Summary of Proposed HHS Notice of Benefit and Payment Parameters for 2025
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Executive Summary
From an actuarial perspective the proposals appear relatively tame. However, we are particularly intrigued by the proposals surrounding Essential Health Benefits, particularly regarding simplifying the process for states to make changes to their EHB Benchmark Plans and allowing adult dental to be considered an EHB. We don’t see significant changes being proposed to the Risk Adjustment program, although a proposal was included to update CSR factors related to the American Indian/Alaskan Natives (AI/AN) plan variants was included in addition to the typical annual updates.
Similarly, significant changes were not discussed regarding Standardized Plan Options, although consideration is being given to whether Standardized Plan Options should be required in State Exchanges where they are not currently offered. A proposal was made to allow insurers to create plan offerings targeting specific chronic and high-cost conditions.
From an administrative perspective, however, the proposals are far more interesting as there are multiple proposals related to Exchange requirements and in particular proposing to establish minimum standards for State Exchanges and State-Based Exchange on the Federal Platform (SBE-FP).
Essential Health Benefits
An interesting update is proposed relating to the EHB Benchmark Plan selection, in particular:
- Proposed change to the standards for State EHB Benchmark Plan selection, and
- Proposal to allow routine non-pediatric dental to be an EHB.
The proposal to change to standard for State EHB Benchmark Plan selection significantly simplifies and clarifies the process beginning with plan year 2027, by:
- Consolidating the options for States to change to EHB-benchmark plan from three options to one, which is to select a set of benefits that would become the State’s EHB-benchmark plan, which was already the most popular and flexible of the three previous options.[3]
- Redefining the typicality standard to require a State to demonstrate that the proposed EHB-benchmark plan provides a scope of benefits that is within the range of the least and most generous of the comparison plans, as opposed to demonstrating that the scope of benefits is the same as a comparison plan (when not supplemented by the State).[4]
- A technical clarification regarding the important but often misunderstood clause, which makes it clear that the EHB-benchmark plan may only exceed the scope of benefits in the typical employer plan only to the extent that supplementation is required to provide coverage within each EHB category.
- Removing the generosity standard, which is now complied with using the typicality standard. [5]
The proposal to allow routine non-pediatric dental to be an EHB, beginning with plan year 2027 has potential to be a significant change in the ACA market.[6] The proposal would not immediately make routine non-pediatric dental an EHB, even if existing language regarding routine non-pediatric dental is included in the current EHB-benchmark plan. States would still have to apply to make this change to their EHB-benchmark plan.
The impact of adding non-pediatric routine dental benefits as an EHB would likely increase premiums, which will also increase the premium tax credits available. The magnitude of this increase will depend on the specific benefits that are added. What qualifies as non-pediatric routine dental benefits usually encompasses services like cleanings, X-rays, fillings, and similar procedures. While the distinction between routine and non-routine may not be highly significant, eliminating this exclusion would empower states to incorporate a broad range of dental benefits, guided by the standard of typicality.
Some unintended consequences of the proposal are as follows:
- How will this impact the standalone dental plan (SADP) market? Unlike pediatric dental benefits, the proposal indicates offering a SADP will not satisfy the EHB requirement for non-pediatric dental benefits.
- As an EHB, non-pediatric routine dental benefits would be subject to annual limitation on cost sharing (proposed $9,200 for self-only coverage and $18,400 for other than self-only coverage for 2025[7]) and restrictions on annual or lifetime dollar limits. This may also impact self-insured group health plans and fully-insured group health plans in the large group market who must also comply with these limitations.
- Currently, the actuarial value (AV) calculator is not equipped to handle dental benefits, and would have to be revised if any States choose to add benefits.
Other EHB-related proposals include:
- Beginning with PY 2025, benefits currently covered in a State’s EHB benchmark plan would not be subject to defrayal. This appears in response to some benefits unintentionally losing EHB status when being included in State actions taken after December 31, 2011. However, this would not allow states to recoup defrayal costs that have already been paid.[8]
- Codify that prescription drugs in excess of those covered by a State’s EHB-benchmark plan are considered EHB.[9] Therefore, if issuers choose to offer more than at least the greater of one drug for each USP category and class or the number of drugs in the EHB-benchmark plan, these drugs would still be considered EHBs and must count towards the annual limitation on cost sharing of proposed $9,200 for self-only coverage and $18,400 for other than self-only coverage for 2025.[10]
Risk Adjustment
No changes were proposed to the structure of the risk adjustment model for the 2025 benefit year, including retaining an adjustment for Hepatitis C drugs. Consistent with prior years, the 3 most recent consecutive years of enrollee-level EDGE data was used to update the risk adjustment coefficients.
The cost-sharing reduction (CSR) factors are proposed to be recalibrated for the American Indian/Alaskan Natives (AI/AN) plan variants, although they proposed to retain the CSR adjustment factors for other CSR variants. [11]
HHS also proposes to require issuers to complete, implement, and provide to HHS written documentation of any corrective action plans based on findings or observations in the high-cost risk pool final audit report.[12]
Other important risk adjustment items are as follows:
- There are no changes proposed to the high-cost risk pool parameters ($1 million threshold and 60 percent coinsurance rate). [13]
- The proposed risk adjustment user fee is $0.20 PMPM (down from $0.21 PMPM in 2024). [14]
- 7 percent of HHS-operated risk adjustment funds collected during the 2024 fiscal year are proposed to be sequestered to become available for payment to issuers in fiscal year 2025 without further Congressional action.
Standardized Plan Options
The proposal did not detail significant alterations to the standardized plan options. Minor updates were described to make the standardized plan options be within the permissible de minimis metal ranges, consistent with the methodology is prior years. They will also seek comment on standardized plan options in State Exchanges.
More interesting was the discussion related to non-standardized plans, which will be limited to two down from four in the previous year. However, a proposal was included to allow issuers to offer more than two non-standardized plan options if plan design features provide substantial benefits to consumers with chronic and high-cost conditions.[15] Under the proposal substantial benefit would be defined as at least 25 percent lower than the cost sharing for the same corresponding benefits in an issuer’s other non-standardized plan option offerings in the same product network type, metal level, and service area. Written justification would be required.
Regarding the high-cost and chronic conditions, the proposal detailed the following as possibilities:
- Hepatitis C virus,
- HIV,
- Multiple sclerosis,
- Rheumatoid arthritis,
- Alzheimer’s disease,
- kidney disease,
- osteoporosis,
- heart disease,
- diabetes, and
- all kinds of cancer.
Specifically, examples of conditions that would not be considered chronic and high-cost in nature would be those that are generally acute in nature, including bronchitis, the flu, pneumonia, strep throat, and respiratory infections.
Exchanges
The bulk of the proposals appear related to Exchange requirements.
A particularly interesting proposal would allow Exchanges to permanently allow a special enrollment period (SEP) for APTC-eligible qualified individuals with a projected household income at or below 150 percent of the Federal Poverty Level (FPL).[16] Currently this special enrollment period was limited to periods when APTC is available such that the applicable taxpayers’ applicable percentage is set to zero, ie as a result of the ARP and IRA. Our interpretation is this is if an Exchange allows, these households would be allowed to change coverage whenever they want (restricted to once a month), and even drop coverage but re-enroll when medical care is required.[17] This appears somewhat contrary to the idea of a single risk pool, and may impact issuers ability to price appropriately and project risk adjustment. However, considering that this proposal would extend a provision that is currently in place due to the ARP and IRA, we believe the impact will likely be minimal.
Additionally, a proposal was included to require Exchanges to re-enroll individuals who are enrolled in catastrophic coverage into a new QHP for the coming plan year.[18] The proposal would attempt to keep enrollees in the most similar product or network, and would maintain enrollment in a catastrophic plan if enrollees maintain eligibility for catastrophic coverage. However, if enrollees are no longer eligible for catastrophic coverage, the proposal would enroll members into a bronze or even higher metal level QHP (if a bronze QHP unavailable) within the same product as their current plan or has the most similar network.
We believe this proposal would prevent enrollees from becoming uninsured if they do not make a plan selection. However, we acknowledge allowing catastrophic members to be auto-enrolled into a bronze or higher coverage level would transfer risk from the catastrophic risk pool into the non-catastrophic individual market risk pool. While this may make risk adjustment projection more difficult, we believe the impact of this would be small as it would impact a relatively small number of enrollees who would either purchase higher metal level coverage or become uninsured under current rules. Enrollee’s premiums would likely increase for a higher level of coverage, however, catastrophic enrollees are not eligible for APTCs, and therefore some of this dollar increase could be offset by a member receiving APTCs in the higher level of coverage.
Another proposal appears to be a continuation from prior rulemaking which would require that State Exchanges and SBE-FPs establish and impose quantitative time and distance QHP network adequacy standards that are at least as stringent as the FFEs’ time and distance standards established for QHPs, with county-specific time and distance parameters to be included in future guidance.[19] The notice specifically indicates that an issuer’s attestation would not be sufficient for plan compliance. The proposal also indicates that State Exchanges and SBE-FPs would require issuers to submit information on whether network provides offer telehealth services.
The proposal details limited exception and justification processes that may be available, and noted CMS would not require enforcement of appointment wait time standards at this time.
HHS propose to retain the 2024 benefit year FFE user fee rate of 2.2 percent of total monthly premiums and an SBE-FP user fee rate of 1.8 percent of the total monthly premiums for 2025.[20]
Other Exchange-related proposals include:
- Requiring states to operate an SBE-FP for at least one plan year prior to transitioning to a full State Exchange.[21]
- Requiring a centralized eligibility and enrollment platform on the Exchange’s website, including clarifying the Exchange is the entity responsible for maintaining effectuated enrollment in QHPs and making all determinations regarding the eligibility for QHP coverage and insurance affordability programs.[22]
- Creating rules surrounding documentation requirements as they relate to States ability to meet and demonstrate progress toward meeting State Exchange Blueprint requirements and public notice.[23]
- Authorizing the CMS Administrator for reconsideration decisions for agents, brokers, and web-brokers whose Exchange participation agreements have been terminated for cause. [24]
- Creating minimum HHS standards governing web-broker non-Exchange website display requirements.[25]
- Requiring State Exchange adopt an open enrollment period from November 1 to at least January 15 of the applicable benefit year, beginning with 2025.[26]
- Requiring all qualifying individuals who enroll in a QHP during a SEP receive coverage the first day of the month following selection, in all Exchanges.[27]
- Allowing enrollees in FFEs and SBE-FPs to retroactively terminate their enrollment in a QHP when the enrollee enrolls in Medicare Parts A or B, to the day before the date Medicare coverage begins. Retroactive termination of coverage must be requested within 60 days of the date they retroactively enroll in Medicare (the date the enrollment occurs, not the Medicare coverage effective date).[28]
- Creating minimum standards for Exchange call center operations.[29]
- Creating new standards for direct enrollment (DE) entity non-Exchange websites including extending HHS standards currently used in FFE and SBE-FPs to State Exchanges and how HealthCare.gov changes are to be reflected and displayed.[30]
- Requiring all Exchanges to notify tax filers the first year they fail to reconcile APTC starting in PY 2025.[31]
- Requiring all Exchanges to accept an applicant’s attestation of incarceration status.[32]
- Requiring Exchanges and State Medicaid and CHIP agencies to pay in advance for the cost of their use of the Verify Current Income (VCI) Federal Data Services Hub (Hub) service if it is used to support their eligibility verification processes. [33]
- HHS will match 75 percent of funds State costs for State Medicaid and CHIP agencies under certain eligibility criteria.
- Requiring all Exchanges to check for deceased enrollees to end coverage twice yearly beginning with the 2025 calendar year.[34]
Other Items
- Allowing states the option to hold virtual (or hybrid) public hearings or forums as equivalent to holding an in-person meeting for the purpose of satisfying 1332 requirements. Two separate meetings would still be required, and the State must develop a process for a member of the public to request in-person meetings.[35]
- When determining financial eligibility for Medicaid for individuals excepted from application of the MAGI financial methodologies, allowing states to adopt income and/or resource disregards at discrete subpopulations in the same eligibility group, provided the subpopulation is reasonable and does not violate other Federal statutes (for example, it does not discriminate based on race, gender, sexual orientation or disability).[36]
- Allowing states operating a Basic Health Plan (BHP) to follow an effective date of eligibility for all enrollees on the first day of the month following the month in which BHP eligibility is determined.[37]
- Propose to enable CMS to approve requests by CO-OP borrowers to voluntarily terminate their loan agreement with CMS, to permit CO-OP borrowers to pursue other business plans, provided certain conditions.[38]
- Beginning January 1, 2026 a P&T committee must include a consumer representative, and requests comments on other requirements. [39]
[3] § 156.111
[4] § 156.111
[5] § 156.111
[6] § 156.115
[7] https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf
[8] § 155.170
[9] § 156.122
[10] https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf
[11] § 153.320
[12] § 153.620
[13] § 153.320
[14] § 153.610
[15] § 156.202
[16] § 155.420
[17] § 155.420
[18] § 155.335
[19] § 155.1050
[20] § 156.50
[21] § 155.105
[22] § 155.205 and 155.302
[23] § 155.106
[24] § 155.220
[25] § 155.220
[26] § 155.410
[27] § 155.420 and 600.320
[28] § 155.430
[29] § 155.205
[30] § 155.221
[31] § 155.305
[32] § 155.315
[33] § 155.320
[34] § 155.330
[35] § 33.112, 155.1312, 33.120, and 155.1320
[36] 42 CFR 435.601
[37] § 600.320
[38] § 156.520
[39] § 156.122