The Obama Administration recently announced a policy change indicating that the Fiscal Year (FY) 2015 budget sequester will not cut cost-sharing subsidies for low-income enrollees in Affordable Care Act (ACA) health plans. According to a March 10, 2014 Office of Management and Budget (OMB) report detailing the federal government’s sequestration-based spending reductions for FY 2015, and in line with the automatic reductions required by the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) (as amended), the Administration has eliminated the $286 million cut in cost-sharing subsidies included in the FY 2014 report. Over the next ten years, this removal essentially will translate into $10 billion in restored cost-sharing subsidies. Had the cost-sharing subsidies been included in the sequester cuts, as they were in FY 2014, they would have been reduced by 7.3%, or approximately $580 million over ten years.

These cost-sharing subsidies, also referred to as cost sharing reductions throughout the ACA marketplace, are discounts that lower the out-of-pocket costs that enrollees must pay for deductibles, coinsurance, and copayments. As explained in detail on the HealthCare.gov website, these subsidies are only available to low-income individuals who enroll in the ACA’s Silver-tier health plan, which covers 70% of the overall cost of essential health benefits provided to enrollees.

In addition to these subsidies, and as discussed in detail on the HealthCare.gov website, low-income ACA enrollees also are eligible for premium tax credits, or advanced payments that can be used to lower an enrollee’s monthly premium costs. Similar to the premium tax credits, it is reported that the cost-sharing subsidies will also be made as advanced payments, and will be paid out of the same account as the premium tax credit.

As is the case with all budgetary balancing, the removal of the cost-sharing subsidies from the FY 2015 sequestration chopping block means that the sequestration dollars must come from elsewhere. Two new FY 2015 additions to the Centers for Medicare and Medicaid Services (CMS) sequestration roster—ACA risk adjustment and reinsurance programs—could feel the pinch.

The risk adjustment program, for example, which redistribute funds from plans with lower-risk enrollees to plans with higher-risk enrollees and protects insurers by diffusing financial risk across the market, shall be reduced by $247 million in FY 2015. Likewise, the transitional reinsurance program, which provides payments to health plans that enroll higher-cost individuals and thus protect against premium increases, shall be reduced by $731 million in FY 2015. The approximately $1 billion in combined sequestration reductions across these two programs alone could result in a changing landscape of health care costs and premiums, as health plans seek to spread those losses and recoup those funds from elsewhere.

The Centers for Medicare and Medicaid Services (CMS) published its final Notice of Benefit and Payment Parameters for 2015 (Final Rule), altering parameters for premium stabilization programs established by the Affordable Care Act (ACA). The Final Rule primarily concerns the risk adjustment, reinsurance, and risk corridors programs.

The Final Rule completes provisions related to the advance payments of the premium tax credit, cost sharing reductions, and premium stabilization programs, including certain oversight provisions for the premium stabilization programs and key payment parameters for the 2015 benefit year. Using the methodology set forth in the 2014 payment notice, the Final Rule establishes a 2015 uniform reinsurance contribution rate of $44 annually per capita, as well as the 2015 uniform reinsurance parameters—a $70,000 attachment point, a $250,000 reinsurance cap, and a 50 percent coinsurance rate. The Final Rule also decreases the attachment point from $60,000 to $45,000. To maximize the impact of the reinsurance program, CMS provides that for reinsurance contributions collected for a benefit year exceeding total requests for reinsurance payments for the benefit year, CMS will increase the coinsurance rate on its reinsurance payments up to 100 percent.

Continue Reading CMS Issues Final Notice Regarding Payment Parameters for 2015

On February 10, 2014, the Centers for Medicare & Medicaid Services (CMS) published a notice seeking public comment on its revision to data elements being collected for coverage offered on and off the Exchange. In particular, CMS seeks comment on revisions to data collected by the Exchange to ensure that Qualified Health Plans meet certain minimum certification standards, such as those pertaining to essential community providers, essential health benefits, and actuarial value, and to data collected from issuers, group health plans, third party administrators, and plan offerings outside the Exchange pertaining to reinsurance, risk corridors, and risk adjustment. Comments are due by March 12, 2014. The notice is available here.