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CMS Releases Proposed Rule on Notice of Benefit and Payment Parameters for 2014

December 7, 2012—The Centers for Medicare and Medicaid Services (CMS) Nov. 30 released, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014,” a proposed rule regarding provisions and parameters for three premium stabilization programs created by the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152): the permanent risk adjustment program, the transitional reinsurance program, and the temporary risk corridors program.  CMS also makes proposals related to provisions designed to make qualified health plans offered on the health insurance exchanges more accessible and reduce the cost of benefits for low- and moderate-income individuals and families.

Key proposals relate to: 

  • Cost-sharing reductions and advance payment of  premium tax credits;
  • Risk adjustment, reinsurance, and risk corridors;
  • User fees for participants in the Federally Facilitated Exchanges; and
  • Medical Loss Ratio Requirements.

To improve affordability of new health insurance options and the services they cover, CMS proposes standards governing the administration of advance payments of the premium tax credit and cost-sharing reductions.  Sec. 1402 of the ACA requires cost-sharing reductions to help qualified low- and moderate-income individuals and families enrolled in specified health insurance exchange plans afford out-of-pocket expenditures associated with health care services.  The proposed rule states that these cost-sharing reductions should be provided to qualified individuals at the point of service and that the Department of Health and Human Services will reimburse the issuers directly.

CMS also proposes standards and guidance for transitional reinsurance, temporary risk corridor programs, and a permanent risk adjustment program.  Other proposals address a risk adjustment methodology, the establishment of uniform reinsurance payment parameters, and the creation of a temporary risk corridor program which will allow the federal government to limit the extent of gains and losses experienced by qualified health plans by sharing in the risk as they enroll sicker individuals. 

The agency proposes that insurance issuers participating in a federally facilitated exchange be charged a user fee proportionate to the fees charged by state-based exchanges.  The rule also contains a proposed 2014 medical loss ratio calculation adjustment to account for Premium Stabilization Programs and a proposal that not-for-profit issuers be allowed to deduct community benefit expenditures and state premium tax.

The proposed rule is scheduled to be published in the Federal Register on Dec. 7, and comments on the rule are due on Jan. 7.


Ivy Baer, J.D., M.P.H.
Senior Director and Regulatory Counsel
Telephone: 202-828-0499

Allison M. Cohen, J.D., LL.M.
Senior Policy and Regulatory Specialist
Telephone: 202-862-6085



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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806