If finalized, these proposals will generally take effect on January 1, 2025, unless otherwise noted.
HHS recently released a proposed rule1 to update standards to the health insurance marketplaces and health plans under the Affordable Care Act (ACA) for 2025. The proposed policy aims to expand marketplace enrollment, improve the consumer experience, and raise standards for marketplace plans nationwide.
HHS also proposed to continue existing risk adjustment policies for the 2025 health plan year, with some exceptions, according to a Health Affairs Forefront post.2 If finalized, these proposals will take effect beginning January 2025, unless otherwise noted.
Both the individual and small group market risk adjustment system are based on a set of regression models that assign risk scores to enrollees regarding their plan metal level and individual characteristics, such as age, sex, and health conditions.
HHS also reported whether the 2020 and 2021 data were distorted by the COVID-19 pandemic, finding there was little evidence that the pandemic affected the relative claims spending of different types of enrollees. HHS also proposed to continue making a downward adjustment to plan spending on hepatitis C drugs, with the aim of capturing price declines associated with the entry of new hepatitis C drugs not reflected in 2019 to 2021 data.
Transfer Formula Updates
While HHS does not plan to change the structure of the transfer formula, which determines the amounts that insurers receive or pay under risk adjustment, for the 2025 benefit year, it does plan to update parameters for risk scores for American Indian and Alaska Native (AI/AN) enrollees. This adjustment was intended to reflect lower cost sharing to increase utilization and plan liability. By doing so, the HHS stated that it hopes this change will encourage issuers to improve the quality of coverage available to AI/AN enrollees, who account for more than 1% of enrollment in only 5 states: Oklahoma, Alaska, Montana, South Dakota, and North Dakota.
Furthermore, HHS did not make any other changes to the treatment of cost-sharing reductions (CSRs) in risk adjustment, believing the CSR adjustment factors for non-AI/AN enrollees are adequate and seeking to maintain stability and predictability for issuers. HHS will also continue its existing approach to selecting CSR adjustment factors in cases, such as Massachusetts’s wrap-around cost-sharing subsidies, where state policies increase the actuarial value of these plans beyond the federally required level.
Risk Adjustment User Fee
Individual and small group issuers are also required to pay a user fee to cover the costs of operating and risk adjustment program, with the fees proposed at $0.20 per member per month for the 2025 benefit year, which is slightly lower than the $0.21 per member per month for the 2024 benefit year. This slight decline was reported to be the result of increased projected enrollment due to updated data, offset by an increase in the projected costs of operating the risk adjustment system due to higher contracting and labor costs.
Lastly, HHS will require issuers to submit a corrective action plan in the case that a risk adjustment program audit finds evidence of issuer noncompliance evidence. This will be required even if the evidence does not result in a formal finding of noncompliance because of a lack of financial impact. This proposal would be effective for 2020 benefit year audits, which are expected to begin in 2024.
1. Corlette S, Levitis J. Proposed 2025 payment rule: marketplace standards and insurance reforms. Health Affairs. Published on November 20, 2023. Accessed November 28, 2023.
2. Fiedler M. Proposed 2025 payment rule: risk adjustment. Health Affairs. Published on November 20, 2023. Accessed November 28, 2023.