Beginning next year, the CMS will pay premium and cost-sharing subsidies to exchange plans through an automated electronic process, and insurers that aren't ready for it will be penalized.
The CMS released guidance late last week to help insurers make sure they're ready for the system if they sell plans on exchanges operated by federal government. The government will withhold 25% of payments owed to plans that aren't prepared.
The CMS currently uses a manual process to make monthly payments. Issuers submit monthly Excel workbooks with plan-level information regarding premium tax credits and cost-sharing reductions. Starting in January, the CMS will calculate payment amounts based on information from the issuers about effectuated enrollment—meaning a consumer has signed up for coverage and paid the first premium.
The agency says this process will allow it to make more accurate payments and will provide it with the data it needs to justify those payment amounts.
Before the transition, the CMS will evaluate the readiness of insurers' enrollment data and data submission processes. On Dec. 4, the agency released a guidance on the criteria and outlined a payment withholding policy for issuers whose data is not deemed ready for the transition to policy based payments in January 2016.
The withholding will grow to 50% for payers that continue to lag, although the sums will be paid retroactively when the issuers comply.
The agency did not provide an estimate for how many plans may not be ready for the change. A request for comment from America's Health Insurance Plans was not returned.
Industry consultants have been working with health insurers to help them prepare for the new “policy-based payments” system, which they say has flown under the radar because there are so many other ACA requirements insurers are juggling.
“If you think your organization has been working from a fire hose these past few years since the launch of the Health Insurance Marketplace, wait until the CMS rolls out policy-based payments to federally-facilitated marketplace issuers beginning in 2016,” Diane Fischer, a senior consultant at Gorman Health Group says in an analysis of the policy. “It's not as if the accuracy of member data wasn't significant before, but now with a direct payment from CMS to the Issuer, your enrollment discrepancy rate will be transparent in real dollars.”
The CMS also notified plans that they must terminate coverage for “issuer orphans,” which refers to beneficiaries who insurers indicate enrolled into a plan via HealthCare.gov but don't appear as covered in data maintained by the federal marketplace.
In a related guidance issued Dec. 4 the CMS says HealthCare.gov cannot passively re-enroll these people, so plans should terminate coverage for them by the end of the year once they've been identified via a data reconciliation process with the federal exchange. They should then be encouraged to re-enroll during open enrollment to maintain coverage.
The CMS did not provide an estimate of how many issuer orphans may be at risk of losing coverage. A CMS spokesperson did not immediately return a request for comment.