Final Benefit and Payment Rule Will Shift Insurers’ ACA Strategies

Insurers need to be adaptable if they are going to succeed on the Affordable Care Act Marketplace. Enrollment has hit record heights – exceeding 16 million people in 2023. Competition has stiffened, with more than 300 insurers participating on the Exchanges, a 66% increase since 2018. And ongoing regulatory changes force insurers to continually revamp their strategic playbooks.

This year is no different. The Centers for Medicare and Medicaid Services on April 17 released its Notice of Benefit and Payment Parameters final rule for 2024. The 577-page regulation sets new ground rules for plan options, marketing requirements, auto re-enrollment, and more. Oliver Wyman’s Exchange team dug into the rule and shares some key changes that carriers need to consider as they develop their 2024 Qualified Health Plan submissions.

This two-part series spotlights significant changes included in the final rule and how they’ll impact the industry. This article hones in on five high-impact areas:

1. Standardized Plan Options and Limits on Non-standardized Options

Some carriers may be flooding consumers with numerous incremental product options to dominate the Healthcare.gov product search page. The 2023 NBPP final rule aimed to simplify the selection by requiring insurers to offer standardized plans in every rating area that they offer non-standardized plans. The justification may have relied on a 2016 RAND Corporation study which concluded that too many exchange product choices lead to poor consumer decisions. There are minimal changes for standardized plans in 2024. The Healthcare.gov website differentiates standardized products as Easy Pricing.

CMS still allows non-standardized plans; as a result, consumers in 2023 will see an average of 114 product options. But for 2024, the final rule limits carriers to four non-standardized plans per product network type and metal tier, further restricting them to two non-standardized plans beginning in 2025.

Our Take: CMS estimated these changes will reduce the average number of products from 114 this year to 90 in 2024 and 65 in 2025. Issuers must become increasingly sophisticated in product portfolio management, consumer behavior modeling, pricing strategy, and micro-market Exchange simulation to attract and retain consumers and sustain their membership and margin. Community outreach, education, and personalized messaging will become critical success factors for carriers.

2. Marketing Name Requirements for Qualified Health Plans

CMS is taking aim at plans that utilize deceptive marketing. The agency and state insurance regulators have concluded that many plans use marketing names with cost-sharing and benefit details as descriptors that are incorrect or misleading. A CMS review uncovered “egregious” examples of potentially deliberately deceptive plan names. One example: using “$0 cost-sharing” without noting that it applies to a limited number of visits.

CMS and state regulators will review plan names and marketing materials more closely during the annual certification process. Most public comments on the proposed rule applauded the approach. Some commenters urged CMS to adopt a standard template for plan marketing names. While CMS declined to do so for 2024, the agency agreed that clear and comparable information in plan names is important to support informed consumer decision-making.

Our Take: Carriers doing a detailed review of product names can get ahead of the issue and minimize consumer complaints. There is a real possibility that CMS will consider pushing

Exchange carriers to adopt a standardized template for marketing plan names in 2025 and beyond. As competition intensifies on the Exchange, carriers that adopt a philosophy of clear and simple messaging will break through the clutter and confusion. With increasing standardization, carriers must find ways to get their plans to stand out.

3. Rules for Agents, Brokers, and Web-Brokers

CMS is also increasing scrutiny of brokers, who are essential in guiding consumers through their Exchange options. The influence of brokers is sizeable. According to CMS, nearly half of all enrollments on the federal Exchange in 2020 were facilitated by brokers. There is a wide range across markets on broker participation. In the hyper-competitive Florida market, over 70% of enrollments are broker-assisted, compared to 23% in a less crowded market like Delaware. Nationally, about 70,000 brokers are certified to sell Marketplace plans.

The large broker presence has resulted in an increasing number of consumer complaints to CMS and state regulators. In response, CMS is moving to strengthen the broker certification process to qualify enrollment of consumers, step-up fraud and abuse reviews, require increased documentation of enrollments, and gain written consumer consent from the enrollee to assist them with their application.

Our Take: A reputable broker with deep knowledge and expertise can give consumers sound advice. They can demystify a complex decision process. Exchange carriers that develop trusted broker relationships and competitive broker compensation models will be well-positioned for Exchange sustainability. As scrutiny from CMS and state regulators intensifies on the broker community, carriers that establish broker councils, include brokers in product development and naming convention strategy sessions, and maintain systems that pay them accurately and on time will establish differentiated loyalty with brokers and engagement with consumers.

4. Optional Special Enrollment Periods for Medicaid and CHIP Redeterminations

The 2024 final rule allows federal and state-based Exchanges to create a special enrollment period allowing consumers to select a plan for Marketplace coverage up to 90 days after the loss of their Medicaid or CHIP coverage. State-based Exchanges with Medicaid or CHIP reconsideration periods longer than 90 days will be able to provide consumers that additional time to select a Marketplace plan commensurate with those states’ reconsideration periods. The Department of Health and Human Services estimates that up to 15 million people may be disenrolled from Medicaid with the end of automatic redeterminations and as states resume eligibility reviews. As many as 3 million people are estimated to qualify for premium subsidized coverage on the exchanges.

Our Take: Medicaid Managed Care Organizations on the Marketplace will be highly focused on maintaining these customers. Many are developing outreach campaigns and educational websites or toolkits to ensure retention (see this Oliver Wyman Health article for more detail). For carriers that are not MCOs, this optional SEP nonetheless would offer an opportunity for incremental enrollments on Exchange. To maximize this enrollment opportunity, carriers will want to incorporate training and scripting into their marketing, sales, and customer service strategies.

5. Auto Re-Enrollment Hierarchy — The Bronze-to-Silver Crosswalk

Every year, thousands of Exchange enrollees do not actively re-enroll but simply rely on their carrier to automatically re-enroll them into the same product. This is often referred to as passive renewal. CMS modified automatic re-enrollment hierarchies for 2024. Previously, enrollees eligible for cost-sharing reductions and currently enrolled in a Bronze plan would typically be re-enrolled in a Bronze-level QHP. In 2024, enrollees will instead be re-enrolled in a Silver-level QHP, with CSRs and within the same provider network if the premium is the same or lower than the Bronze plan after applying the advance premium tax credit. This is being called the “Bronze to Silver Crosswalk” policy.

Our Take: The crosswalk will apply mostly to people earning under 200% of the Federal Poverty Level. This change is very consumer-friendly. The biggest beneficiaries will be enrollees earning under 150% FPL, which virtually guarantees these consumers will have greater coverage and a more economical plan, with at least one zero premium Silver plan with a $0 to $800 deductible instead of a zero premium Bronze plan with a $8,000 deductible.

Exchange carriers should dive deep into their current membership to identify customers to whom the crosswalk applies and assess the impact on their business. This likely has margin, risk adjustment, and customer retention implications. Scripting for customer service teams and broker education will go a long way to enabling them to help the consumer better understand this crosswalk as a benefit to their coverage.

This Bronze to Silver crosswalk is a complex consumer issue. CMS may be taking a stance here to help some people out of what retailers call a dominated default choice. Given the complexity of the Marketplace and number of choices, consumers default to the status quo or default choice and pay more to get less. Carriers should continue to build up their marketing analytics and consumer insights to balance retention with healthy lifetime value of the customer metrics.

Building Resiliency into Exchange Businesses

This regulatory process is an annual rite of passage for Exchange carriers. It’s just one of the major change factors carriers face as they aim to stay competitive. The high degree of volatility, uncertainty, complexity, and ambiguity in the Marketplace means to remain competitive carriers must build resiliency and adaptability into their market strategies and teams.

For more information about OW's Exchange platform, contact Travis Kistler, Partner, Health and Life Sciences, and Shyam Vichare, Partner, Health and Life Sciences.