The US Department of Health and Human Services (HHS) has released Part 2 of the Notice of Benefit and Payment Parameters for 2022. The annual notice primarily addresses Affordable Care Act (ACA) standards for the small-group and individual insurance markets, but also has some items that affect employer-sponsored plans. The notice provides the adjustment factor used to update the ACA’s cost-sharing limits (also called the out-of-pocket (OOP) maximums), employer shared-responsibility (ESR) assessments and the maximum employee contribution percentage for “affordable” employer coverage. The latest notice also creates a special-enrollment period so COBRA beneficiaries can enroll in individual market coverage after losing government- or employer-paid COBRA subsidies. Other items in the notice focus on implementation and enforcement of existing standards and increased transparency for prescription drug information in the individual and small-group insurance markets. This GRIST describes the provisions that most directly affect large employer-sponsored plans.
HHS determines the annual adjustment to the ACA’s in-network OOP maximums and ESR assessments using the “premium adjustment percentage.” This figure reflects the average per capita growth in private health insurance premiums since 2013. Although the method of determining the premium growth rate for 2020 and 2021 included individual market data, HHS has reverted to the method used from 2015 to 2019, which includes only employer-sponsored insurance plan data. This method sets the 2022 premium adjustment percentage at 1.3760126457.
Using the final premium adjustment percentage, the 2022 ACA in-network OOP maximums for essential health benefits (EHBs) under nongrandfathered group health plans are:
These figures represent an approximately 1.8% increase above the 2021 OOP maximums of $8,550 for self-only coverage and $17,100 for all other coverage tiers.
High-deductible health plans (HDHPs) qualifying to work with health savings accounts (HSAs) have different limits. The 2022 HDHP OOP maximums for HDHPs are $7,050 for self-only coverage and $14,100 for other coverage tiers, up from $7,000 and $14,000 in 2021.
The premium adjustment percentage is also used to adjust the ESR assessment. Although IRS has not yet announced the 2022 adjusted amounts, Mercer has projected the 2022 ESR assessments by applying the final premium adjustment percentage:
IRS is expected to announce the 2022 assessments in regularly updated ESR Q&As (#55) posted on the agency’s website.
The premium growth rate used to update the premium adjustment percentage is also part of the IRS formula for calculating the “required contribution percentage.” This percentage determines whether an employee’s contribution for employer coverage is affordable for ESR purposes. In the past, IRS has adjusted this percentage using HHS’s method for determining the premium growth rate. Using that method, Mercer has projected the 2022 affordability figures for employer coverage:
IRS will likely use the revised HHS methodology in future years to adjust the premium tax credit that eligible individuals can receive for public exchange coverage. HHS states that the new methodology will increase premium tax credits starting in 2023. For 2021 and 2022, the American Rescue Plan Act of 2021 (ARPA) temporarily increases public exchange subsidies in lieu of annual indexing.
Individuals seeking public exchange coverage generally must enroll during an annual enrollment period, unless they experience certain events triggering eligibility for a special-enrollment period (SEP). The final notice adds two new events that trigger a SEP for individuals losing subsidized COBRA coverage. Both SEPs apply across the entire individual insurance market — public exchanges in all states (whether run by the state or federal government), as well as the off-exchange private individual insurance market.
If the government is paying all or part of an individual’s COBRA premium, the complete cessation of this subsidy triggers a special-enrollment opportunity for individual market coverage. The government subsidy includes, but is not limited to, the COBRA subsidy under ARPA. Only complete, not partial, cessation of the subsidy triggers the SEP.
The date of the triggering event for the SEP is the last day of the period when the government subsidized all or part of the coverage. Individuals have 60 days before or after that date to enroll in coverage.
Example. Maria gets laid off on June 1 and enrolls in fully subsidized COBRA coverage due to the ARPA. The ARPA COBRA subsidy will expire on Sept. 30, so Maria will become responsible for the full COBRA premium on Oct. 1. If she decides to end her COBRA coverage when the ARPA subsidy expires, she will have 60 days before (from Aug. 2 through Sept. 30) or after (Oct. 1 through Nov. 29) the last date of subsidized COBRA coverage to enroll in individual insurance coverage.
Complete cessation of employer contributions for COBRA coverage likewise will trigger a SEP. A reduction in an employer’s COBRA contribution does not trigger a SEP — the employer must cease its contributions entirely. Employer contributions include complete or partial payment of an individual’s COBRA premium. In the preamble to the notice, HHS states that an employer’s payment of a 2% administrative fee for COBRA coverage doesn’t qualify as an employer contribution, since employers do not have to charge this fee.
According to the notice, this is not a change for the federal Healthcare.gov exchange, which currently allows a SEP when employer contributions to COBRA cease. However, state exchanges and off-exchange individual market insurers now must offer the same SEP.
The date of the triggering event for the SEP is the last day of the period when the employer either completely or partially subsidized COBRA coverage. Individuals have 60 days before or after that date to enroll in coverage.
Example. Michael is laid off on June 1, 2022. He enrolls in COBRA. His former employer pays 50% of the COBRA premium. Later that year, the employer informs Michael that it is completely terminating its COBRA contributions after Sept. 30, 2022. Beginning Oct. 1, 2022, Michael will be responsible for 100% of the COBRA premium. If Michael decides to end COBRA coverage effective Oct. 1, he will have 60 days before or after Sept. 30 to enroll in an individual market plan.
Every year, the notice addresses a myriad of operational and enforcement standards for the individual and small-group insurance market, including some specific to the qualified health plans (QHPs) on public exchanges. However, the 2022 notice has a few items of potential interest to employers sponsoring group health plans.
Medical loss ratio. Medical loss ratio (MLR) requirements apply to health insurers, including those providing large-group insurance coverage. The latest notice allows insurers more flexibility to pay out an MLR rebate early. The notice also makes some technical changes to MLR rules, such as adding a definition of “prescription drug rebates and other price concessions” to calculate the MLR.
EHB benchmark plans. Many self-insured employer health plans select a state EHB benchmark plan to determine which benefits are subject to certain ACA mandates. Last year’s notice required states to annually report certain information about their benchmark plans, starting July 1, 2021. This year’s notice states that HHS will not enforce the reporting requirement in 2021 and will not publish any 2021 reports on its website.
ACA pharmacy benefit manager (PBM) transparency. For the first time, this year’s notice implements the ACA’s PBM transparency requirements. Under the ACA’s amendments to the Social Security Act, health benefit plans or other entities providing PBM services to QHPs or Medicare Part D plans must disclose certain information to HHS. The notice places the reporting obligation directly on PBMs and any QHP issuers that do not contract with a PBM. These disclosures are to HHS only, not to the public. HHS last year set out some specifics on the form and manner of this data collection.
Upcoming pharmacy transparency rules for employer plans. Employers await more details on implementation of the Consolidated Appropriations Act of 2021 (CAA), which requires group health plans to disclose certain prescription drug and other information to relevant agencies. Large employer plan sponsors may want to review the notice’s prescription drug transparency-reporting requirements for exchange and off-exchange QHPs and their contracted PBMs. The required disclosures for group health plans and QHPs don’t directly overlap, but both do require disclosing information about prescription drug rebates, fees and other remuneration provided by drug manufacturers to the plan or its PBM. The notice says that HHS, along with Treasury and the Department of Labor (DOL), may issue future guidance explaining any interaction between the QHP and future CAA pharmacy data collections.
Transparency-in-coverage regulation. Another set of transparency rules, the 2020 final transparency-in-coverage regulation, will require large employer-sponsored plans and insurance issuers to publicly disclose extensive price and cost-sharing information beginning in 2022. Among other details. the disclosure must provide certain prescription drug pricing information, including a prescription drug’s net price after manufacturer rebates, discounts, chargebacks and other reductions. HHS has released some information on the form and manner of this public disclosure in data collection notices published last year. Those templates set out the data elements for disclosures by HHS-regulated insurers. Whether DOL will create different templates for ERISA plans is unclear.
Drug coupons and OOP maximums. Unlike past notices in recent years, the current one makes no changes to how large employer-sponsored plans can treat drug manufacturer coupons when tracking individuals’ costs toward the OOP maximum.
The main takeaways from the notice for large employers include the following: