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DRAFT 2017 LETTER TO INSURERS IN THE FEDERALLY-

FACILITATED MARKETPLACES

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Introduction

On December 23, 2015, the Centers for Medicare & Medicaid Services (CMS) released its

Draft 2017 Letter to Insurers in the Federally-Facilitated Marketplaces. The Letter provides

guidance to issuers seeking to offer qualified health plans (QHPs) and stand-alone dental

plans (SADPs) in the Federally-facilitated Marketplaces (FFMs) or the Federally-facilitated

Small Business Options Programs (FF-SHOPs).

Many of the new proposals were included in CMS’ Proposed Notice of Benefit and Payment

Parameters for 2017. CMS released this rule on December 2, proposing some significant

changes to the Health Insurance Marketplaces. Comments on the notice were due December

21, and CMS is currently reviewing the comments.

Some of the major proposals include:

Network Adequacy – Request for states to establish provider network adequacy

standards for health plans in the FFM, subject to minimum standards set by CMS in

the final rule, based on either time and/or distance.

Ease of Plan Comparison – CMS is proposing to allow issuers the voluntary option of

offering standard cost sharing designs for bronze, silver, and gold plans. This proposal

would ideally make it easier for consumers to compare standardized plans, but issuers

are not required to do so, and would be able to offer more variable plans as well.

Cost Sharing Consumer Protection – CMS proposes out-of-pocket and out-of-network

services billed to a consumer without advance notice of the out-of-network status will

count toward the in-network out-of-pocket maximum for the policyholder.

Expansion of Navigator Duties – Navigators will be responsible for assisting

consumers with additional escalated issues such as Marketplace eligibility appeals,

applying for exemptions through the Marketplace, and navigating the transition from

coverage to care.

Expansion of SHOP Coverage – Employers would be able to offer plans across all

levels of coverage, instead of one metal level as is currently allowed, including

ancillary products.

Keep the Open Enrollment period November 1 to January 31 in order to make

transition into Medicare easier. However, CMS sought comment on this proposal for

years after 2017.

Some rate setting and risk adjustment proposals, including:

Keeping the Marketplace user fee stable for 2017.

Options to transition consumers from Marketplace to Medicare more smoothly in order

to bring down the Marketplace risk pool.

Recalibrating the risk adjustment formula to conform to the most recent data.

Improve the child age rating curve to more accurately reflect risk adjustment and more

accurately price premiums.

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Plans and organizations should review the Draft Letter to Insurers AND Notice of Benefit and Payment Parameters as it will have major impact on the structure of future plans and requirements for years 2017 and beyond. Included below is a review of key changes included in the 2017 Draft Annual Letter, applicable to the 2017 plan year. Please review the Draft 2017 Letter for complete guidance for plan year 2017. Chapter 1: Certification Process for Qualified Health Plans

The certification process for 2017 largely mirrors the 2016 process, and CMS provides some key dates in this section. Please review Chapter 1, Section 1, for a chart of all the key certification dates for the 2017 plan year. Standardized Options For the 2017 plan year, CMS proposed a “standardized option” for each plan level (bronze, silver, gold) with a total of six standardized options. CMS designed the options to be as similar as possible to the most popular options in 2015. Each option is standardized in in-network cost-sharing: deductible, annual limitation on cost-sharing, and copayment or coinsurance for benefits which comprise a large percentage of the average enrollee’s total spending. CMS proposed the options have the four drug tiers currently typically utilized: generic, preferred brand, non-preferred brand, and specialty, with the option to add lower cost tiers. CMS also proposed standard options do not have more than one in-network provider tier. An issuer may offer a standardized option in one tier but not offer an option in the other tiers. However, an option provided at one tier must be provided at the cost sharing reduction tier as well. An issuer is not required to offer a standardized option, however, if the proposal is finalized, CMS is strongly encouraging all issuers to offer at least an option on the silver tier. Chapter 2: Qualified Health Plan and Stand-Alone Dental Plan Certification Standards

In this section, CMS first reviews the licensure and good standing and service area requirements for QHPs. CMS will follow the same approach used in 2016. Network Adequacy For 2017, they are proposing new policies to provide transparency for QHPs around how to best achieve the required access to care. Some states currently review plans for specific quantitative network adequacy standards. CMS will continue to support this function as a role of the State provided they use an acceptable adequacy metric that is commonly used in the health care insurance industry. CMS proposes that States can adopt one of two methods:

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1. The state can utilize default standards similar to the time & distance standards

currently applied to Medicare Advantage (MA) plans and focus on specific provider

and facility types. As with MA plans CMS would anticipate the need to review

variations/gaps as applicable based on local circumstances, such as pattern of care.

CMS analyzed the provider network data submitted as part of the 2016 certification

process and found that, if the MA metrics were applied, there was an overall passage

rate above 90%.

2. States could proactively verify a minimum provider to covered persons rations for the

specialties with the highest utilization rate for their state.

Provider Transition Provider Terminations have been another key focal point for CMS. For 2017 CMS proposes QHPs make a good faith effort to provider written notice of a discontinued provider at least thirty (30) days in prior to termination to all patients seen on a regular basis or receiving primary care services from the provider regardless of the reason for the provider contract termination. The proposal goes on to express a need and provided details around ensuring continuity of care for the beneficiaries during such transitional periods. Network Transparency CMS proposed a standardized labeling system for the breadth of each QHPs provider network in a way that would show transparency in support of the enrollee’s decision making process regarding the type of coverage they are selecting. CMS anticipates each network would be compared to other QHPs in the same geographic area. CMS would identify this network breadth based on QHP provider and facility data submitted as part of the 2017 certification process. CMS is proposing to focus on hospitals, adult primary care, and pediatric primary care, with a separate classification for each or a composite classification. CMS anticipates comparing the total number of providers in the network compared to the number in a county – or the Provider Participation Rate (PPR). Networks within one standard deviation of the mean would be “Standard.” Networks more than one standard deviation above the mean would be “Broad,” and one standard deviation below would be “Basic.” CMS found 68 percent of plans currently fall into Standard, 16% fall into Basic, and 16% into the Broad category. CMS is welcoming comments on this proposal as well which other specialties should be considered.

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Out-of-Network Cost Sharing CMS is also proposing a new out-of-network cost sharing provision. Under the proposal, a plan must provide written notice to an enrollee at least 10 business days before the provision of the benefit that additional costs will be incurred for the essential health benefit, due to an out-of-network provider in an in-network setting, and that any additional charges and cost sharing may not count toward the in-network annual limit. As a best practice, the notice could be provided during pre-authorization. If the plan does not provide such a notice, the new rule would require the plan to apply the out-of-network cost sharing toward the enrollee’s in-network annual limit or cover the out-of-network cost above the annual in-network limit. Accreditation Issuers in their fourth year of certification in 2017 must be accredited based on local performance of its plans based on: clinical quality measures, patient experience ratings, consumer access, utilization management, quality assurance, provider credentialing, complaints and appeals, network adequacy and access, and patient information programs. Issuers in their second or third year should review accreditation standards described in the 2016 and 2015 letter to issuers. Patient Safety Standards for QHP Issuers CMS is proposing issuers who contract with a hospital with more than 50 beds verify the hospital utilizes a patient safety evaluation system as defined by CMS and has implemented a comprehensive person-centered discharge program to improve care coordination and healthcare quality for each patient. Quality Reporting Beginning in the 2016 calendar year, CMS will calculate and publicly display QHP quality rating information on healthcare.gov. Issuers must collect and submit validated clinical qualit y measure data and QHP Enrollee Survey Response data to CMS in 2016, in a standardized form and manner specified by CMS, to support the calculation of these ratings. CMS anticipates issuing technical guidance for 2017 data submissions in the 2016 calendar year. Quality Improvement Strategy Requirements CMS published the Quality Improvement Strategy (QIS): Technical Guidance and User Guide for 2017 Coverage Year in November 2015. The guidance states, beginning in the 2017 plan year, issuers must submit a QIS to the Marketplace if they offered coverage through the Marketplace in 2014 and 2015, provide family and/or adult-only medical coverage, and meet the QIS minimum enrollment threshold. The minimum enrollment threshold is more than 500 enrollees within a product type as of July 1, 2015.

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In applying for QHP certification for 2017, issuers are expected to submit the QIS implementation plan and then implement the QIS no later than January 1, 2017. For more QIS guidance, visit the CMS QIS site. Review of Rates For rates filed for 2017 plans, CMS proposes a health insurer will be required to submit the Unified Rate Review Template for all single-risk pool plans, including new or discontinuing plans. This includes single-risk pool plans experiencing no rate changes, rate decreases, and those that are new single-risk pool plans. CMS is also proposing that a rate increases be subject to review if the average increase, including premium rating factors for all enrollees, weighted by premium volume for any plan within the product, is 10 percent or more. Prescription Drugs In 2017, CMS will perform the following formulary reviews: Formulary Outlier Review – CMS will review each formulary drug list to ensure non-discrimination in benefit design. CMS will perform an outlier analysis by comparing to other QHP plans offered through FFM and will review those flagged as outliers. Clinical Guideline-Based Review of Prescription Drug Coverage – CMS will continue to analyze the availability of drugs recommended by nationally-recognized clinical guidelines used in the treatment of specific medical conditions. The review will also analyze cost sharing requirements. Review of Tier Placement of Prescription Drugs Recommended for Treatment of Specific Medical Conditions – CMS will review formularies to seek out adverse tiering. Supporting Informed Consumer Choice/Meaningful Difference CMS clarifies some meaningful difference definitions for plans by applying more standardized criteria for the 2017 plan year. First, CMS proposes to remove the following criteria in assessing material difference between plans: Health Savings Account eligibility, self-only plan offering, and non-self-only plan offering. CMS will review plans by subgroups based on plan type, metal level, child-only offering, and overlapping service areas. CMS will determine whether the plans are meaningfully different based on the criteria set forth for cost sharing, provider networks, and covered benefits. The criteria can be reviewed on Page 50 of the Draft Letter.

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Third Party Payment of Premiums and Cost Sharing CMS proposed insurers are required to accept third-party payments for premiums or cost sharing from federal and state government programs and programs of the political subdivisions of the state (counties and municipalities). Under the proposal, the same requirement applies for Ryan White HIV/AIDS programs. Finally, this proposal would also apply in cases where an issuer’s downstream entity engages in activities on behalf of the issuer. Data Integrity Tool CMS expects issuers to use the Data Integrity Tool in 2016 for plan year 2017. Issuers choosing not to use the tool should contact their CMS Account Manager to discuss their reasons. Issuers not using this tool risk their plan information not displaying properly on Medicare Plan Finder. CMS will conduct data integrity reviews on all applications. CMS will send issuers notices of data integrity errors which would either display improper plan information to consumers or other irregularities. CMS will also send data integrity results to states during each review round. Chapter 3: Decision Support Tools

This chapter reviews the decision support tools CMS has developed over the years. Provider Directory Links and Provider Lookup Tool: Similar to previous years, a QHP issuer must publish an up-to-date, accurate, and complete provider directory, including whether the provider is accepting new patients, location, contact information, specialty, medical, and other affiliations in an easily-accessible manner. The directory must be updated monthly in order to be considered up to date. Easily accessible means the general public is able to view all the current providers in a plan through a clearly identifiable link on the public website without having to create an account or enter a policy number. The directory must also be available in a machine-readable format as specified in Information Collection for Machine Readable Data for Provider Network and Prescription Formulary Content for FFM QHPs. With this information, CMS updates its directory lookup tool on healthcare.gov. Formulary Drug List and Formulary Lookup Tool: Similar to previous years, CMS will collect FFM QHPs’ formulary drug list URLs as part of the QHP Application and will make formulary drug list links provided by issuers available to consumers on healthcare.gov. The formulary drug list must be published in a manner easily accessible to plan enrollees, prospective enrollees, the state, the Marketplace, CMS, Office of Personnel Management (OPM), and the general public. A formulary drug list is easily accessible when it can be viewed on the plan’s public website through a clearly identifiable link or tab without requiring an individual to create or access an account or enter a policy number; and, if an issuer offers more than one plan, when an individual can easily discern which formulary drug list applies to which plan. This information must also be submitted to CMS in a machine-readable format.

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Out-of-Pocket (OOP) Cost Comparison Tool: CMS offers an OOP cost comparison tool which can help a potential enrollee evaluate key differences across QHPs available through the FFM. Transparency in Coverage Reporting: Please review CMS’ information collection request, CMS-10572, “Transparency in Coverage Reporting by Qualified Health Plan Issuers,” which seeks additional feedback on proposed elements for transparency reporting. Chapter 4: Stand-Alone Dental Plans: 2017 Approach

This section outlines the requirements SADPs are subject to and those they are not. The Standards and Tools applicable to SADPs are: essential health benefits, annual limits on cost sharing, network adequacy, marketing, non-discrimination, acceptance of third-party premium and cost sharing payments, actuarial value, licensure, inclusion of Essential Community Providers (ECPs), Service Area, Data Integrity Tool, Machine Readability. The following sections do not apply to SADPs: accreditation, cost sharing reduction plan variations, unified rate review template, cost sharing reductions, patient safety, quality reporting, meaningful difference, and prescription drugs. Chapter 5: Qualified Heath Plan Performance and Oversight

CMS will continue to monitor QHP issuers’ compliance with certification requirements. CMS notes the good-faith compliance policy only applies through the 2015 calendar year and no longer applies. CMS expects issuers have gained more experience operating in the FFM environment and by now have updated their policies and procedures (P&Ps) to adhere to applicable standards, guidelines, and operations. CMS will continue to perform compliance reviews to monitor compliance with Marketplace-specific requirements and operational standards. These reviews will occur throughout the year. CMS will continue using a risk-based process to select issuers for compliance reviews but may also select issuers based on a specific issue of potential non-compliance. Agents and Brokers CMS proposed that if it reasonably suspects an agent or broker may have engaged in fraud or abusive conduct using Personal Identifiable Information of FFM applicants or enrollees, or in connection with an application, CMS may temporarily suspend the agent’s or broker’s agreement(s) with the FFM for up to 90 calendar days, with the suspension date effective as of the date of the notice to the agent or broker. CMS also proposed that if it reasonably confirms the credibility of such allegation, CMS will terminate the agent’s or broker’s agreement(s) for cause, with the termination effective as of the date of the notice. CMS also proposed a new requirement that agents and brokers must comply with new proposed FFM standards of conduct to protect consumers and ensure proper administration of FFMs. The new requirements include providing FFMs with correct information, obtaining

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consent of the individual, employer, or employee prior to assisting with or facilitating enrollment through an FFM, or assisting with affordability programs (see “Marketing Updates” below). Finally, CMS also proposes that it may deny agents or brokers the right to enter agreements with FFMs in the future and/or impose civil money penalties for non-compliance. Web Brokers Web brokers are required to provide oral interpretation services, including the availability of a telephonic interpreter, in at least 150 languages. This standard is in effect as of November 1, 2015, or one year after registering with the FFM, whichever is later. A web broker must include taglines in non-English languages and any document critical for obtaining health insurance coverage or access to healthcare services. These taglines must include the availability of these services in at least the top 15 languages spoken with limited English proficiency in the pertaining state. The web broker must also translate website content if that non-English population reaches 10 percent or more of the population in that state. CMS intends to publish data identifying non-English languages triggered by this guideline, as well as sample taglines, in February 2016. Vendor Approval Process CMS proposes to amend the requirements on entities interested in becoming an approved vendor by removing the requirement that approved vendors perform identity verification services as CMS intends to continue performing this function and expects issuers to ensure brokers and agents have appropriate licenses required by law. Marketing Updates CMS proposes to require agents and brokers assisting consumers with FFM transactions to provide consumers with correct information without omission of material fact, regarding FFMs and insurance affordability programs, and refrain from marketing or conduct which is misleading or coercive or discriminates based on race, color, national origin, disability, age, sex, gender identity, or sexual orientation. These standards extend to naming of businesses and websites associated with agents, brokers, and web brokers. The use of “Marketplace” or “Exchange” in a URL name may be considered misleading. As a best practice, a non-FFM site should indicate it does not offer all available Marketplace plans. A standardized disclaimer must be prominently displayed to indicate the site is not a Health Insurance Marketplace site, and an active link to healthcare.gov must be provided. Chapter 6: Federally-Facilitated SHOPs

CMS provides a recap of the renewal and non-renewal process for FF-SHOPs. CMS notes it will not support calculating premiums based on average enrollee premium amounts for 2017. CMS will provide guidance when this functionality becomes available in

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FF-SHOP. CMS also notes it plans to make several enhancements to the online system available at healthcare.gov in order to reduce costs and increase FF-SHOP enrollment. Some of these enhancements may include providing more detailed descriptions of plan benefits, enhancing the FF-SHOP Call Center’s ability to respond without requiring a data correction, and adding agent/broker enhancements to encourage their broader participation. Chapter 7: Consumer Support and Related Issues

Similar to previous years, CMS outlines the process for QHP and SADP issuers to investigate and resolve consumer issues. The same prior year standards for internal claims and appeals and external review also apply. CMS reminds issuers language access requirements pertaining to taglines and translation of website content become applicable for issuers the first day of the open enrollment period for the 2017 benefit year. CMS will issue further guidance on the language requirement in February 2016. Please see Chapter 5 above for more information on website requirements. Summary of Benefits and Coverage CMS states revised templates and instruction guides for the 2017 plan year are forthcoming. As a reminder, issuers must include a web address where a copy of the actual policy or group certificate can be obtained. These documents must be readily available to individuals, plan sponsors, participants and beneficiaries shopping for coverage, and prior to submitting an application for coverage. CMS reminds issuers the SBC limited safe harbor no longer applies, and issuers must include on the SBC a website where the actual individual coverage policy or group certificate can be obtained. Chapter 8: Tribal Relations and Support

CMS reminds QHPs to contract with Indian healthcare providers and continues to require QHPs to offer contracts in good faith to all available Indian healthcare providers in the QHP’s service area. CMS reminds plans to refer to the Model QHP Addendum when contracting with Indian healthcare providers. Chapter 9: State-Based Marketplaces in the Federal Platform

CMS proposes to establish a new platform under which an SBM and its QHP can use the federal platform for certain functions, particularly eligibility and enrollment through healthcare.gov, consumer call center, casework processes, and the related IT infrastructure. The Marketplace would be defined as an SBM on the federal platform, or SBM-FP, and would retain the primary responsibility for plan management functions. However, the plan would be subject to certain FFM standards and user fees.

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The SBM-FP would be required to enforce certain QHP and QHP issuer requirements which are no less strict than the FFM requirements, including the following standards:

- Formulary drug list

- Network adequacy

- ECP

- Enrollment periods for qualified individuals

- Enrollment process for qualified individuals

- Termination of coverage or enrollment standards for qualified individuals

- Meaningful difference

- Issuer change of ownership

- Issuer compliance and compliance of delegated and downstream entity

- Maintenance of records

- Compliance review related to the eligibility and enrollment functions

- Casework standards

Eligibility and enrollment requirements for the SBM-FPs would need to mirror the FFM requirements, as the federal platform cannot provide customized options for these processes in 2017. Finally, HHS would have the authority to suppress a plan in order to enforce the above FFM standards when the SBM-FP is not substantially enforcing these requirements. Gorman Health Group Observations:

Risk Adjustment

o 2017 will be the first year actual Affordable Care Act (ACA) enrollee data will be

included in the three-year rolling calendar risk adjustment model. A majority of the

data utilized will be non-ACA, but the inclusion of the ACA enrollee data is the first

step in a true look at the commercial enrollee population for the risk adjustment

program. HHS is looking to make changes to the risk adjustment model factors to

ensure the revenue reimbursement is comparable to the actual cost incurred by the

health plan. This is good news but still falling short of break-even for a lot of diagnoses.

o On the other side, many of the hierarchical condition categories (HCCs) are

decreasing to account for factors which were weighted too high. The HHS proposal is

also looking to modify the methodology to calculate the risk adjustment model factors

to include preventive services. There are indicators the current risk adjustment model

under-predicts the cost for enrollees who do not have a diagnosis relating to an HCC.

So the proposal to include the preventive services is a way to help predict the non-

HCC enrollee risk more effectively.

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o Currently, health plans send three files to the EDGE Server: enrollment, medical

claims, and pharmacy claims. Only the enrollment and medical claims information is

utilized for risk adjustment. The pharmacy claims file is only utilized to calculate the

reinsurance amount. With reinsurance phasing out, HHS is looking for comments on

whether pharmacy data should be included in the risk adjustment model. The inclusion

of the pharmacy data within the model would provide a more complete look at overall

expenses incurred by the health plans, but, without knowing the methodology or

factors associated with the pharmacy data, it's hard to know the impact.

Standardized Plans

o The development of standardized plan offerings is likely to be quite impactful. This is

significant and one of the areas which had the potential to become a requirement for

health plans to offer down the road.

o To make the experience for the consumer better and allow for an easier comparison

between plans, it is possible HHS may eventually require all health plans to have only

the standardized plans offered through the Marketplace. Health plans will likely stuff

offer customized plans outside of the Marketplace.

Cost Sharing Reductions (CSRs)

o The letter defines “substantially similar” for CSR.

o It highlights the differences in plan and benefit designs which need to occur in order

for an off-Exchange plan not to be classified as a substantially similar plan for the

purposes of CSR. This is a big win for health plans because it's been a looming

question all plans have been asking in order to accurately calculate CSR.

Compliance Standards and Reporting

o The Letter also brings to light the compliance standards and reporting coming down

the line for the commercial markets. The areas and data HHS is going to start looking

at is comparable to the Medicare compliance processes in place. Such areas noted in

the letter HHS will be reviewing are the following: complaints, issuer-self reporting of

problems, issuer policies, procedures, and operations, network adequacy analysis,

and indicators of customer service satisfaction. These compliance standards will

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create required tracking and operational changes needed by health plans in order to

comply with the standards.

Network Adequacy

o The CMS has continued their renewed focus towards provider networks for all

governments sponsored health programs.

o Presently all Qualified Health Plans (QHPs) must maintain a network that is sufficient

in number and types of providers, including providers that specialize in mental health

& substance abuse disorder services, to ensure all covered benefits are accessible to

beneficiaries without an unreasonable delay. As with Medicare Advantage Plans,

QHPs are required to attest they meet these standards as part of the certification/re-

certification process.

Provider Terminations

o Terminations have been another key focal point for CMS, with them now proposing

that QHPs make a good faith effort to provide written notice of a discontinued provider

at least thirty (30) days prior to termination.