Thriving in the Health Insurance Marketplace 2016 and Beyond

Stephanie Leftwich
Director, Provider Innovation Strategies

2016 is here, and we are off and running. As the industry continues to move forward, many of us are also taking time for reflection. As a member of the Health Insurance Marketplace "club", I am not only reflecting on 2015 but how far this industry has come since 2013 when the flurry of CCIIO webinars, slide presentations, and and site visits became the new normal. And now we are going further.

On December 2nd 2015, the Centers for Medicare and Medicaid Services (CMS) published the proposed rule for the Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment parameters for 20171. Let's reflect on five proposed changes:

1. Risk Adjustment

Screenshot retrieved from January 13, 2016

Risk adjustment under the Affordable Care Act is maturing and a cornerstone of this program is training the model. There are some unique nuances from the traditional Medicare Risk Adjustment program; therefore, these separate models will continue to evolve as claims experience matures. CMS recognized that the longer the lag in data used to develop risk factors meant costs of treating one disease versus another could change over time and not be reflected in the risk factors. CMS proposed to recalibrate the risk adjustment factors using multiple years of industry benchmark data from 2011, 2012, and 2013.

CMS also proposed to incorporate preventative services into the simulation of plan liability in the recalibration of the risk adjustment models for the 2017 benefit year. This will benefit health plans because the mandated preventive services have proven to be costly. In addition, a lower default risk adjustment charge was proposed for the 2016 benefit year for small issuers. This proposal will allow the small issuers to be more competitive.

2. Network Adequacy

Since the first year of Health Insurance Marketplaces, health plans had to be creative in managing their products. The change in the underwriting rules was a catalyst for issuers to use other tools. Widely reported tools have included creation of provider networks and narrow provider networks. In the past two Letters to Issuers, CMS has referenced additional scrutiny on network adequacy. CMS proposed leveraging the National Association of Insurance Commissioners (NAIC) policy deliberations. CMS anticipates that the states will select among a certain number of the metrics articulated in the Letter to Issuers. If a state does not select one of the applicable metrics, CMS proposed the application of a default time and distance standard to issuers applying for Qualified Health Plan (QHP) certification in a federally facilitated marketplace. Depending on how your state proceeds, you will need to ensure your network strategy is compliant.

3. Out-of-Pocket Maximum

The issuers have been dealing with how to educate consumers on the intricacies of receiving treatment from a non-participating provider. Most consumers have accepted this except when they feel the treatment is out of their control. For example, the consumer goes to a participating facility for a procedure and then is surprised to learn the anesthesiologist or radiologist delivering care is not a participating provider. CMS proposed that certain types of cost sharing for non-participating providers be counted towards the enrollees' out-of-pocket maximums. There is an exception if the issuer notifies the enrollee ahead of time. This one will be challenging to implement and likely lead to some angst for issuers and consumers because many of these specialties are not willing to contract with health plans and consumers have no control over who reads their x-ray.

4. Standardized Options

If you have looked at or any of the state-based marketplace websites to shop, you will quickly see that it is challenging to compare costs for plans across issuers. Even though the metallic levels have the same actuarial value, this does not translate to real world understanding for the consumer. CMS proposed to designate plans with certain standardized cost-sharing structures as "standardized options" at each of the bronze, silver (with CSR variations), and gold metal levels. Issuers can offer both standardized and non-standardized plans. CMS anticipates being able to display the standardized plans on to consumers to compare plans based on differences in quality and premium price rather than cost-sharing structure. This strategy further restricts product differentiation for the health plan but makes comparison shopping much easier for the consumer.

5. Small Business Health Options Plan - SHOP

In addition to the current "horizontal choice" offered by the federally facilitated SHOP, CMS proposed a "vertical choice" in which an employer will be able to offer qualified employees a choice of all plans across all available levels of coverage from a single issuer. One goal of this new "vertical choice" is to make the issuer more appealing to a broader spectrum of the employees and reduce risk. This "vertical choice" will make rating difficult for the plan but will give the consumers greater control over their health care coverage.

In order to thrive in 2016 and years moving forward , you must be able to reflect on what you have learned, start planning early to adopt new technologies and adapt to changing regulations in this increasingly complex healthcare environment.

If you are interested in learning more about how DST Health Solutions can support your organization by providing services that are imperative to Marketplace success, please contact us at 800.272.4799 or at


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