DraftMedicarePolicy CMS-9916-P

HHS Notice of Benefit and Payment Parameters for 2021 (proposed rule)

Proposed HHS rule setting payment parameters and program provisions under the ACA for Exchanges, risk adjustment, cost-sharing, user fees, special enrollment, and related operational requirements; affects issuers, Exchanges, states, and enrollees nationally.

Policy Summary

PayerMedicare

PolicyHHS Notice of Benefit and Payment Parameters for 2021 (proposed rule)

Policy CodePolicy CMS-9916-P

Change TypeProposed rule with multiple material changes (HCC updatesrecalibrationHRA notices)

Effective DateN/A

Next Review DateN/A

Key ActionSubmit comments by March 2, 2020; issuers and plan sponsors should review proposed HCC and ICD‑10 crosswalk changes and HRA notice requirements.

SourceLink

POLICY UPDATE CHANGES

Proposes requiring non-Federal governmental excepted benefit HRAs to provide an annual notice describing eligibility, benefit limits, and a benefits summary, provided no later than 90 days after participant enrollment and annually thereafter.

Proposes to discontinue use of MarketScan data and instead recalibrate HHS risk adjustment models using the three most recent years of enrollee-level EDGE data beginning with the 2021 benefit year.

Proposes a large set of HHS-HCC changes (adds, deletes, regroupings, hierarchies, constraints) to payment HCCs to be incorporated beginning with the 2021 benefit year.

Multiple new HCCs are proposed across adult, child, and infant models (examples: diabetes type 1 additive HCC; severe head injury HCC; narcolepsy HCC; exudative macular degeneration HCC; vertebral fracture HCC).

Adjust Hepatitis C RXC coefficient (pricing adjustment) to reflect market pricing changes and constrain it to average expected drug costs for 2021 recalibration.

Proposes to make counting of drug manufacturer coupon amounts toward the annual limitation on cost sharing optional for plans and issuers, rather than required in certain circumstances.

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.

2021Plan year

+17Adult model net HCC change

+12Child model net HCC change

+8Infant model net HCC change

3.0% / 2.5%User fee rates (FFE / SBE-FP)

8.27%Required contribution % (2021)

Coverage, Risk Adjustment, and Enrollment Proposals

inv-01: Proposed coverage and operational criteria

Operational and coverage-related proposals included in the proposed rule.

HHS proposes multiple operational and coverage changes to Exchanges, risk adjustment, cost-sharing, user fees, special enrollment, and related program provisions affecting issuers, Exchanges, states, and enrollees for the 2021 benefit year; see specific proposals below.

Risk adjustment recalibration: Recalibrate HHS-operated risk adjustment models using a blend of the 3 most recent years of enrollee-level EDGE data beginning with the 2021 benefit year and discontinue reliance on MarketScan data.

HCC updates: Implement multiple HHS-HCC additions, deletions, splits, regroupings, hierarchy changes, and constraints in the 2021 benefit year risk adjustment models to reflect ICD-10 and recent claims experience.

RXC and interactions: Apply RXC (prescription drug factor) adjustments and RXC×HCC interaction coefficients (including a constrained Hepatitis C RXC pricing adjustment) in the recalibrated model and plan-liability simulations.

High-cost risk pool: Retain the high-cost risk pool parameters (threshold $1,000,000; coinsurance 60%) and continue truncation for model factors to reflect HC risk pool treatment.

CSR adjustment: Continue CSR adjustment factors (including Massachusetts wrap-around factor 1.12) and induced utilization factors in risk score plan-liability calculations.

Enrollment and SEP changes: Propose multiple special enrollment period (SEP) operational changes including shortened time to effective dates, standardized binder payment options for retroactive SEPs, flexibility for QSEHRA non-calendar year SEP eligibility, and termination/retroactive termination flexibilities for technical errors and PDM-identified cases.

Notices and termination: Propose requiring termination notices for all Exchange coverage terminations and notice requirements for non-Federal governmental excepted-benefit HRAs (annual + initial within 90 days).

Drug coupon policy and MLR reporting: Propose making counting of drug manufacturer coupon amounts toward the annual limitation on cost sharing optional (to the extent consistent with state law) and clarifying MLR reporting to require deduction of PBM-retained price concessions from incurred claims and consistent reporting of outsourced expenses.

State reporting and EHB: Propose annual state reporting of state-required benefits in addition to EHB (content, attestations, timing) and republishing EHB-benchmark plan options and actuarial/certification requirements with proposed submission deadlines.

inv-02: Notice and applicability criteria

Proposed regulatory requirement and related HRA rule context:

HHS proposes to add §146.145(b)(3)(viii)(E) to require non-Federal governmental plan sponsors that offer excepted-benefit HRAs to provide a specified notice to eligible participants, consistent with the HRA rule preamble and DOL SPD timing/format rules.

Content requirement: notice must describe eligibility conditions, annual or lifetime caps or other limits on benefits, and a description or summary of benefits consistent with DOL summary plan description regulations (29 CFR 2520.102-3(j)(2) and (3)).

Timing and manner: notice must be provided annually (and consistent with DOL timing rules), and in a manner reasonably calculated to ensure actual receipt (e.g., same manner as other plan documents).

Applicability: proposed to apply to excepted-benefit HRA plan years beginning on or after 30 days following the effective date of the final rule.

inv-03: Excepted Benefit HRA Notice Criteria

Notice content and timing requirements proposed for non-Federal governmental excepted benefit HRAs.

Provide an annual notice that describes conditions pertaining to eligibility to receive benefits, annual or lifetime caps or other limits on benefits, and a description or summary of benefits (consistent with DOL SPD regs).

Initial/annual timing: initial notice no later than 90 days after the employee becomes a participant and annually thereafter (or no later than 90 days after first day of the plan year for annual notice); for participants who become covered mid-year, provide notice within 90 days of becoming a participant.

Delivery standard: notice must be provided in a manner reasonably calculated to ensure actual receipt (for example, in the same manner as other plan documents provided to participants).

Effective date: requirement applicable to excepted benefit HRA plan years beginning on or after 30 days following the final rule's effective date.

inv-04: Risk Adjustment Recalibration and HCC Criteria

Risk adjustment model recalibration and HCC changes proposed for 2021 benefit year.

Data source and blending: discontinue use of MarketScan data and recalibrate using a blend of the 3 most recent years of enrollee-level EDGE data beginning with the 2021 benefit year (proposed 2016–2018 blend for 2021).

Timing: apply recalibration and all proposed HHS-HCC changes beginning with the 2021 benefit year; draft coefficients in the proposal are based on 2016–2017 EDGE data with 2018 to be incorporated for final coefficients.

HCC changes: implement a broad set of HHS-HCC updates (adds, deletes, splits, reconfigurations, hierarchies, constraints) summarized in Table 1 across adult, child, and infant models to better reflect ICD-10 and recent claims experience.

Hierarchy adjustment example: Remove hierarchy constraint for HCC 159 (Cystic Fibrosis) in the child model so it can predict higher costs than HCC 158 (Lung Transplant Status/Complications) beginning 2021.

inv-05: Preventive services in plan liability simulation

Adjustments to plan liability simulation and preventive services

Include PrEP as a preventive service in the simulation of plan liability for adult and child risk adjustment models so 100% of preventive service costs are reflected in plan-liability simulations, despite PrEP not indicating HIV/AIDS diagnosis and not being part of RXC 1 currently.

inv-06: Hepatitis C RXC adjustments and RXC-HCC interactions

RXC and HCC treatment in recalibration

Hepatitis C RXC pricing: reassess and constrain the Hepatitis C RXC coefficient (pricing adjustment) to reflect market pricing changes and average expected drug costs for incorporation into 2021 recalibration.

RXC-HCC plan-liability credit: implement plan-liability adjustments to allow incremental credit for RXC and HCC interactions across metal levels while constraining Hepatitis C RXC as noted above.

inv-07: Risk adjustment model recalibration criteria

Proposed model considerations and factors for risk adjustment recalibration

Model options considered: Consider alternative model specifications including: (1) a count model adding indicator variables for 1-to-8+ payment HCC counts to vary incremental predictions by HCC count; and (2) a non-linear specification (exponentiated weighted-sum term) to capture overall disease burden. Both were tested and solicited for comment; further testing with additional EDGE data is planned.

Enrollment duration factors: Evaluate replacing prior enrollment-duration adjustments with finer monthly enrollment duration factors (up to 6 months considered) and assess interaction with count/non-linear specifications; enrollment duration factors may be unnecessary if count/non-linear model adopted.

Draft factors: Publish draft blended factor tables for adult, child, and infant models (age-sex, HCCs, RXCs, RXC×HCC interactions, and enrollment duration) based on 2016–2017 EDGE data with intent to incorporate 2018 when available for final coefficients.

inv-08: Risk score interactions and enrollment duration factors

Interaction and adjustment factors included in the model

Apply RXC×HCC interaction factors where enrollee has both listed RXC drug-class and specified HCC(s); values vary by metal level and modify the enrollee's risk score (examples include RXC02×HCC037_1/036/035/034 with Platinum=-0.412 through Catastrophic=0.040; RXC06 (Insulin)×diabetes HCCs with small positive values at most metal levels).

Apply enrollment duration multipliers by months enrolled (example months 1–9 positive small factors; months 10–11 = 0) to adjust risk scores per tables when relevant and if enrollment-duration approach retained.

Interaction example: RXC08×HCC118 (Multiple Sclerosis Agents×Multiple Sclerosis) interaction factors are negative across metal levels (e.g., Platinum=-2.347), altering predicted costs when both present.

inv-09: Operational criteria for incorporating factors into risk scores

Application rules implied by tables:

When an enrollee has a specified RXC drug-class and one of the associated HCC(s), apply the corresponding RXC×HCC interaction factor for the enrollee's metal tier to the enrollee's risk score as shown in the RXC×HCC tables.

For child model application: when enrollee falls within the specified pediatric age groups (e.g., 2–20) or has listed pediatric HCC diagnoses, apply the child age/sex and diagnosis factor values for the enrollee's metal tier from the child factor table.

Use severity illness indicator and infant maturity/severity tables (Table 3, Tables 6–7) to map HCCs into infant severity/maturity categories and apply infant model factor values accordingly.

inv-10: Examples of proposed factor nodes

Numeric factors to be applied in the risk adjustment model for specified conditions and infant severity/age combinations; examples shown below.

Major Depressive Disorder, Severe and Bipolar Disorders — Platinum=2.952; Gold=2.706; Silver=2.515; Bronze=2.341; Catastrophic=2.325.

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease — Platinum=25.035; Gold=24.747; Silver=24.542; Bronze=24.466; Catastrophic=24.460.

Cystic Fibrosis — Platinum=40.080; Gold=39.483; Silver=39.100; Bronze=39.106; Catastrophic=39.106.

Infant Extremely Immature Severity Level 5 (Highest) — Platinum=225.321; Gold=223.595; Silver=222.465; Bronze=222.451; Catastrophic=222.455.

Infant demographic example Age 0 Male — Platinum=0.645; Gold=0.597; Silver=0.560; Bronze=0.489; Catastrophic=0.481.

inv-11: CSR Adjustment Criteria

Cost-Sharing Reduction (CSR) adjustment application and induced utilization factors

Maintain CSR adjustment factors in risk adjustment plan-liability calculations (including a CSR factor of 1.12 for Massachusetts wrap-around plans with AV>94%).

Use induced utilization factors by FPL band and plan AV (Table 8) to scale plan liability for CSR recipients as specified in the CSR adjustment table.

inv-12: State Transfer and High-Cost Pool Criteria

State payment transfer computation and components

Use the republished HHS state payment transfer formula (statewide average premium as cost-scaling factor) to calculate PMPM transfer amounts as the difference between premium estimates reflecting and not reflecting risk selection, scaled by plan and state factors.

Maintain administrative-cost reduction to statewide average premium (14%) for 2021 and retain high-cost risk pool parameters (threshold $1,000,000; coinsurance 60%).

Timing and calculation note: Transfers (including high-cost risk pool adjustments) are calculated after issuers complete EDGE data submissions for the applicable benefit year and total transfers equal PMPM transfer times billable member months plus high-cost pool adjustments.

State flexibility: States may request reductions (up to 50% in examples) to HHS-calculated transfers following required evidence submission processes; catastrophic plans treated as separate risk pool for state calculations.

inv-13: RADV adjustments and pilots

Proposals and pilots related to RADV and incorporation of prescription drug codes (RXCs):

Propose RADV procedural changes including outlier identification thresholds (do not consider issuer an outlier for an HCC group if issuer has fewer than 30 HCCs on EDGE) and continued RADV pilot approaches for RXC validation with a second pilot year for 2019 benefit year prior to full incorporation into score adjustments.

Solicit comment on further incorporation of RXCs into RADV and on piloting strategies to validate RXCs given differences in RXC vs HCC validation metrics.

inv-14: Enrollment and SEP operational and proposal criteria

Proposals and operational positions extracted from the text:

PDM and terminations: Exchanges may terminate QHP coverage identified via periodic data matching (PDM) for dual enrollment or deceased enrollees following specified processes and need not redetermine eligibility when enrollee consents to termination via PDM or fails to contest within 30 days.

Automatic re-enrollment modifications: solicit comment on re-enrolling individuals who would otherwise receive APTC that covers full premium into plans without APTC or reduced APTC to require participant action and reduce passive APTC exposure; solicit comments on applicability to Federal platform only vs state Exchanges.

SEP effective dates and binder payments: propose standardizing SEP effective dates to first of month following plan selection for Federal platform and standardizing binder payment rules for retroactive coverage so consumers may elect prospective-only coverage by paying only 1 month premium.

inv-15: Retroactive coverage binder payment options

Binder payment and effective-date options for consumers eligible for retroactive coverage:

Binder payment options for retroactive SEPs: consumer may (A) pay premiums for all months of retroactive coverage through the first prospective month to effectuate retroactive coverage, or (B) pay premium for only 1 month to effectuate prospective-only coverage beginning the applicable prospective date.

Standardization and issuer operations: eliminate special SEP verification-specific forward-effective option and standardize a single binder payment rule to simplify issuer operations and allow enrollee option for prospective-only coverage when paying 1 month's premium.

Cross-reference effects: removal of §155.420(b)(5) (and corresponding off-Exchange cross-reference) aligns binder payment rules across scenarios and reduces issuer uncertainty when partial payments received.

inv-16: QSEHRA non-calendar year SEP

Special enrollment period eligibility for QSEHRA participants with non-calendar year plan years:

Propose to amend §155.420(d)(1)(ii) to codify that individuals and their dependents provided a QSEHRA with a non-calendar year plan year qualify for the non-calendar year plan year special enrollment period annually.

Cross-reference: this SEP entitlement would be incorporated by reference in guaranteed availability rules at §147.104(b)(2), enabling QSEHRA participants to enroll through or outside an Exchange accordingly.

inv-17: Eligibility pending appeal rules and questions

Eligibility pending appeal considerations and potential clarifications:

Scope of plan options: solicit comment on whether appellants granted eligibility pending appeal should be limited to particular plan categories or issuers or be allowed to remain in previously selected plans (e.g., bronze for APTC only vs silver for APTC+CSR) and whether eligibility-pending-enrollment should be retroactive or prospective.

Timeliness window: consider establishing a timeliness window (e.g., 30 days from appeal receipt acknowledgement) to request eligibility pending appeal, with potential good-cause exceptions for exceptional circumstances (hospitalization, natural disaster, etc.).

Life events during appeal: solicit comments on handling life events (e.g., birth) reported during appeal pendency that affect eligibility and interaction with eligibility pending appeal processes.

Retroactive implementation limits: solicit input on limitations or conditions for retroactive implementation of favorable appeal decisions given issuer operational burdens for reprocessing claims, refunds, and recalculations.

inv-18: Proposed state annual EHB reporting requirements

Proposed annual reporting requirements for states under §156.111(f).

Annual reporting requirement: states must submit an annual document (form/manner specified by HHS) listing all state benefit requirements applicable to QHPs in the individual and/or small group market (baseline listing first year, then annual updates), accurate as of at least 60 days prior to submission deadline.

Defrayal identification: states must specify which listed state-required benefits are identified as in addition to EHB and subject to defrayal under §155.170 and which are not, providing basis and citations for determinations.

Metadata and attestation: reports must include metadata (date of state action, effective date, applicable market, precise benefit text, exclusions, citation) and be signed by an authorized state official; HHS will provide templates and post submissions on CMS website.

Timing: Proposed first-year reporting deadline: July 1, 2021; annual reporting thereafter with a 60-day lookback for report accuracy; HHS may post a document if a state fails to timely report.

inv-19: State reporting of state-required benefits

State reporting and defrayal process (proposed) — high-level criteria

States may continue existing approaches for identifying and defraying state-required benefits provided they comply with §155.170; reporting requirement is complementary to state defrayal obligations and issuers remain responsible for quantifying costs and reporting to states.

HHS support and posting: HHS will provide templates, intends to post state submissions on CMS website prior to end of plan year, and may prepare a document for states that fail to timely report; HHS seeks comment on public comment period before posting.

Coordination: states that defer identification to HHS may align defrayal timing with HHS determinations; reporting does not alter statutory defrayal obligations under §155.170.

inv-20: EHB-benchmark plan options and actuarial/certification requirements

EHB-benchmark plan selection criteria

State options: states may select updated EHB-benchmark plans via three pathways (use another state's 2017 benchmark, replace categories with same categories from another state's 2017 benchmark, or otherwise select a set of benefits) subject to additional scope and generosity standards.

Standards: selected EHB-benchmark plan must meet typical employer plan scope (per §156.111(b)(2) definition) and not exceed generosity standard (may not exceed generosity of most generous comparison plan), supported by an actuarial certification and report from a qualified actuary.

Deadlines and process: proposed deadline for state EHB-benchmark submissions for 2023 plan year is May 7, 2021; states opting into between-category substitution must notify by same deadline; HHS seeks comment on deadlines.

inv-21: 2021 premium adjustment percentage and maximum annual limitation on cost sharing / CSR reductions

2021 premium adjustment and cost-sharing parameters

Premium adjustment percentage: propose to use NHEA per-enrollee premium measure (excl. Medigap & P&C) giving proposed premium adjustment percentage for 2021 of 1.3542376277 (≈35.4% increase 2013→2020).

Maximum annual limitation on cost sharing: propose 2021 maximum annual limitation on cost sharing of $8,550 for self-only and $17,100 for other-than-self-only based on proposed premium adjustment percentage.

CSR reduced limits: Propose reductions in maximum annual limitation on cost sharing for CSR-eligible enrollees by FPL band (100–150% and 151–200% reduced ~2/3; 201–250% reduced ~1/5 to avoid exceeding statutory AV targets) as shown in Table 10.

AV testing: used three test silver QHP designs and AV Calculator to assess impacts of statutory reductions and to set adjusted reductions where necessary to maintain AV constraints.

inv-22: Manufacturer coupon accounting

Treatment of drug manufacturer coupon amounts toward the annual limitation on cost sharing (proposal):

Optional accounting: propose to revise §156.130(h) to make counting of drug manufacturer coupon amounts toward the annual limitation on cost sharing optional (per issuer/plan decision), to the extent consistent with applicable state law, rather than mandatory in certain circumstances.

Definition interpretation: propose to interpret the definition of cost sharing to exclude expenditures covered by drug manufacturer coupons (coupon value not treated as enrollee-incurred cost), allowing issuers/group plans flexibility to include or exclude coupons from the annual limit.

Issuer transparency expectation: issuers and group plans that elect whether to count coupon amounts should be transparent to enrollees regarding whether coupon value accrues to the annual limitation on cost sharing and disclose practices in plan materials and websites.

HCCs, RXCs, ICD-10 Crosswalks and Factor Tables

Essential Health Benefits categoriesmixed

EHB-01..EHB-10

Essential Health Benefits categories (ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; pediatric services including oral and vision care)

HHS-HCC payment HCC changesICD-10

HHS-HCC updates (various)

Proposed additions, deletions, splits, reconfigurations, and hierarchy changes to HHS-HCCs (examples: substance use disorder HCCs; pregnancy HCCs; diabetes type 1 additive HCC; asthma severity split; fracture reconfigurations; third-degree burns; severe head injury; traumatic amputations; narcolepsy; exudative macular degeneration; congenital heart anomalies; changes to HCC groups and hierarchies)

ICD-10 to HHS-HCC crosswalkmixed

Draft ICD-10 Crosswalk

Crosswalk of ICD-10 codes to proposed HHS-HCCs and hierarchy rules for the 2021 proposed HHS-HCC updates (draft crosswalk provided on CMS website)

Sample HHS-HCC factors listedmixed

HCC001	HIV/AIDS
HCC002	Septicemia/Sepsis/SIRS/Shock
HCC008	Metastatic Cancer

Sample HCC factor entriesmixed

HCC087	Schizophrenia
HCC094	Anorexia/Bulimia Nervosa
HCC107	Quadriplegia

Sample RXC drug class factor entriesmixed

RXC01	Anti-HIV Agents
RXC06	Insulin
RXC08	Multiple Sclerosis Agents

RXC drug-class interaction groupsmixed

RXC_04	Phosphate Binders interaction with renal HCCs (HCC184, HCC183, HCC187, HCC188)
RXC_05	Inflammatory Bowel Disease Agents interaction with HCC048 and HCC041
RXC_06	Insulin interaction with diabetes-related HCCs (HCC018, HCC019, HCC020, HCC021)
RXC_07	Anti-diabetic agents (non-insulin) interaction with diabetes HCCs
RXC_08	Multiple Sclerosis Agents interaction with HCC118
RXC_09	Immune Suppressants/Immunomodulators interactions with inflammatory bowel and intestine HCCs (HCC048, HCC041)

Sample HCCs referenced in tablesICD-10

HCC056	Rheumatoid Arthritis and Specified Autoimmune Disorders
HCC057	Systemic Lupus Erythematosus and Other Autoimmune Disorders
HCC118	Multiple Sclerosis
HCC159	Cystic Fibrosis

Condition-factor listingsmixed

(various condition labels)

Listed clinical condition labels with proposed numeric risk adjustment factor values by metal level (Platinum, Gold, Silver, Bronze, Catastrophic) as shown in factor tables

HHS HCC groupingsmixed

HCC lists

HHS-HCCs mapped to infant model maturity and severity categories (tables listing HCC descriptions by maturity and severity levels)

Risk adjustment transfer componentsmixed

No codes listed

Affordability metricmixed

required_contribution_percentage=8.27%

Proposed required contribution percentage for 2021 used for affordability exemptions and catastrophic eligibility (calculated using proposed premium adjustment and per-capita personal income ratios)

VBID service/drug examplesmixed

Table 11 examples

Examples of high-value services and drug classes for VBID (zero or reduced cost sharing) and low-value services for increased cost sharing (see Table 11: e.g., blood pressure monitors; cardiac rehabilitation; glucometers and testing strips; high-value drug classes such as ACE inhibitors/ARBs, antiretrovirals, statins; PrEP listed as preventive example)

Principles guiding HCC reclassification

Reclassification principlesTen guiding principles used to reclassify HHS-HCCs: (1) clinically meaningful; (2) predict medical (including drug) expenditures; (3) adequate sample sizes for stable estimates; (4) use hierarchies to characterize illness level while unrelated diseases accumulate; (5) encourage specific coding; (6) not reward coding proliferation; (7) monotonicity — providers not penalized for recording additional diagnoses; (8) internal consistency (transitive); (9) assign all diagnosis codes (exhaustive classification); (10) exclude discretionary categories where appropriate.

Source and contextPrinciples derive from the 2014 proposed Payment Notice approach used to guide HCC classification and Medicare model development.

PurposeEnsure diagnostic categories support stable, predictive, and clinically coherent payment HCC groupings for risk adjustment recalibration.

Provider/Issuer Responsibilities and Operational Impacts

Note

Rulemaking comments and contacts — Submission instructions and contacts

Rulemaking comments must be submitted according to the methods and deadlines in the proposed rule. Mail comments to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9916-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. Allow sufficient time for mailed comments to be received before the close of the comment period. For further information or topic-specific questions, contact: Usree Bandyopadhyay (410) 786-6650; Kiahana Brooks (301) 492-5229; Evonne Muoneke (301) 492-4402 for general information. David Mlawsky (410) 786-6851 for excepted benefit HRA matters. Allison Yadsko (410) 786-1740, Joshua Paul (301) 492-4347, or Krutika Amin (301) 492-5153 for risk adjustment matters. Aaron Franz (410) 786-8027 for FFE/SBE-FP user fees and sequestration. Joshua Paul (301) 492-4347 or Allison Yadsko (410) 786-1740 for RADV. Joshua Paul (301) 492-4347 for premium adjustment percentage. Rebecca Zimmermann (301) 492-4396 for value-based insurance design. Becca Bucchieri (301) 492-4341 for EHB-benchmark plans and state-required benefit defrayal. Jill Gotts (202) 603-0480 for eligibility appeals. Emily Ames (301) 492-4246 for coverage effective dates and termination notices. Marisa Beatley (301) 492-4307 for employer-sponsored coverage verification and PDM.

Mail comments to CMS-9916-P at Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Allow sufficient time for mailed comments to arrive before the close of the comment period.
Topic-specific contacts listed above for excepted-benefit HRAs, risk adjustment, user fees, RADV, premium adjustment, VBP design, EHB, eligibility appeals, termination notices, and PDM.

Key Terms and Definitions

Exchange

Exchange definitionAmerican Health Benefit Exchange — entity established under the PPACA through which qualified individuals and employers purchase QHPs.

FunctionCertifies Qualified Health Plans and facilitates enrollment in individual and small group markets, including APTC and CSR administration.

Statutory basisEstablished under sections of the PPACA to support market access and consumer subsidies.

Essential Health Benefits (EHB)

Essential Health Benefits (EHB)A set of 10 general categories of benefits that QHPs must cover as directed by section 1302 of the PPACA (ambulatory services; emergency services; hospitalization; maternity/newborn; mental health/substance use; prescription drugs; rehabilitative/habilitative services and devices; laboratory services; preventive/wellness/chronic disease management; pediatric services including dental and vision).

Policy Summary

PayerMedicare

PolicyHHS Notice of Benefit and Payment Parameters for 2021 (proposed rule)

Policy CodePolicy CMS-9916-P

Change TypeProposed rule with multiple material changes (HCC updatesrecalibrationHRA notices)

Effective DateN/A

Next Review DateN/A

Key ActionSubmit comments by March 2, 2020; issuers and plan sponsors should review proposed HCC and ICD‑10 crosswalk changes and HRA notice requirements.

SourceLink

On This Page

High-cost risk pool treatment: truncate/removal of 60% of costs above $1M in factor tables to account for high-cost risk pool payment parameters in adult, child, and infant models.

Grace period interaction: seek comment on applicability of 3-month grace period rules to appellants granted eligibility pending appeal and treatment when in a grace period at time of redetermination.

age-sex coefficient inclusion threshold

65+ age-sex coefficients decisionNo new age-sex coefficients for enrollees age 65+ are proposed for the 2021 adult models; enrollees 65+ continue to be excluded from adult model calibration for now.

EDGE data observationOver 70% of enrollees age 65+ in EDGE are ages 65–66, likely transitioning to Medicare, with differing expenditure patterns across 65–66 vs 67+.

Monitoring planHHS will continue to monitor expenditures for enrollees age 65+ to assess whether adding age-sex coefficients is appropriate in a future year.

High-cost risk pool threshold and coinsurance

High-cost risk pool threshold$1,000,000

Coinsurance rate60% coinsurance applied to costs above the threshold

ApplicationParameters retained for 2021 benefit year consistent with 2020 Payment Notice; used to truncate model costs when computing factors.

Enrollment duration months with nonzero factors

Months with positive factorsEnrollment months 1–9 have positive, decreasing enrollment-duration factors (example Platinum: months 1–3 = 0.252; month 4 = 0.215; month 9 = 0.051).

Months with zero factorsMonths 10 and 11 have factor = 0.000 across metal tiers.

InterpretationMonthly multipliers replace broader partial-year factors to better reflect PMPM expenditures for partial-year enrollees, particularly those with HCCs.

Infant factor maximum example

Example maximum infant factor225.321 — Extremely Immature Severity Level 5 (Platinum) as shown in Table 5.

ContextInfant severity-by-age factors span large magnitudes for highest severity/maturity combinations and vary by metal level.

UseApplied in infant risk adjustment model for 2021 benefit year to adjust plan liability for extremely immature, high-severity infants.

High-cost risk pool threshold

High-cost risk pool threshold (dup)$1,000,000

PurposeUsed in state payment transfer formula to compute high-cost risk pool adjustments added to PMPM transfers.

RetentionParameters carried forward from 2020 Payment Notice into 2021 recalibration tables.

High-cost risk pool coinsurance rate

High-cost risk pool coinsurance rate (dup)60%

Application60% coinsurance applied to costs above the $1,000,000 threshold when computing high-cost pool payments/charges.

Policy noteNo changes proposed to this coinsurance rate for the 2021 benefit year unless amended through rulemaking.

HCC outlier consideration threshold

Minimum HCC count to trigger outlier considerationAn issuer is not considered an outlier for an HCC group if the issuer has fewer than 30 HCCs recorded on EDGE for that group (i.e., sample size <30 -> not outlier).

RationaleThreshold derived from simulation showing implied alpha above 5% with smaller sample sizes and standard sample-size practice recommending ≥30 observations.

Operational effectIssuer data with <30 HCCs remain included in national metrics but will not individually trigger outlier adjustments for that HCC group.

required_contribution_percentage

Proposed required contribution percentage for 20218.27%

MethodologyCalculated using proposed 2021 premium adjustment percentage (1.3542376277) divided by per-capita PI ratio (1.3094029651), then applied to initial 8% base (8% × 1.0342405385 ≈ 8.27%).

UseUsed for affordability and catastrophic eligibility calculations for the 2021 plan year.

Premium adjustment percentage for 2021

Premium adjustment percentage (2021) — ratio1.3542376277

InterpretationRepresents ~35.4% increase in per-enrollee private health insurance premiums from 2013 to 2020 (used to index cost-sharing parameters).

Derived fromNHEA per-enrollee premium estimates for 2020 ($6,759) and 2013 ($4,991): 6,759 / 4,991 = 1.3542376277.

payment dispute reporting window

Payment dispute reporting window90 days (proposed amendment to §156.1210 to lengthen reporting time from 15 days to 90 days)

ReasonProvides issuers more time to research and resolve payment inaccuracies and accounts for reconciliation update delays.

Process changeReplace monthly confirmations with an annual confirmation in a form/manner specified by HHS.

enrollment update/error reporting window

Enrollment update/error reporting window30 days — issuers must update enrollment records or report errors to the Exchange within 30 days as directed.

Submission requirementIssuers must include most recent verified enrollment information in monthly reconciliation submissions.

ScopeApplies to State Exchanges on the Federal platform where references to the Exchange mean CMS as administrator.

Note

Notice requirement for excepted‑benefit HRAs — Required content

Non‑Federal governmental plan sponsors that offer excepted‑benefit HRAs would be required to provide a participant notice describing eligibility conditions, annual or lifetime caps or other limits on benefits, and a description or summary of benefits available under the excepted‑benefit HRA. The notice content would be generally consistent with DOL summary plan description requirements (29 CFR 2520.102‑3(j)(2) and (3)), though non‑Federal governmental sponsors would not necessarily need to include every DOL data element.

Notice must describe eligibility to receive benefits, annual/lifetime caps or other limits, and a description/summary of benefits.
Content aligned generally with 29 CFR 2520.102‑3(j)(2) and (3).

Note

Excepted‑benefit HRA Notice Requirement (proposed) — Timing and delivery

HHS proposes that non‑Federal governmental plan sponsors must furnish the excepted‑benefit HRA notice no later than 90 days after an employee becomes a participant and annually thereafter. For plan administration efficiency, the annual notice may be provided no later than 90 days after the first day of the HRA plan year, and for participants who enroll after the plan year starts, no later than 90 days after becoming a participant. The notice must be delivered in a manner reasonably calculated to ensure actual receipt (for example, the same manner used for other plan notices/documents). The notice requirement would apply to HRA plan years beginning on or after 30 days following the final rule’s effective date.

Initial notice: no later than 90 days after employee becomes a participant.
Annual notice: no later than 90 days after first day of the HRA plan year (or within 90 days of participant enrollment if after plan year start).
Delivery: manner reasonably calculated to ensure actual receipt (e.g., same method used for other plan notices).
Applicability: HRA plan years beginning on or after 30 days after the final rule effective date.

Note

Implementation timing and crosswalk — Apply HHS‑HCC changes at once and review ICD‑10 crosswalk

HHS will apply the proposed HHS‑HCC changes and ICD‑10 crosswalk at one time for the 2021 benefit year. A draft ICD‑10 crosswalk mapping ICD‑10 codes to proposed HCCs and hierarchy rules is available for issuer review at the CMS CCIIO regulations and guidance page; issuers should review the draft crosswalk when assessing operational impacts to coding and reporting.

All HHS‑HCC changes proposed for 2021 would be applied together to account for ICD‑10 coding changes.
Draft ICD‑10 Crosswalk available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html for issuer review.

Note

Stakeholder comment solicitation — Risk adjustment model specifications and enrollment factors

HHS solicits stakeholder comments on multiple aspects of the proposed risk adjustment model and implementation choices, including model specifications (count and non‑linear variables), enrollment duration factors, and whether these alternative approaches should be considered for future recalibrations. Comments are requested on potential impacts to coding incentives and operational considerations for implementation.

Comments requested on count and non‑linear model specifications (e.g., use of specific HCC variables).
Comments requested on enrollment duration factor adjustments, including potential monthly factors and market‑specific factors.
HHS seeks input on operational considerations and coding incentive impacts.

Note

HCC factors by metal level (excerpt) — Examples and reference to full tables

Excerpted adult HHS‑HCC factor examples by metal level (Platinum, Gold, Silver, Bronze, Catastrophic) are provided in the proposed rule and reflect the 2021 draft recalibration. Example mental health factors: Alcohol Use Disorder (Moderate/Severe) — Platinum 1.390, Gold 1.218, Silver 1.097, Bronze 0.989, Catastrophic 0.980; Schizophrenia (HCC087) — Platinum 2.734, Gold 2.500, Silver 2.349, Bronze 2.238, Catastrophic 2.229. These factor tables and full listings are in the proposed rule for issuer operational review.

HCC factor tables list values by metal level for numerous HCCs (excerpted in the rule).
Examples provided above; consult the proposed rule tables for complete lists.

Note

Prescription drug factor table (excerpt) — RXC coefficients by metal level

Excerpted Prescription Drug Factor (RXC) table shows RXC coefficients by metal level to be used in the 2021 recalibration. Examples include: RXC 01 (Anti‑HIV Agents) — Platinum 7.913, Gold 7.213, Silver 6.737, Bronze 6.388, Catastrophic 6.360; RXC 02 (Anti‑Hepatitis C Agents) — Platinum 10.016, Gold 9.334, Silver 8.948, Bronze 9.021, Catastrophic 9.034. Issuers should review these RXC factors and the full table in the proposed rule for operational impacts.

RXC coefficients provided by RXC class and metal level (excerpted examples above).
RXC 02 (Hepatitis C) is subject to proposed pricing constraint to reflect average expected drug costs.

Note

RXC x HCC interaction factors (drug‑class adjustments) — Interaction coefficients and examples

The proposed rule includes RXC x HCC interaction adjustments (drug‑class by diagnosis interaction factors) that modify risk scores when specific RXC classes co‑occur with certain HCCs. Examples: RXC 04 (Phosphate Binders) x HCC184/183/187/188 — interaction factors listed (zero in excerpt); RXC 05 (Inflammatory Bowel Disease Agents) x HCC048/041 — Platinum -0.676, Gold -0.629, Silver -0.565, Bronze -0.520, Catastrophic -0.515; RXC 06 (Insulin) x diabetes HCCs — small positive interaction factors varying by metal level. Review the RXC x HCC tables in the proposed rule for full interaction mappings.

RXC x HCC interaction coefficients apply additional effects when a prescription drug class and HCC(s) co‑occur.
Examples provided above; consult the full proposed tables for comprehensive interactions.

Note

Child risk adjustment factor table — Proposed child model factors for 2021 (excerpt)

Proposed child risk adjustment model factors for the 2021 benefit year are provided by age group, sex, diagnosis HCCs, and metal level. Examples: Age 2‑4 Male — Platinum 0.217, Gold 0.175, Silver 0.126, Bronze 0.082, Catastrophic 0.078; Age 15‑20 Female — Platinum 0.251, Gold 0.199, Silver 0.134, Bronze 0.077, Catastrophic 0.072. Diagnosis factors for children (e.g., HIV/AIDS, Septicemia, CNS infections) and extensive HCC lists with metal‑level factors are included in the proposed tables for operational use.

Child demographic factors by age/sex and metal level (excerpt examples above).
Child diagnosis HCC factor listings by metal level provided in Table 4 of the proposed rule.

Note

Proposed infant risk adjustment factors — TABLE 5 excerpt

TABLE 5 of the proposed rule provides infant risk adjustment factors for 2021 by severity/immaturity levels and metal level. Example: Extremely Immature Severity Level 5 — Platinum 225.321, Gold 223.595, Silver 222.465, Bronze 222.451, Catastrophic 222.455. These infant severity‑by‑age factor tables should be reviewed by issuers and administrators for calibration and operational implications.

Infant severity level factors provided by metal level (example values above).
Full infant factor tables available in the proposed rule for implementation reference.

Note

State payment transfer formula continued — 2021 application and references

The proposed rule republishes and continues use of the HHS state payment transfer formula finalized in the 2020 Payment Notice for the 2021 benefit year. Transfers are calculated after EDGE data submissions and use statewide average premium as the cost‑scaling factor to preserve budget neutrality. The formula and administrative cost reductions to statewide average premium and high‑cost risk pool factors are republished unchanged.

State payment transfer formula republished for clarity; applies as finalized in 2020 Payment Notice.
Statewide average premium used as cost‑scaling factor to maintain budget neutrality.
Transfers calculated after EDGE data submission; administrative cost reductions republished unchanged.

Billing Rule

Risk adjustment user fee remittance — 2021 proposed PMPM and remittance requirement

Issuers of risk adjustment covered plans in states where HHS operates risk adjustment must remit a risk adjustment user fee to HHS. For the 2021 benefit year HHS estimates total program administrative costs of approximately $50 million and proposes a user fee of $0.19 PMPM, calculated as the product of monthly billable member months and the PMPM fee specified in the annual HHS notice. HHS seeks comment on the proposed $0.19 PMPM user fee for 2021.

Proposed 2021 risk adjustment user fee: $0.19 PMPM (estimate based on ~$50M operating cost).
Issuers remit the fee as monthly billable member months multiplied by the PMPM rate specified in the annual notice.
HHS solicits comment on the proposed fee.

Note

PDM‑based terminations and processes — Dual enrollment and deceased enrollee procedures

Exchanges will use Periodic Data Matching (PDM) to identify dual enrollments and deceased enrollees and may terminate QHP coverage following the processes in §155.330 and §155.430. For PDM‑identified dual enrollment: Exchanges may end QHP coverage where consumers have consented to termination via PDM, or follow the 30‑day notice and response process before terminating. For deceased enrollees identified via PDM who do not respond within the 30‑day period, Exchanges will terminate coverage retroactively to the date of death per §155.430(d)(7) without a separate eligibility redetermination.

PDM used to detect dual enrollment with Medicare, Medicaid/CHIP, or BHP and to identify deceased enrollees.
Exchanges may terminate coverage for dual enrollment with participant consent or after required notice processes.
For deceased enrollees who do not contest within 30 days, termination is retroactive to date of death following §155.430(d)(7).

Note

Termination effective date flexibility — Enrollee‑initiated and technical error terminations

Issuers and Exchanges may have flexibility on termination effective dates for enrollee‑initiated terminations. Exchanges may permit retroactive enrollee‑initiated terminations effective as of the request date or another prospective date chosen by the enrollee, rather than the prior 14‑day advance notice requirement. HHS proposes aligning effective‑date rules for terminations due to technical errors and other circumstances to ensure enrollees are put in the position they would have been absent the error and seeks comment on these changes.

Exchanges may allow enrollee‑initiated terminations effective on the request date or another prospective date selected by the enrollee.
Proposal to align retroactive effective date rules for terminations due to technical errors with enrollee‑initiated termination flexibilities.
HHS seeks comment on aligning and adopting these flexibilities.

Used as the scope for AV calculations and benefit standards for QHP certification.

ReferenceSection 1302(d) and related PPACA provisions govern AV and de minimis variation guidance.

excepted-benefit HRA

Excepted-benefit HRA (definition)An HRA recognized as a limited excepted benefit under the HRA rule; qualifies as excepted benefit if it meets conditions (sponsor also offers traditional group coverage, funded with newly available amounts ≤ $1,800 per year, does not reimburse premiums for individual or most group coverage, and offered on same terms to similarly situated individuals).

Regulatory contextHHS proposes notice requirements for non-Federal governmental sponsors offering excepted-benefit HRAs to inform participants of benefits and limits.

Funding capLimited excepted-benefit HRAs funded with amounts newly available each plan year not to exceed $1,800 (adjusted annually).

limited excepted benefits (conditions)

Limited excepted benefits funding capFunded with amounts newly made available each plan year not to exceed $1,800 (annual adjustable limit).

ConditionsMust be offered by sponsor that also offers traditional group coverage and not reimburse premiums for individual coverage (with limited exceptions).

Regulatory sourceDefined in HRA rule preamble and implemented conditions referenced in proposed rule.

participant

Participant (definition)Defined consistent with 45 CFR 144.103 and ERISA section 3(7): an employee or former employee (or member) who is or may become eligible to receive a benefit from an employee benefit plan, or whose beneficiaries may be eligible.

Timing implicationNotice timing for excepted-benefit HRAs references participant definition for 90-day delivery requirements after becoming a participant.

Regulatory cross-referenceUses DOL rules at 29 CFR 2520.104b-2(a) for furnishing notices to participants.

enrollee-level EDGE data

Enrollee-level EDGE dataIssuer-submitted enrollee-level claims data used by HHS to recalibrate risk adjustment models; proposed to be primary data source blending the 3 most recent years for 2021 recalibration.

UseBlended 2016–2018 EDGE data proposed for 2021 benefit year recalibration; replace MarketScan® data.

Availability noteDraft coefficients in proposal based on 2016–2017 EDGE data; 2018 data to be incorporated for final coefficients when available.

non-linear model

Non-linear model (definition)A model specification that adds an exponentiated weighted-sum term of payment HCCs to the linear model to capture overall disease burden (Plan liability = Current Model + (Σβi HCCi)^p).

PurposeDesigned to allow incremental HCC effects to vary with overall disease burden using a single additional parameter (p).

StatusConsidered for future improvement; not adopted for 2021 but subject to further testing using EDGE data.

count model (indicator variables for 1 to 8+ payment HCCs)

Count model (definition)Model option adding indicator variables for 1 to 8-or-more payment HCCs so incremental predictions vary with a person's HCC count; similar to MA approach but truncated at 8 based on enrollee distribution.

RationalePopulation size of enrollees with given HCC counts drops off around 8 HCCs; count model yielded predictive gains similar to non-linear model in testing.

ScopeConsidered for adult model improvements; further evaluation planned.

count model

Count model (duplicate)Indicator variables for 1–8+ payment HCCs to vary incremental HCC predictions by count; tested against EDGE data.

ComparisonGenerally more consistent with other programs (e.g., Medicare Advantage) and yielded similar model performance gains to the non-linear model.

Next stepsFurther testing and solicitation of comments for potential future adoption.

non-linear model

Non-linear model (duplicate)Adds an exponentiated weighted-sum term of payment HCCs to capture disease burden; may improve prediction for some groups but not all.

Trade-offsKeeps model relatively simple (one parameter) but may not improve predictions across all subpopulations.

EvaluationContinued evaluation planned using additional years of EDGE data.

EDGE data

EDGE data (term) — referenceEnrollee-level EDGE data: issuer-submitted claim-level datasets used for model recalibration and analysis of enrollment duration, count and non-linear models.

Role in recalibrationBlend of 3 most recent years of EDGE data proposed for recalibration beginning 2021; used for testing model alternatives and enrollment-duration analyses.

Limitation note2016–2017 EDGE data used for draft coefficients; 2018 data awaited for final blending.

RXC

RXC — Prescription Drug FactorA drug-class factor applied in the adult risk adjustment model (e.g., RXC01 Anti-HIV Agents, RXC02 Anti-HCV Agents) with metal-level coefficients.

ExamplesRXC01 Platinum=7.913; RXC02 Platinum=10.016; RXC04 Phosphate Binders Platinum=1.998 (see RXC table).

Interaction useRXCs interact with HCCs via RXC×HCC coefficients to adjust risk scores for enrollees with specific drug classes and diagnoses.

HCC

HCC — Hierarchical Condition CategoryClinical condition group used in risk adjustment; examples include HCC087 Schizophrenia, HCC094 Anorexia/Bulimia, HCC107 Quadriplegia, etc.

FunctionHCCs form the basis of diagnosis factors applied by metal level to predict plan liability in risk adjustment models.

UpdatesMultiple HCC additions, deletions, and regroupings proposed for 2021 to reflect ICD-10 claims experience.

RXC x HCC interaction factor

RXC x HCC interaction factor (definition)An additional coefficient applied when an enrollee has both a specified RXC (drug class) and specified HCC(s) to modify risk-predicted costs by metal tier.

ExamplesRXC04×HCC184/183/187/188 factors listed (often 0.000); RXC05×HCC048/041 Platinum = -0.676; RXC06×diabetes HCCs Platinum = 0.049.

Operational ruleApply the RXC×HCC factor for the enrollee's metal tier when both the RXC and listed HCC(s) are present.

Child risk adjustment factor

Child risk adjustment factor (definition)Per-age/sex and diagnosis coefficients used in the child risk adjustment model for the 2021 benefit year across metal tiers (tables of age/sex demographic values and diagnosis factors).

ExamplesAge 2–4 Male Platinum = 0.217; Major Depressive Disorder, Severe & Bipolar Platinum = 2.952 (child-specific entries).

ApplicationApply age/sex and diagnosis factor values appropriate to the enrollee's age group and metal tier in child model scoring.

Severity Level

Severity Level (infant) — definitionCategorical severity tiers applied to infant clinical status (levels 1–5 where 5 is highest) used in infant model maturity/severity factor tables.

UseSeverity levels combine with maturity categories to produce infant-specific risk adjustment factors (Table 5).

ExamplesExtremely Immature Severity Level 5 = 225.321 (Platinum).

Metal level

Metal level — definitionBenefit tiers (Platinum, Gold, Silver, Bronze, Catastrophic) for which separate factor values are provided in the adult, child, and infant models.

ImplicationEach HCC, RXC, and demographic factor is specified by metal tier to reflect differing plan liabilities across metal levels.

ExampleCystic Fibrosis Platinum = 40.080; Gold = 39.483; Silver = 39.100; Bronze = 39.106; Catastrophic = 39.106.

R-squared statistic

R-squared statistic — definitionPercentage of individual variation explained by a model; used to evaluate overall predictive accuracy of risk adjustment models.

ApplicationHHS publishes R-squared statistics for each model (Table 9) to verify statistical validity of recalibration using blended EDGE coefficients.

InterpretationR-squared values for adult models based on 2016–2017 EDGE data reported in range ~0.4064–0.4256.

Predictive ratio

Predictive ratio — definitionRatio of weighted mean predicted plan liability to weighted mean actual plan liability for a sample population; measures subgroup predictive accuracy (1.0 = perfect prediction).

UseUsed alongside R-squared to assess model fit across subpopulations when testing count and non-linear specifications.

ReportingHHS reports predictive ratios for various subgroups as part of model performance evaluation.

State payment transfer formula

State payment transfer formula — definitionThe formula HHS uses to calculate plan-level PMPM transfers under the state payment transfer methodology based on statewide average premium, plan liability risk scores, AV, rating factors, induced demand factor, geographic cost factor, and plan share.

ComponentsIncludes PMPM transfer (Ti), billable member months (Mi), and high-cost risk pool adjustments (HRPi, HRPCm, TPi) which are added to total transfers.

TimingTransfers are calculated after issuers complete EDGE data submissions for the applicable benefit year.

Total Transferi

Total Transferi — definitionPlan i's total HHS risk adjustment program transfer amount: PMPM transfer × billable member months plus high-cost risk pool adjustments (payments/charges).

Formula componentsTotal Transferi = Ti × Mi + HRPi + HRPCm × TPi (as applicable).

PurposeDetermines net payment or charge for each plan to balance the state market risk pool.

RADV

RADV — definitionRisk Adjustment Data Validation: an audit program consisting of an issuer-engaged initial validation audit followed by an HHS-retained second validation audit to verify findings and ensure accurate risk adjustment data.

ScopeApplied in states where HHS operates risk adjustment (all 50 states + DC for 2021 benefit year) to ensure verifiable actuarial risk differences among issuers.

AdjustmentsProposed methodological changes include excluding HCC-group outlier consideration for issuer samples <30 HCCs and pilot expansion for RXC validation.

HCC outlier threshold

HCC outlier threshold (definition)Proposed rule: do not consider an issuer's HCC-group failure rate an outlier if the issuer has fewer than 30 HCCs recorded for that group (Freq_EDGE_i_G < 30 implies 'not outlier').

Statistical basisThreshold identified via simulation showing small sample sizes (<30) inflate implied alpha of outlier tests above desired levels.

Operational effectIssuer HCC counts <30 are included in national metrics but will not individually trigger outlier adjustments for that HCC group.

automatic re-enrollment

Automatic re-enrollment — definitionProcess by which Exchanges automatically re-enroll current enrollees into their current plan (or a similar plan) if they take no action at renewal; Federal platform used this to re-enroll ~1.8 million people in 2019 open enrollment.

Policy considerationsHHS solicits comments on modifying auto-re-enrollment for enrollees whose APTC would cover the entire premium to require active re-determination or reduced APTC to create non-zero enrollee premium.

Operational noteProposed consumer outreach and education would accompany any change to auto-re-enrollment to ensure consumers update applications during open enrollment.

PDM

PDM — definitionPeriodic data-matching used by Exchanges to identify duplicate coverage or deceased enrollees (e.g., Medicare, Medicaid/CHIP, BHP) and to facilitate voluntary or administrative terminations following regulatory procedures.

Use casesExchanges may terminate QHP coverage for dual-enrolled or deceased enrollees following PDM processes; voluntary terminations via PDM follow enrollee-initiated processes.

30-day responseExchanges need not redetermine APTC/CSR eligibility for enrollees found dually enrolled who do not respond within 30 days and have provided written consent to terminate via PDM.

binder payment

Binder payment — definitionPayment required to effectuate coverage; rules specify that for retroactive SEP effective dates, binder payment must include premium for all months of retroactive coverage through the first prospective month to effectuate retroactive coverage, otherwise only prospective coverage is effectuated.

Operational changeProposed updates standardize binder payment deadlines so SEPs using revised effective dates follow the same binder payment rules as other SEPs effective the first of the month following plan selection.

Effect of proposed eliminationProposal to eliminate §155.420(b)(5) removes the option allowing a consumer to move forward effective date by up to 1 month for pended verifications.

SEP verification

SEP verification — definitionSpecial enrollment period verification: the Exchange process to verify eligibility for SEPs; related effective-date and binder payment rules define options for retroactive/prospective coverage.

Timing and effectHHS proposes to align verification-related effective date rules and binder payment options and to eliminate certain verification-specific options (e.g., moving effective date forward up to 1 month).

Processing performanceCMS historically processed SEP verifications quickly (1–3 days average in 2017), and few enrollees requested moving forward effective dates, supporting proposed streamlining.

QSEHRA

QSEHRA — definitionQualified Small Employer Health Reimbursement Arrangement (QSEHRA): an employer-provided HRA subject to tax code rules; HHS proposes codifying that individuals provided a QSEHRA with a non-calendar year plan year qualify for the non-calendar year plan year SEP.

ImplicationWould allow employees with non-calendar year QSEHRAs to access an annual non-calendar year plan year SEP to enroll in or change individual coverage.

Cross-referenceSpecial enrollment period incorporation in guaranteed availability rules at §147.104(b)(2).

required contribution percentage

required contribution percentage — definitionThe percentage used for affordability calculations under section 5000A/36B rules; proposed 2021 value is 8.27%.

Calculation basisDerived from premium adjustment percentage (1.3542376277) and per-capita PI ratio (1.3094029651) applied to the 2014 base of 8%.

UseDetermines affordability threshold and eligibility for catastrophic plans and premium tax credits.

state-required benefits in addition to EHB

State-required benefits in addition to EHB — definitionBenefits mandated by state action after Dec 31, 2011 that are considered in addition to EHB and for which the state must defray associated costs under §155.170.

Reporting proposalStates would be required to annually notify HHS (using HHS templates) of state-required benefits considered in addition to EHB; issuers remain responsible for quantifying costs.

PurposeStrengthen program integrity and ensure appropriate defrayal of added state benefit costs, reducing improper Federal expenditures.

EHB-benchmark plan

EHB-benchmark plan — definitionState-selected benchmark plan used to define the scope of EHB; states may choose among options including another state's 2017 benchmark or a set of benefits meeting employer-plan parity and generosity standards.

StandardsSelected benchmark must meet scope and generosity standards and be supported by an actuarial certification and report from an actuary member of the American Academy of Actuaries.

DeadlinesHHS proposes deadlines for state submissions (e.g., May 7, 2021 for 2023 plan year benchmark selections).

Premium adjustment percentage

Premium adjustment percentage — definitionThe percentage change in per-enrollee private health insurance premiums (excluding Medigap and P&C) from 2013 to the prior year used to index cost-sharing and other parameters; proposed 2021 value = 1.3542376277.

ApplicationUsed to compute 2021 maximum annual limitation on cost sharing and other indexed parameters per §156.130.

DerivationBased on NHEA per-enrollee premium estimates: 2020 $6,759 / 2013 $4,991 = 1.3542376277 (~35.4% increase).

cost sharing

Cost sharing (proposed interpretation)HHS proposes to interpret cost sharing to exclude expenditures covered by drug manufacturer coupons; issuers may choose to include or exclude coupon amounts from annual limit on cost sharing, subject to state law and disclosure to enrollees.

Operational effectIssuers of non-grandfathered individual and group coverage would have flexibility to determine whether coupon amounts count toward enrollee annual limit on cost sharing.

RationaleCoupon value reduces enrollee point-of-sale payment and is not a cost incurred by the enrollee, so HHS believes it need not count toward the annual limit.

price concession

Price concession — definitionAny item of value related to provision of a covered prescription drug (rebates, incentive payments, DIR, etc.) regardless of recipient; HHS proposes requiring deduction of retained price concessions from incurred claims for MLR reporting.

MLR reporting changeProposed amendment to §158.140(b)(1)(i) to require issuers to deduct prescription drug rebates and other price concessions even when received and retained by PBMs or vendors.

PurposeEnsure consistent MLR treatment of pharmacy costs and remove unfair advantage for issuers whose PBMs retain price concessions.