ModifiedMedicarePolicy CMS-9937-F

HHS Notice of Benefit and Payment Parameters for 2017 (Final Rule)

Final rule establishing 2017 payment parameters and operational provisions for Exchanges and related ACA programs, affecting Federal and State Exchanges, QHP issuers, consumers, agents/brokers, and related stakeholders.

Policy Summary

PayerMedicare

PolicyHHS Notice of Benefit and Payment Parameters for 2017 (Final Rule)

Policy CodePolicy CMS-9937-F

Change TypeFinal rule (modified)

Effective DateMay 9, 2016

Next Review Date

Key ActionSubmit the Unified Rate Review Template (URRT Part I) for all single risk pool products in the individual or small group market.

SourceLink

POLICY UPDATE CHANGES

Regulatory text was finalized to avoid referring to locations where employees live or reside as a principal business address; instead the rating area is the area where the greatest number of an employer's employees within a plan's service area live or reside as of the beginning of the plan year.

Will not interpret product discontinuance or market withdrawal notice periods to create an exception to guaranteed availability; issuers must continue to offer coverage until product discontinuance.

Student health insurance issuers may establish one or more bona fide school-related risk pools and must base rates on the claims experience of those pools with actuarially justified adjustments.

Student health insurance coverage must meet a minimum 60% actuarial value and AV must be calculated using the federal AV calculator.

Student health insurance coverage is required to meet a minimum 60 percent actuarial value and must have AV calculated using the federal actuarial value calculator rather than by actuarial certification.

HHS finalized recalibration and methodological updates to the HHS risk adjustment model for 2017, including updated coefficients and separate trend factors for traditional drugs, specialty drugs, and medical/surgical expenditures.

Finalized cost-sharing reduction adjustment factors for 2015-2017 risk adjustment (including induced utilization factors such as 1.12 for certain silver variants).

HHS will operate risk adjustment in all States for the 2017 benefit year and is not recertifying Massachusetts' alternate methodology.

Revised the 2017 risk adjustment user fee to $1.56 per enrollee per year ($0.13 PMPM) based on updated cost and enrollment assumptions.

Finalized approach to expend any remaining 2016 reinsurance contribution funds as reinsurance payments for the 2016 benefit year (including increasing coinsurance rate up to 100% and potentially decreasing the $90,000 attachment point).

HHS finalized that issuers must report any adjustment made or approved by HHS by August 15 of the reporting year in the current MLR and risk corridors reporting cycle unless it meets 'de minimis' criteria.

HHS raised the default risk adjustment charge calculation from the 75th percentile to the 90th percentile for the second year (2015 benefit year) to increase deterrence against noncompliance.

A separate, lower default charge of 14 percent of premium PMPM was finalized for issuers with 500 or fewer billable member months (individual + small group combined) for the 2016 benefit year.

Issuers acquiring business from an insolvent issuer (or State guaranty funds/liquidators) may accrue prior months' claims experience and submit combined EDGE data if coverage is 'substantially the same' and accumulators are carried over.

For single risk pool coverage effective on or after January 1, 2017, rate increases subject to review are calculated as the premium-weighted average increase for all enrollees (including rating factors), not plan-adjusted index rate.

Issuers must submit the Unified Rate Review Template (URRT/Part I) for all single risk pool products in the individual or small group (or merged) market, regardless of whether any plan within a product is subject to a rate increase.

Trek Health ingests and normalizes Transparency in Coverage data and payer policy updates to give provider organizations a clear view of how commercial reimbursement behaves across markets, payers, and services. Our platform transforms raw payer disclosures into structured intelligence that supports contract evaluation, payer negotiations, and service line strategy. By combining market benchmarks with ongoing policy visibility, Trek helps teams identify variability, risk, and opportunity in commercial reimbursement. The result is faster insight, stronger negotiating positions, and more informed financial decisions.

2017benefit year targeted

60%min student AV

single addressFF‑SHOP rating limit

6.8% / 7.0%sequestration rates

2014–2016years: reinsurance/risk corridors

1.56 USDrisk adj. user fee (annual)

Coverage, Rating, and Program Criteria

Operational criteria and program rules

Operational and program criteria established or finalized in this rule include:

Finalize codification of SBE-FP Exchange model and requirement for Federal platform agreement; apply certain FFE requirements (including agent/broker registration and training) to QHPs offered via SBE-FP.

Introduce standardized plan options (bronze, silver with CSR variations, gold) for individual market FFEs to simplify consumer comparison while permitting non-standard options.

Finalize network adequacy categorization and provider transition provisions for QHPs on FFEs; no minimum State quantitative threshold finalized but continued use of timedistance standards in issuer review.

Amend Navigator and assister program requirements: require training prior to outreach, require Navigators to provide targeted assistance to underserved populations, and expand certain post-enrollment duties beginning in 2018.

Establish open enrollment period dates: Nov 1–Jan 31 for 2017–2018 benefit years and Nov 1–Dec 15 for 2019 and later benefit years.

Finalize risk adjustment methodology updates including incorporation of preventive services into simulated plan liability and recalibration using 2012–2014 MarketScan data; amend risk corridors reporting of allowable costs.

Finalize premium adjustment percentage and maximum annual limitation on cost sharing for 2017, finalize CSR plan variation limits, and finalize standards for SADPs and third-party payments.

Finalize SHOP 'vertical choice' model for FF-SHOPs beginning Jan 1, 2017 with opt-out flexibility for certain States and SBEs.

Rate review and single risk pool disclosure

Requirements for issuers and State posting of rate information for single risk pool coverage.

Issuers offering single risk pool coverage in the individual or small group market must submit the Unified Rate Review Template (URRT/Part I) for all products, including plans with rate decreases, unchanged rates, and new plans.

HHS will disclose proposed rate increases for single risk pool coverage at a uniform time on the CMS website, including increases under 10 percent.

States with Effective Rate Review programs must post proposed and final rate increases for single risk pool coverage at a uniform time following the established uniform timeline process; States with effective programs retain certain flexibility on submission/posting dates consistent with CMS timelines.

Guaranteed availability and renewability

Guaranteed availability and product discontinuance/market withdrawal:

Issuers must continue to offer coverage to and accept every employer or individual in the State that applies for coverage under a product until the product is formally discontinued; no exception to guaranteed availability will be recognized during product discontinuance or market withdrawal notice periods.

For individuals who enroll after the discontinuation notice deadline but before discontinuation, providing prominent and effective notice at application or enrollment satisfies the issuer's notice obligations to late enrollees.

State options

States may prohibit issuers from restricting small group availability based on employer contribution or participation rules or may adopt other restrictions under State authority.

Geographic rating rules

Geographic rating and principal business address determination for employers:

If an employer has a registered in-State principal business address (not solely for service of process and constituting a substantial worksite), that address is the principal business address for rating purposes.

If an employer lacks an in-State business location (or only has an address solely for service of process), the principal business address is the business address in the State where the greatest number of employees within the plan's service area work as of the beginning of the plan year; for network plans with limited service areas an additional principal business address within the plan's service area may be identified where the greatest number of employees in that service area work.

Due to current operational constraints, SHOPs (including FF-SHOPs) may use the employer address used to establish SHOP eligibility for plan availability and geographic rating and an FF-SHOP may be limited to a single principal business address per State for premium calculation purposes; FF-SHOP may investigate and correct reported inaccurate addresses.

Operational limitation

Student health insurance standards

Student health insurance coverage rules:

Student health insurance issuers may establish one or more bona fide school-related risk pools (including pools spanning multiple institutions) provided pools are based on bona fide school-related classifications and not health-status factors; rates for such pools must reflect the pool's claims experience and any within-pool rate adjustments must be actuarially justified.

States may require broader student risk pooling than the federal minimums if they choose.

Outdated provisions permitting annual dollar limits for pre-2014 policy years are removed consistent with EHB protections effective Jan 1, 2014.

Student health insurance AV criteria

Student health insurance coverage requirements and disclosure expectations.

Student health insurance plans must meet a minimum actuarial value of 60 percent for policy years beginning on or after July 1, 2016.

Actuarial value for student health insurance must be calculated using the federal actuarial value calculator (not by individual actuary certification).

Issuers must disclose in plan summary materials the plan's actuarial value and the metal level (or next lowest metal level) the coverage would satisfy based on its actuarial value; this disclosure is not required in the SBC until the SBC template is updated.

Risk adjustment criteria and updates

Risk adjustment model updates, calibration choices, and planned policy engagement.

HHS recalibrated risk adjustment model coefficients for 2017 by blending 2012–2014 MarketScan data and incorporated separate trend factors for traditional drugs, specialty drugs, and medical/surgical expenditures to better reflect treatment cost growth.

Preventive services were incorporated as covered charges with zero cost sharing in the simulation of plan liability for recalibration, increasing relative age-sex coefficients particularly in lower metal tiers.

HHS will explore incorporation of prescription drug data and adjustments for partial-year enrollment through a White Paper and a public risk adjustment conference; any model changes will follow notice-and-comment rulemaking as appropriate.

Sequestration applies to reinsurance and risk adjustment payments for FY2016 at specified rates (sequestered funds become available in FY2017 absent further Congressional action).

Risk adjustment model criteria and factors

Stance and operational details in this section pertain to model inputs, treatment of partial-year enrollees, and the finalized factor tables for adults.

HHS will evaluate using pharmacy claims as predictors or proxies for missing diagnoses, balancing predictive gains against potential incentives to alter prescribing behavior; exploration to occur in White Paper and conference.

Model estimation uses weighted least squares regression with weights equal to fraction of year enrolled to account for partial-year enrollees; future recalibrations will continue to consider partial-year effects.

Adult demographic and diagnosis (HCC) factor tables were finalized using blended 2012–2014 coefficients with incorporated trend adjustments; tables list numeric coefficients by metal level and represent predicted relative incremental expenditures.

For an enrollee, the sum of applicable HCC and demographic factors yields the total relative predicted expenditures used in the risk adjustment payment transfer formula.

Child risk adjustment factor entries (selected examples)

Table of child risk adjustment model factors by demographic and diagnosis categories with coefficients per metal tier.

Age 2-4 Male demographic factors: Platinum = 0.224; Gold = 0.145; Silver = 0.067; Bronze = 0.021; Catastrophic = 0.020.

Selected diagnosis factor examples (child model): HIV/AIDS diagnosis factor — Platinum 4.875; Gold 4.437; Silver 4.110; Bronze 4.033; Catastrophic 4.032.

Selected high-severity diagnosis examples: Septicemia/Sepsis/SIRS/Shock — Platinum 17.228; Gold 17.069; Silver 16.969; Bronze 16.994; Catastrophic 16.995; Metastatic cancer — Platinum 36.648; Gold 36.404; Silver 36.207; Bronze 36.207; Catastrophic 36.207.

Table 3 continuation — no coverage criteria

Table entries continue listing condition groups and factor values by metal level; no coverage criteria provided in these chunks.

Continued child risk adjustment factor table entries listing multiple condition groups (e.g., congenital heart disorders, connective tissue disorders, myelodysplastic syndromes) with numeric factor values by metal level; reference only — no coverage decision criteria in these table continuations.

Finalized operational criteria

Operational criteria and parameters finalized in this section:

Finalize cost-sharing reduction adjustment factors to be applied to risk scores for 2015–2017; apply induced utilization multiplier of 1.12 for specified silver plan variants and corresponding Medicaid alternative plan variations.

HHS will operate risk adjustment in all States for the 2017 benefit year; Massachusetts' alternate methodology will not be recertified.

Finalize 2017 risk adjustment user fee at $1.56 per enrollee per year ($0.13 PMPM) based on revised contract cost and enrollment assumptions.

For the transitional reinsurance program, HHS will expend any remaining 2016 reinsurance contribution funds as reinsurance payments for the 2016 benefit year and may increase coinsurance up to 100% and potentially decrease the $90,000 attachment point to exhaust remaining contributions.

Operational criteria for reinsurance, risk corridors, and risk adjustment data processes

Key finalized operational criteria and program stances described in these sections:

HHS will expend any remaining reinsurance contribution funds as reinsurance payments for the 2016 benefit year consistent with program statute and the goal of premium stabilization.

HHS will not extend direct audit authority to third-party administrators or administrative services-only contractors; however, contributing entities that use such third parties must ensure those third parties cooperate with any HHS audit of the contributing entity.

HHS will adjust 2015 risk corridors payments or charges to reflect differences between certified estimates and actual cost-sharing reductions where applicable, and will true-up unpaid claims estimates for 2014 and 2015 in reporting for 2015 and 2016 benefit years.

HHS will conduct EDGE data quantity and quality analyses after the April 30 data submission deadline, notify issuers of outliers and allow 10 calendar days to submit justifications for final analyses, and will assess default risk adjustment charges where data quality/quantity thresholds are not met.

MLR and risk corridors reporting criteria

Reporting and adjustment requirements for MLR and risk corridors submissions

Issuers must report any adjustment made or approved by HHS by August 15 (or next business day) of the reporting year in the current MLR and risk corridors reporting cycle unless the adjustment meets 'de minimis' criteria; HHS will assist resubmissions when necessary.

Require reporting of CSR amounts and adjustments per §153.710(g)(1)(iii); adjust reported amounts to reflect actual CSR calculations and reimbursements where applicable.

Issuers must adhere to the July 31 regulatory deadline for MLR and risk corridors data submissions and include HHS-notified adjustments received by August 15 in the current reporting cycle.

Default risk adjustment charge rules

Default charge application for noncompliant issuers

If an issuer fails to establish a dedicated distributed data environment or submits inadequate EDGE data, HHS may assess a default risk adjustment charge calculated as Tn = Cn * En where Cn is a PMPM default charge derived from statewide average premium and a percentile of plan risk transfer amounts.

For the 2015 benefit year (second year of risk adjustment), HHS raised the percentile used to calculate the PMPM default charge from the 75th to the 90th percentile to increase deterrence against noncompliance.

Small-issuer rule

For issuers with 500 or fewer billable member months (individual + small group combined), HHS finalized a separate lower default charge equal to 14 percent of premium PMPM for the 2016 benefit year to limit operational burden on very small issuers.

Insolvent issuer data submission rules

Treatment of insolvent issuers and acquiring entities

An acquiring entity (including another issuer, liquidator, or State guaranty fund) that assumes liability and provides 'substantially the same' coverage may accrue prior months' claims experience and submit combined EDGE data so that enrollees' risk and claims costs are properly reflected; acquiring entity must carry over accumulators for deductibles and annual limits and submit complete, accurate data.

Guaranty fund/liquidator participation

A State guaranty fund or liquidator that assumes liability may participate in the risk adjustment and reinsurance programs to the extent permitted by State law, submitting EDGE data on behalf of the insolvent issuer while the insolvent issuer retains coordination responsibility for EDGE submissions.

HHS will work with acquiring entities, issuers, and States to facilitate EDGE submissions in insolvency scenarios and provide further operational guidance as needed.

Operational assistance

Rate review calculation methodology

Rate increase calculation for rate review

For single risk pool coverage effective on or after January 1, 2017, a rate increase subject-to-review must be calculated as the premium-weighted average rate increase for all enrollees for any plan within the product, capturing all rating factors (rating area, age, tobacco) rather than relying on a plan-adjusted index rate; plan-level trigger remains determinant for subject-to-review status.

State-required benefits and EHB criteria

Rules determining when State-required benefits are considered EHB and who must defray costs.

Benefits required by State action on or before December 31, 2011 may be considered EHB and thus do not require the State to defray the cost to QHPs.

Benefits required by State action after December 31, 2011 that apply directly to QHPs are not considered EHB (unless enactment is directly attributable to State compliance with Federal requirements); States generally must defray the cost of such additional State-required benefits.

Large-group embedded benefits

A benefit embedded in a large group base-benchmark plan that is only required in the large group market is not an EHB for individual/small group QHPs unless it applies directly to those markets; if large group plans are sold as QHPs, the State must defray costs for those QHPs covering the mandated benefit.

States should apply benefit mandates uniformly within a given insurance market; imposing different mandates for QHPs and non-QHPs in the same market may violate ACA section 1252 and can trigger defrayal obligations.

Coding, Factors, and Tables

Actions Required by Issuers, Agents, and Exchanges

Note

Regulatory codification and 2017 risk adjustment user fee

The final rule codifies these regulations in 45 CFR parts 144, 147, 153, 154, 155, 156, and 158 and establishes a 2017 HHS risk adjustment user fee to offset Federal costs of operating the risk adjustment program. Part 153 now specifies HHS processes for evaluating risk adjustment and reinsurance data submitted to an issuer's dedicated distributed data environment and includes the 2017 risk adjustment user fee. Issuers must follow the codified requirements and the fee schedule as published by HHS for 2017.

Codification: 45 CFR parts 144, 147, 153, 154, 155, 156, 158
2017 risk adjustment user fee published under Part 153

Prior Authorization

SHOP operational limitation and verification

Due to current operational limitations, FF-SHOPs (and SHOPs that rely on the Federally-facilitated platform) may not accommodate multiple principal business addresses within a State for premium calculation purposes. When a single-employer application is completed in a State with an FF-SHOP, plan availability and premium calculations will be based on the principal business address entered on the FF-SHOP employer application. If operational limitations prevent fully implementing geographic-rating policies, SHOPs may use the address that established the employer's SHOP eligibility to determine available plans and the applicable rating area for premium calculation.

Key Terms and Acronyms

Selected acronyms

FFEFederally-facilitated Exchange (FFE).

SBE-FPState-based Exchange using the Federal platform (SBE-FP).

QHPQualified Health Plan (QHP).

EHBEssential Health Benefits (EHB).

Actuarial value — definition

DefinitionActuarial value (AV) is calculated based on provision of EHB to a standard population per section 1302(d).

GuidanceSection 1302(d)(3) directs HHS to develop guidelines that allow de minimis variation in AV calculations.

Policy Summary

PayerMedicare

PolicyHHS Notice of Benefit and Payment Parameters for 2017 (Final Rule)

Policy CodePolicy CMS-9937-F

Change TypeFinal rule (modified)

Effective DateMay 9, 2016

Next Review Date

Key ActionSubmit the Unified Rate Review Template (URRT Part I) for all single risk pool products in the individual or small group market.

SourceLink

On This Page

Single principal business address governs plan availability and premium calculations in an FF-SHOP when operational limitations exist
States/SHOPs may use the address used to establish employer eligibility for determining rating area

Note

Model estimation and enrollment-fraction weighting

The risk adjustment model coefficients were estimated using weighted least squares regression, where the weight equals the fraction of the year an individual is enrolled. Factors for each HCC and demographic category are then expressed as regression dollar values divided by a weighted average plan liability for the full modeling sample. The finalized factors represent predicted relative incremental expenditures and are applied by summing factor values for an enrollee's HCCs.

Estimation method: weighted least squares regression
Weighting: fraction of year enrolled (partial-year enrollment weighting)
Factors: regression dollar values divided by weighted average plan liability

Documentation Required

Reference: Child Risk Adjustment Model factors

HHS finalized the Child Risk Adjustment Model factor tables (Table 3 and continuations) that list demographic and diagnosis factor coefficients by metal level for child age/sex categories and pediatric HCCs. Issuers and implementers must use these finalized child factors (including demographic cells such as age 2–4 male/female, age 5–9, age 10–14, age 15–20, and the detailed diagnostic HCC entries) when calculating risk scores for child enrollees in the HHS risk adjustment program.

Use finalized Table 3 child demographic factor coefficients by age/sex and metal level
Use finalized child HCC diagnosis factor entries as published (Table 3 continuations)
Apply same methodology (weighted enrollment fraction and factor normalization) as adult model

Denial Risk

Audit authority over third parties (proposal not finalized)

HHS considered but did not finalize a proposal to extend HHS audit authority directly to third-party administrators, administrative services-only contractors, or other third parties that assist contributing entities with reinsurance program compliance. However, the final rule requires that a contributing entity that uses such third parties must ensure those third parties cooperate with any audit of the contributing entity under §153.405(i). HHS (or its designee) retains the authority to audit the contributing entity itself.

HHS will not extend audit authority directly to third parties (proposal not finalized)
Contributing entities must ensure any third party they use cooperates with audits of the contributing entity
HHS retains authority to audit the contributing entity under §153.405(i)

Billing Rule

Rate filing submission requirements (URRT for all single risk pool products)

All issuers offering single risk pool products in the individual or small group market (including merged markets) must submit the Unified Rate Review Template (URRT / Part I of the Rate Filing Justification) for each single risk pool product, regardless of whether any plan in the product has a rate increase. States with Effective Rate Review Programs may set issuer submission dates (not later than July 15, 2016); in States without effective programs, the latest permissible submission date is May 11, 2016. CMS will post proposed and final rate information for all single risk pool coverage at a uniform time (by the first day of open enrollment), and issuers should follow state-set deadlines that comply with these maximum dates.

URRT (Part I) required for all single risk pool products in individual and small group markets
States with Effective Rate Review Programs: issuer submission date may be set by State, but no later than July 15, 2016
States without Effective Rate Review Programs: issuer submission no later than May 11, 2016
CMS will post proposed and final rate information for all single risk pool coverage at a uniform time (by first day of open enrollment)

ContextAV levels define metal tiers and are used in model and plan comparisons.

Plan year — interpretation

Plan year lengthPlan year interpreted to mean a period no longer than 12 months; may be shorter under certain circumstances.

ScopeApplies to both grandfathered and non-grandfathered group health plans in interpretation of §144.103.

Implementation noteStudent plans often use policy year terminology due to academic cycles; rule adapted accordingly for student AV timing.

Small employer / Large employer

Small employer definitionRegulatory definitions revised to align with statutory changes (Protecting Affordable Coverage for Employees Act); determination for new employers based on expected average employees.

Large employerFinalized revisions to definitions of large and small employer in §§144.103 and 155.20 as proposed.

Rating implicationRating area for small group plans is based on the group policyholder's principal business address per §147.102.

Principal business address (small group rating)

Principal business address ruleIf an employer has a registered in-State principal business address, that location is the principal business address unless registered solely for service of process and not a substantial worksite.

Alternate addressIf no in-State principal business address is registered (or only for service of process), employer designates the business address in the State where the greatest number of employees work as of the beginning of the plan year.

SHOP operational noteFF-SHOPs may use the address establishing employer eligibility and operationally may be limited to a single principal business address per State for premium calculation.

Principal business address — short entry

Short refPrincipal business address: in-State registered address used for rating unless only for service of process.

UsageDetermines rating area for small group plans under §147.102.

No definition of 'substantial worksite'Final rule does not provide a specific definition; HHS will monitor implementation for potential clarification.

Bona fide school-related classification

Bona fide classificationStudent health insurance risk pools must be based on a bona fide school-related classification and not on a health factor (per §146.121).

Risk pool flexibilityIssuers may establish one or more risk pools per institution or across institutions; States may require broader pooling.

Rate basisRates must reflect the claims experience of the risk pool and any adjustments must be actuarially justified.

Actuarial value calculator (federal)

AV calculatorActuarial value must be calculated using the federal AV calculator for student health insurance plans.

PurposeEnsures comparability with other individual market coverage and transparency for students and dependents.

DisclosureIssuers must disclose AV and applicable metal level or next lowest metal level in plan materials.

HHS risk adjustment model — name & use

Model name / useHHS risk adjustment model predicts plan liability using age, sex, and HCC diagnoses; separate models for adults, children, and infants (§153.320).

ApplicationPlan liability predictions feed into the risk adjustment payment transfer formula to determine payments/charges.

CalibrationModels were recalibrated using blended 2012–2014 MarketScan data for 2017 with updated trend factors and preventive service adjustments.

Preventive services in the risk model

Preventive services handlingPreventive services were incorporated into simulated plan liability as covered charges with zero cost sharing for model calibration.

MethodIdentified preventive services in MarketScan samples and added 100% of preventive services covered charges to simulated plan liability.

ImpactAdjusting for preventive services increases age-sex coefficients relative to HCC coefficients, especially in lower metal tiers.

HHS HCCs — role in model

HCC usageHHS HCCs are used as diagnosis factors in the risk adjustment model; factors represent predicted relative incremental expenditures per HCC.

Interaction groupsHCC groups (e.g., G03, G06, G08) are used in interaction factors with 'severe illness' indicators in the model tables.

TablesTables list HCCs and numeric factor values by metal level for adult, child, and infant models.

Prescription drug data consideration

Pharmacy data considerationHHS will explore incorporation of prescription drug (pharmacy) claims as potential predictors or proxies for missing diagnoses in a White Paper and public conference.

BenefitsPharmacy claims may improve predictive power and help smaller issuers with limited medical coding experience.

CaveatsHHS cautions about gaming risks and notes need for definitions and guardrails in any pharmacy data use.

Plan metal levels (definitions)

Metal tiersRisk adjustment factors provided for five metal levels: Platinum, Gold, Silver, Bronze, Catastrophic.

UseNumeric factors listed by condition and metal level to predict relative expenditures across plans.

Tables presentAdult, child, and infant factor tables include condition-level coefficients and interactions by metal level.

Risk adjustment factor — numeric multiplier

Risk adjustment factorNumeric weight applied to conditions (HCCs) in the HHS adult risk adjustment model representing predicted relative incremental expenditures.

EstimationDollar coefficients estimated via weighted regressions and normalized by a weighted average plan liability for the modeling sample.

SummationAn enrollee's risk score is the sum of demographic and HCC factors (plus interactions and adjustments).

HCC group examples (G06/G08/G03)

HCC group examplesHCC groups referenced include G06, G08, and G03 (e.g., G03 = musculoskeletal HCCs 54, 55) used in severe-illness interactions.

Use in interactionsSevere illness x HCC group interaction factors are listed with numeric coefficients by metal level.

ReferenceTables show group-based interaction entries used in modeling high-severity cost multipliers.

HCC group G03 — musculoskeletal example

G03 exampleHCC group G03 (musculoskeletal category including HCCs 54 and 55) appears in 'severe illness x HCC group G03' interaction entries with coefficients by metal level.

Interaction coefficientsPlatinum interaction example for G03 reported ≈1.906 in table excerpts.

ContextUsed to adjust predicted expenditures when severe illness indicators co-occur with G03 conditions.

Child risk adjustment multiplier

Child risk multiplierNumeric multipliers assigned to child diagnostic condition groups adjust plan liability risk scores across metal levels (examples include HIV/AIDS ≈4.875 Platinum; Metastatic Cancer ≈36.648 Platinum).

Age/sex factorsChild demographic factors by age and sex are listed separately by metal level in Table 3.

TablesChild model factors include many condition-level numeric multipliers by metal tier used to compute child risk scores.

Infant severity levels 1–5

Infant severity levelsInfant model uses severity levels 1–5 (Severity 5 = highest) mapped to maturity categories (Extremely Immature, Immature, Premature/Multiples, Term, Age 1).

Severity mappingInfant risk scores determined by inclusion in one of 25 mutually exclusive groups based on maturity and severity.

Large numeric rangeSeverity 5 factors are especially large (e.g., Extremely Immature Severity 5 Platinum = 378.927).

Plan metal levels — listing

Metal level listingMetal levels defined as Platinum, Gold, Silver, Bronze, Catastrophic across factor tables.

ApplicationUsed consistently across adult, child, and infant risk adjustment factor tables.

ComparabilityEnables comparison of predicted liabilities across plan generosity tiers.

Maturity categories (infant model)

Maturity categoriesInfant maturity categories: Extremely Immature, Immature, Premature/Multiples, Term, Age 1 used to group infants in risk model tables.

Mapping to HCCsTables 5–6 map HHS HCCs into these maturity categories and severity levels for the infant model.

UseCategory membership determines which severity-level numeric factor applies to an infant enrollees' risk score.

Severity level mapping

Severity mappingSeverity Levels 1–5 map to sets of HCC groupings for infants; Level 5 is highest severity and includes conditions like metastatic cancer, transplant status, respirator dependence, and heart assist devices.

Operational useSeverity level determines the numeric factor applied in infant risk score calculation.

TablesTABLE 6 lists HCCs included in each severity category for the infant model.

Cost-sharing reduction adjustment (1.12)

CSR multiplicative factorCost-sharing reduction adjustment: multiplicative factor = 1.12 applied to risk scores for specified silver plan variations and corresponding Medicaid alternative plan variants (effective 2015–2017).

ApplicationMultiplier is multiplied against the sum of demographic, diagnosis, and interaction factors in the risk score.

EvaluationHHS will continue to evaluate the adjustment as more data become available.

Risk adjustment variables

Risk adjustment variablesKey variables include State average premium (PA_s), plan liability risk score (PLRS_i), plan AV (AV_i), allowable rating factor (ARF_i), induced demand factor (IDF_i), geographic cost factor (GCF_i), and plan share of State enrollment (s_i).

UseThese variables are inputs to the risk adjustment payment transfer formula determining payments/charges.

DenominatorDenominator sums across all plans in the risk pool in the State for the payment transfer calculation.

Induced utilization factor

Induced utilization factorMultiplicative factor applied to adjust risk scores for plan variants with induced utilization (examples: 1.12 for some silver variants).

PurposeAccounts for increased utilization by enrollees receiving CSRs or in corresponding Medicaid alternative plan variations.

Table referenceTABLE 7 lists induced utilization factors by plan AV and FPL range (e.g., 1.12 for 100–200% and some silver variants).

Risk corridors (temporary program)

Risk corridors programTemporary risk corridors program applies to QHP issuers for benefit years 2014–2016.

ScopeProvisions and reporting relate to risk corridors payments and allowable cost true-ups for 2014–2016.

True-up policyHHS finalized true-up of 2014 and 2015 unpaid claims estimates in reporting for 2015 and 2016 benefit years.

EDGE server / distributed data environment

EDGE server definitionDedicated distributed data environment (EDGE server) used by issuers to provide reinsurance and risk adjustment data to HHS; issuers must submit EDGE data by April 30 data deadline.

Interim reportsHHS deleted the interim discrepancy reporting process (§153.710(d)) effective with 2016 benefit year but maintains help desk and support for data issues.

Issuer responsibilitiesIssuers must respond to final EDGE reports within 15 calendar days and adhere to data quantity/quality thresholds.

Substantially the same coverage (insolvent acquisitions)

Substantially the same coverageAn acquiring entity may accrue prior months' claims experience if coverage terms are 'substantially the same' and accumulators are carried over; acquiring entity must submit complete and accurate claims and baseline data to HHS.

Accrual requirementAcquiring entity must carry over accumulators for deductibles and annual limitations on cost sharing to meet the standard.

Operational assistanceHHS will work with issuers and acquiring entities to facilitate EDGE submissions in insolvency cases.

Default risk adjustment charge — formula and parameters

Default risk adjustment charge formulaTotal default charge Tn = Cn * En (Cn = PMPM amount; En = enrollment in member-months).

2015 percentile changeFor 2015 benefit year, Cn is calculated using the 90th percentile of plan risk transfer amounts (previously 75th).

Small-issuer default optionA separate lower default charge of 14% of premium PMPM was finalized for issuers with ≤500 billable member months for 2016 benefit year.

Federal platform agreement & declaration letter

Federal platform agreementAgreement between a State Exchange and HHS under which the State Exchange relies on the Federal platform for select Exchange functions; to be executed after Blueprint approval process.

Declaration letter timingStates must submit a declaration letter ~21 months prior to SBE first enrollment or ~9 months prior to SBE-FP open enrollment to initiate transition planning.

Blueprint timingBlueprint submission and approval timelines specified (e.g., 15 months prior for State Exchange); agreements published later by HHS.