such as short-term plans. In the individual market, which is relatively new and has transitional membership, a public role remains essential for optimal enrollment outreach and customer support. Therefore, we believe that to maximize enrollment in the individual market, direct enrollment works best as a complement to, rather than as a replacement for, a public exchange.

The role of the public exchange is particularly important from an equity perspective, since some of the functions most important to the lowest-income consumers could be affected by the Direct Enrollment option. One potential concern relates to the ability of a privatized enrollment system to successfully refer eligible applicants to their state Medicaid and CHIP agencies. The Payment Notice proposes that under the direct enrollment pathway, exchanges would maintain responsibility for conducting eligibility determinations for Medicaid and CHIP. However, in a world where private entities are completely responsible for enrollment, it will be difficult to ensure that applicants ever visit the public exchange and are made aware of their eligibility. While there is little evidence that bears directly on this issue, one recent analysis suggests that Medicaid eligible applicants were less likely to be routed to the right place in a DE environment./vii

CMS states that its goal for creating this option is to give states a lower-cost privatized alternative to HealthCare.gov, without the responsibility of creating a state-based marketplace. Yet minimizing the public role in insurance exchanges, particularly at a time when so many Americans are facing economic hardships, may restrict growth for the market as a whole, and endanger access to coverage for the most vulnerable potential enrollees.

This proposed change also seems inconsistent with the intent of the ACA, which was to try to provide consumers with a single forum where they could shop and compare plans with confidence. The establishment and maintenance of an 'internet portal' is clearly outlined in sections 1311 and 1103. Georgia applied to waive parts of section 1311 in its recent 1332 waiver, suggesting that allowing such a conversion in the absence of a waiver, as proposed in the Payment Notice, should be impermissible.

We disagree with the interpretation in the Payment Notice of Section 1311 as not requiring the federal or state government to operate an enrollment website. The ACA also explicitly prohibits the exchange from offering non-QHPs. But under Georgia's proposed DE exchange, these private entities would be allowed to offer both ACA-compliant and noncompliant plans. Further, we disagree with the definition of "exchanges" in the Proposed Rule as including state, federal, and also Direct Employment (DE) pathways.

User Fee

In a recommendation that seems conceptually linked to the advocacy for the DE pathway, CMS also proposes in the Payment Notice that user fees on the exchange should be lowered, from 3.0 percent to 2.25 percent for states using Healthcare.gov, and from 2.5 percent to 1.75 percent for State-Based Exchanges using the Federal Platform (SBE-FP). Generally, actions that reduce the cost of health insurance should be applauded. Yet in this case we are concerned that lowering user fees may reduce the ability of exchanges to maintain their important suite of activities that are in the public interest, including enrollment outreach, technical assistance, and advanced technology to provide customer assistance and provide consumer decision support.

This reduction in the user fee will jeopardize the ability of public exchanges to undertake consumer assistance and enrollment outreach. Many would argue that funding for these services should in fact be increased, and there is evidence that prior cuts to navigators and other enrollment resources have impeded their effectiveness./viii

While we are not opposed to entertaining other reasonable approaches to the financing of exchange operations, and we are certainly advocates of governmental efficiency--our primary concern is that the public exchange role be sufficiently funded so that the federal and state exchanges can adequately perform their essential services. Seen in combination with the proposed DE option, it is hard not to interpret this proposal as part of an overall effort to diminish the role of public exchanges in a manner that we believe would be injurious to the individual market.

1332 Waiver Guidance

We would also like to comment on the proposal about Section 1332 waivers, which are designed to allow states to waive some ACA requirements on the condition that they stay within certain guardrails. In the Payment Notice, CMS proposes to codify the 1332 guidance that they issued in 2018.

This guidance advanced a set of proposals that would facilitate the privatization of the exchanges and the use of tax credits for noncompliant insurance products. Additionally, the guidance would allow states to receive shared savings from reductions in federal tax subsidies for qualified health plans (QHPs), a provision that may create incentives that could be harmful for consumers. So far, Georgia is the only state that has submitted a waiver application making use of this guidance. The 2018 guidance effectively weakens the guardrails in section 1332 to allow waivers that will result in fewer people having affordable, comprehensive health insurance, so long as they theoretically have "access" to such coverage. We believe this guidance is incompatible with a plain reading of section 1332 and the intent of the ACA as a whole. We have expressed our concerns about this guidance in previous regulatory comments./ix

Our views remain the same.

We also observe that codifying this guidance would require the next administration to engage in formal rulemaking to reverse or eliminate this interpretation of the 1332 guardrails, creating an administrative burden and distracting limited resources at a difficult time with no clear substantive benefit.

Special Enrollment Periods

There are several suggestions in the proposal regarding Special Enrollment Periods (SEP) that we support, since they are consistent with increasing the continuity of coverage.

One proposal is to create a new "loss of coverage" SEP triggered by the termination of employer contributions to Consolidated Omnibus Budget Reconciliation Act (COBRA) premiums as an official qualifying event for individual market coverage, both on-exchange and off-exchange. We agree that this should be a qualifying event for individual market coverage, which may become increasingly important in light of the ongoing recession, which could lead more employees to lose employer-sponsored insurance. On that note, we would also like to add our voice to the many who have suggested that CMS consider a SEP related to COVID, which would allow those without coverage to enroll during a limited period that is consistent with the public health emergency.

We agree with the recommendation that consumers be given more time (an additional 60 days) to enroll during a SEP in situations where they were not notified of the triggering event in a timely manner.

We also support the suggestion to permit those who have lost eligibility for tax credits to enroll in a new QHP with a lower metal level, such as switching from a gold to a silver plan. These recommendations are consistent with the overall goal of maintaining continuous coverage and avoiding lapses.

Medical Loss Ratio (MLR)

CMS proposes some adjustments to medical loss ratio (MLR) requirements that we believe are reasonable. Among them is a requirement that prescription drug rebates and other price concessions be deducted from claims for the purposes of MLR and rebate calculation. The suggestion that issuers be given more flexibility in the timing and nature of rebate payments to consumers is appropriate within reason, although some upper limit on the amount of time should continue in order to protect consumers.

Risk Adjustment

There are also several suggestions regarding the risk adjustment program that we support.

These include a proposed new methodology for calculating risk adjustment scores, which is designed to overcome some of the inaccuracies in the current method. The proposal is designed to adjust for Hierarchical Condition Categories (HCC) in a new way, and will include a two-stage specification that adds severity and transplant indicators. We also support the proposal to modify the schedule for collection of data and disbursement of payments so that they occur within the same year that the data validation results are released.

Finally, we agree with the suggestion that would permit states to make multiyear requests to reduce the amount transferred among insurers under the state's risk adjustment program. Thus far, very few states have taken advantage of this opportunity, but it may be an important way to counteract excessive consolidation and promote more competition in insurance markets.

We thank you for providing us with the opportunity to comment. We remain willing to work with this Administration and other health care stakeholders to improve access to high-quality, comprehensive health insurance.

Sincerely,

Richard E. Besser, MD

President and CEO

Robert Wood Johnson Foundation

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Footnotes:

i/ State Health and Value Strategies program. www.shvs.org/about/state-health-and-value-strategies/

ii/ Hix Compare. https://hixcompare.org/

iii/ German Alliance Ins. Co. v. Lewis, 233 U.S. 389 (1914).

Iv/ We use "DE" to refer to both Direct Enrollment and Enhanced Direct Enrollment, which permits private entities to process consumer applications for tax credits.

v/ Manatt Health. December 2020. Technology Opportunities for the ACA Marketplaces. www.manatt.com/insights/white-papers/2020/technology-opportunities-for-the-aca-marketplaces

vi/ Marketing Matters: How Marketing and Outreach Builds Stable Marketplaces and Pays Off for the Federal Government. September 2017. https://hbex.coveredca.com/data-research/library/CoveredCA_Marketing_Matters_Issue_Brief.pdf

vii/ Straw, Tara. "Direct Enrollment" in Marketplace Coverage Lacks Protections for Consumers, Exposes Them to Harm New "Enhanced Direct Enrollment" Heightens Risks. March 2019. www.cbpp.org/research/health/direct-enrollment-in-marketplace-coverage-lacks-protections-for-consumers-exposes

viii/ Mathematica. A Closer Look: Perspectives on the 2019 Marketplace Open Enrollment Period. May 2019. www.mathematica.org/our-publications-and-findings/publications/a-closer-look-perspectives-on-the-2019-marketplace-open-enrollment-period

ix/ The Robert Wood Johnson Foundation. December 2018. Comments from Richard Besser, MD, on Guidance Relating to Section 1332 of the Affordable Care Act. www.rwjf.org/en/library/articles-and-news/2018/12/comments-from-richard-besser-on-guidance-relating-to-section-1332-of-the-aca.html

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2020-0151-0005

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