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The QHP Certification Process in Federally-Facilitated Exchanges: Network Adequacy and Essential Community Providers

Posted on March 27, 2013 | No Comments

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Key Developments
Implementation Briefs

By: Sara Rosenbaum


One of the more complex Affordable Care Act implementation questions involves the relationship between health insurance Exchanges and state departments of insurance around the issue of qualified health plan (QHP) certification. This relationship is discussed at some length in federal guidance published on March 1 2013, which offers the federal government’s latest thinking on how this relationship might work in states in which a federally funded Exchange (FFE) is operating, either with or without a Partnership agreement (see this previous Implementation Brief for a discussion of state partnership agreements). As of March 2013, an FFE is expected to be operating in 33 states, and most will be operating in states in which there is no formal Partnership agreement in place (as of the date of this posting, 7 states (Arkansas, Iowa, Illinois, Michigan, West Virginia, Delaware and New Hampshire) had entered into a formal Partnership agreement).

For several reasons, the Exchange QHP certification process is deeply intertwined with a state’s broader regulated insurance market. All QHPs sold in Exchanges must be licensed by the state in which they are sold (this is true even in the case of multi-state plans governed by an agreement with the federal Office of Personnel Management).[1] Second, QHPs also must comply with the federal market-wide insurance reforms contained in the ACA. Third, many of the ACA’s QHP certification standards mirror state licensure standards; as a result, there is a high potential for overlapping duties and responsibilities between Exchanges and state insurance departments. For these reasons, the broader insurance reforms and the new Exchange markets are inextricably linked, making coordination between Exchanges and state insurance departments essential.

Even where a state operates its own Exchange or has entered into a Partnership arrangement with the FFE, working through the complexities of the Exchange/state Department of Insurance relationship inevitably will be a challenge. The Exchange, after all, is simply a subset of the entire state-regulated insurance market. But these complexities may be more pronounced in states in which the FFE operates without the benefit of a formal state Partnership. For this reason, the March 1, 2013 guidance (which addresses numerous issues) attempts to clarify how the federal government will go about the QHP certification task, with or without a formal state Partnership. Among the issues the Guidance addresses are two – network adequacy and the inclusion of essential community providers – that are specific to QHPs and that, in many cases, may be additional requirements that lie outside the purview of insurance regulators. How the FFE will certify compliance with federal standards on these two requirements thus becomes a matter of great importance.


The ACA’s market-wide insurance reforms and their enforcement

The Affordable Care Act introduces sweeping changes into the state market for plans sold by insurers to groups and individuals (grandfathered plans are exempt from many of these requirements).[2] Some of these changes already have taken effect:[3] a bar on annual and lifetime limits on coverage; a ban on unjustified rescissions; coverage of certain preventive health services; coverage of young adults up to age 26; uniform explanation of coverage documents; quality reporting; premium rate reviews aimed at controlling costs; appeals procedures; and patient protections. These reforms join other changes (including parity in coverage of mental illness and addition disorder treatment) that already have taken effect.

Beginning January 1, 2014, more sweeping reforms take effect:[4] a ban on pre-existing condition exclusions and other forms of discrimination based on health status (other than certain permitted wellness programs); a ban on discriminatory premiums that take factors other than age, family status, use of tobacco, and geographic rating areas into account; guaranteed issue and renewal of policies; a ban on discrimination against certain types of providers; and coverage of routine health care furnished as part of an approved clinical trial.

In addition, beginning January 1, 2014, health plans sold in the individual and small group markets (under 100 full-time employees) will be expected to offer “essential health benefits” (EHBs) meeting certain actuarial value (AV) standards as part of their plans.[5] (State benefit mandates enacted before December 31, 2011 that fall within the EHB categories can be included as part of the EHB package at no additional cost, while those enacted after this date can be included if a state pays any additional premium subsidy that might be required in the case of QHPs sold to low and moderate income individuals who purchase coverage through an Exchange).

These three sets of reforms are market-wide; that is, they apply to health insurance plans sold either inside or outside the Exchange. Under the Public Health Service Act as amended by the ACA,[6] states maintain the primary responsibility for enforcing these new federal standards. This approach to enforcement follows the enforcement system established in 1996 under the Health Insurance Portability and Accountability Act (HIPAA), whose reforms were in large part are modified by the ACA. The PHSA enforcement system[7] reflects the highly devolutionary and federally deferential nature of insurance regulation in the U.S. Under this system, states have the option of requiring that insurers meet these standards and assuring their enforcement; that is, the PHSA provides that states “may” require insurers to meet its market reform standards.[8] The PHSA also provides that where the HHS Secretary determines that “a state has failed to substantially enforce” one or more market reform provision, the Secretary is directed to enforce the provision(s) in question through the use of civil money penalties.[9] States may inform the Secretary that they do not intend to enforce the PHSA provisions, since by law, enforcement is an option.

A March 2012 review of state insurance market reforms conducted by researchers at Georgetown University[10] found that with the exception of Arizona, all states and the District of Columbia had begun the task of implementing the early market reforms through legislative, regulatory, and sub-regulatory (i.e., informal policymaking) actions or though the review of insurance policies sold in the state. However, a more recent review conducted for the Commonwealth Fund by the Georgetown research group[11] noted far slower state implementation of the 2014 reforms, finding that as of February 2013, only one state (CT) had enacted comprehensive market reform legislation adopting the federal reforms and authorizing their full enforcement. Researchers also found at least some level of movement on one or more reforms in 10 states and the District of Columbia.

In states that do not enforce the federal market reforms, Exchanges will be expected to assure that QHPs comply with these reforms along with state licensure standards. Furthermore, it may fall solely to an Exchange to certify issuer compliance with additional QHP certification standards that have no counterpart in the federal market reforms or (potentially) state licensing standards. The two most prominent examples of such additional certification requirements are network adequacy and ECP requirements, both of which are specific to the Exchange market.

Exchange activities

Exchanges are effectively markets within markets. Among other responsibilities, they are responsible for assuring compliance with QHP certification standards. As noted, state insurance departments may be the primary enforcers of the federal market reforms, and they are the authoritative enforcers of state licensure standards. This leaves the remaining QHP certification standards for Exchange review, most notably, the network adequacy and ECP participation standards.

The FFE Guidance: Network Adequacy and ECP Participation

The March 1 FFE guidance provides extensive information on the certification process that will apply in the FFE:

  • The guidance clarifies that the FFE will focus on those requirements that apply “only to QHPs seeking certification from an Exchange.”[12] It reiterates earlier guidance issued by CMS and related to state Partnership Exchanges, which stresses the agency’s intent “not to duplicate state reviews of potential QHPs conducted under state authority or as part of a state’s enforcement of 2014 market reforms (e.g., essential health benefit and actuarial value standards).”[13]
  •  The guidance specifies that while the FFE QHP review process will be the norm in the FFE, Partnership states may adopt an alternative review approach “that is consistent with the federal regulatory standards in consultation with CMS.” The guidance also clarifies that state-based Exchanges can develop their own QHP review procedures for QHP-specific standards.
  • The guidance identifies network adequacy and essential community providers as two specific issues to be addressed in the QHP certification review process.

Network adequacy

  • With respect to network adequacy, CMS notes that the question of network adequacy may, in fact, be part of a state’s issuer license review, in which case the federal process will rely on state analyses and recommendations “when the state has the authority and means to assess issuer network adequacy.” IN this case, CMS’ review will “vary based on whether the state assesses network adequacy in a sufficient manner and uses standards at least as stringent” as those required [under federal regulation] 45 C.F.R. §156.230(a).”[14]
  • In states “with sufficient network adequacy reviews, CMS will use a state’s findings as part of its evaluation.” In states “without sufficient network adequacy review,”[15] CMS indicates that it will accept an issuer’s Medicaid or commercial accreditation from an HHS-recognized accrediting entity. By contrast, unaccredited issuers will be required to submit an access plan with their QHP application. (Federal QHP certification takes a phased-in approach to accreditation in the FFEs).
  • CMS indicates that it will monitor network adequacy on an ongoing basis through two possible techniques: “complaint tracking” or “gathering network data from any QHP issuer at any time to determine whether the QHP’s network(s) continues to meet these certification standards.”[16]

Essential community providers

  • In the case of QHPs that do not operate with employed physicians or through a single contracted medical group, a QHP must meet essential community provider contracting standards. CMS indicates that its FFE reviews will include an explicit review of the ECP requirement.
  • In the case of “integrated issuers” (i.e., those that employ physicians or contract with single medical groups), the issuer must demonstrate that it has “a sufficient number and geographic distribution of employed providers and hospital facilities” to ensure reasonable and timely access for low income, medically underserved individuals in the QHPs service area. Integrated issuers seeking this exemption must show that they have “providers located in or contiguous to Health Professions Shortage Areas (HPSAs)” and 5-digit zip codes in which 30% or more of the population falls below 200% of the federal poverty level.”[17] Integrated issuers that cannot satisfy this standard must explain in their QHP applications how they intend to ensure access in areas in which they do not already have coverage (for example, plans to contract with ECPs or hire more providers). Integrated issuers also must explain how their sites are accessible to specific underserved populations including individuals with HIV/AIDS, American Indians and Alaskan Natives, and low income and underserved individuals seeking women’s health and reproductive services.
  • For its QHP reviews of issuers that are not “integrated,” CMS has fashioned a “safe harbor” standard in order to measure compliance with its regulatory ECP requirement that QHPs evidence “sufficient inclusion” of ECPs.[18] Under the safe harbor standard, an issuer application that demonstrates compliance with the safe harbor standard will be “determined to meet the regulatory standard established by 45 C.F.R. §156.235(a) without further documentation.”[19]To qualify for the safe harbor, the issuer’s application must:
    • Demonstrate that the at least 20% of available ECPs participate in the issuer’s provider network(s); and
    • “[O]ffer contracts during the coverage year” to all available Indian providers using the model QHP Addendum for Indian providers developed by CMS as well as to “at least one” ECP in each ECP category (in accordance with the CMS ECP Table) in each county in the service area where an ECP in that category is available.
  • CMS indicates that it may verify the offering of contracts after certification.
  • As part of the safe harbor threshold, the guidance also sets a “minimum expectation” regarding ECP participation. This “minimum expectation” provides that as long as an issuer application demonstrates that at least 10% of “available ECPs” in the plan’s service area participate in the issuer’s provider networks, the issuer will be determined to meet the federal regulatory standard, providing that the issuer in its application is able to explain how its network(s) as currently designed and after taking into account new 2014 enrollment, provides “an adequate level of service for low income and medically underserved enrollees.”
  • The CMS ECP guidance allows issuers that meet neither the safe harbor nor minimum expectation standard to nonetheless be certified if the issuer attaches to its application “a narrative justification describing why the issuer was not able to achieve either standard.” The justification “should describe how the issuer’s provider network(s) will provide an adequate level of service for low income and medically underserved enrollees consistent with the regulatory standard.” CMS also notes that “it will be difficult for issuers that do not meet the minimum expectation to meet the regulatory standard.”[20] Unlike the integrated issuers, issuers that seek an exemption from either the safe harbor or the minimum standard do not explicitly have to explain how their networks are accessible. Instead, they must explain how their networks will “provide an adequate level of service” for low income and medically underserved populations.


State adoption of an alternative approach to the CMS QHP certification review process. How many states will elect to adopt a QHP certification review process that diverges from the CMS approach? On which issues will states seek to use an alternative process?

State network adequacy reviews. How will CMS go about the task of determining that the state’s review process is “sufficient?” Will CMS analyze state QHP review instruments, hold discussions with state reviewers, or both?

Will CMS monitor network adequacy in all FFEs? The Guidance indicates that in its FFEs, CMS will both respond to complaints and use a network data gathering process that gathers data “at any time”. It is unclear however, whether CMS intends to use both techniques even in states in which the threshold question of network adequacy is determined by the state as part of its licensure review. Will CMS independently review network adequacy on an ongoing basis, even in states that do the initial review?

“Available” ECPs and the CMS’ ECP categories. The guidance (Table 2.1) relates its safe harbor provisions to “available” ECPs. ECPs in turn are identified by category. Some ECP categories are single entity categories; that is, the FQHC category (Table 2.1)[21] contains only federally funded and look-alike FQHCs. The same is true for Ryan White Providers and Title X clinics. Other categories (hospitals and “other” ECP providers) contain multiple types of entities. For example, the hospital ECP category contains DSH hospitals, children’s hospitals, rural referral centers, sole community hospitals, free-standing cancer centers, critical access hospitals. The “other” ECP category shown on Table 2.1 contains STD clinics, TB clinics, black lung clinics, hemophilia treatment centers, and “other entities that serve predominantly low income, medically underserved individuals.” In other words, radically different entities are grouped into individual ECP categories in some cases. Is it acceptable if the issuer offers a contract to an STD clinic but not a tuberculosis clinic? How about if the issuer offers a contract to a children’s hospital but not a critical access hospital? Is a local public health agency that offers children’s preventive services an ECP? How about a school health clinic?

All networks? The CMS guidance suggests that the agency will examine all provider networks for the issuer’s plans. Will CMS in fact require ECP participation in accordance with the safe harbor for all plans offered by an issuer at all metals levels? Only certain plans? Only plans sold at the second lowest-cost silver level (the level that qualifies for subsidies)?

The quality and extent of ECP participation. The safe harbor establishes a 20% participation rate but does not amplify on the terms of participation. Will it be acceptable if ECPs are invited to participate but only at a level that reflects fewer than all covered services offered? For example, will participation contracts be expected to cover all FQHC services including pharmacy services, or will CMS consider the threshold to be met as long as FQHC clinicians participate for purposes of ambulatory medical care? Will CMS require that the contract include the full range of FQHC services, including mental health and addiction treatment where available, pediatric dental care where available, maternity and newborn care, and preventive benefits? Will contracts with Title X family planning programs (another form of ECP recognized by CMS) be expected to cover all FDA-approved drugs and devices as specified in the EHB package or will issuers be allowed to offer contracts that cover fewer than all covered drugs and devices?

Post-QHP-certification ECP contract offers. CMS indicates that it may verify the offering of contracts as part of the safe harbor after certification. Does this mean that certification can be granted simply if the first prong of the safe harbor is satisfied (i.e., the 20% participation rate among available ECPs in the plan’s service area)? Is the safe harbor deemed satisfied even if the contract offers above and beyond the 20% threshold are rejected by ECPs that determine, for example, that the contracts cover too few services or provide unfavorable terms such as low payment rates, limited or no performance incentives, or no opportunity to participate in plans’ auto-assignment systems? (Auto-assignment is the practice of assigning members to primary care providers if their selected PCP is unavailable).

How long does the minimum expectation trump the safe harbor standard? The CMS guidance essentially allows issuers to bypass its safe harbor 20% and contract offer rules by showing that they have at least 10% available ECP participation and that their networks as configured are adequate to meet member needs. Will CMS apply any ongoing monitoring requirements to this alternative means for satisfying the participation threshold and its impact on member access to care? If so, what form will the monitoring take and what measures of access will be used? If, for example, a Title X family planning program is not part of the 10% of participating ECPs and the issuer has represented that its available family practice and gynecology practices are available to provide family planning services, will CMS monitor the network? If so, what will be the monitoring criteria? Will languages spoken be considered? How about access for adolescents? How about the forms of contraceptive coverage that are available through the issuer network?

Monitoring out-of-network use of ECP services. If a network is configured too narrowly or lacks providers who can engage members and patients, there is the possibility that members may attempt to go out-of-network to obtain covered services. Typically, out-of-network services may not be covered by a plan (except in cases of medical emergency) without evidence that the service is not available in-network. Will CMS monitor the ECPs that are available in a plan’s service area but excluded from the network or not offered contracts to determine if they are treating members on an out-of-network basis and being denied payment by the plan?

Issuers that fail to meet either the safe harbor or minimum standard. CMS will certify QHPs that fail to meet either standard if the issuer is able to justify the fact that it was unable to meet either standard and has an adequate network for low income and medically underserved populations without ECP participation up to at least the 10% threshold. Will CMS look behind the justification to determine whether either the claim of inability to meet the standard or the claim of adequate access is justified? Will either justification be permitted in geographic areas designated as experiencing shortages of health professionals (i.e., Health Professions Shortage Areas) or as being medically underserved on either a geographic or population basis?

Adequate level of services versus access. The guidance requires integrated issuers who seek an exemption from the ECP rules, to explain how their services are accessible and to do so specifically for certain populations including persons with HIV/AIDS, American Indians and Alaska Natives, and medically underserved populations seeking women’s health and reproductive health services. Non-integrated issuers that seek exemptions from either the safe harbor or minimum standard are not held to a comparable level of justification. Instead, they simply must show how their existing networks will provide an adequate level of services. As the Medicaid and CHIP Payment and Access Commission (MACPAC) has pointed out,[22] the potential availability of services (i.e., services that are an adequate level) does not equate with access, which may include many dimensions of access from access for persons with disabilities to language access, the ability to communicate with patients in culturally appropriate manner, the availability of transportation services, and other factors that affect access. Will CMS monitor all issuers seeking an ECP exemption for the accessibility of their services?

[1] PPACA §1301(a)(2).
[2] PPACA §1251.
[3] PPACA §1001.
[4] PPACA §1201.
[5] PPACA §1302.
[6] PHSA §§2701 et seq.
[7] PHSA §2723; 45 C.F.R. §150.203.
[8] PHSA §2723(a)(1).
[9] PHSA §2723(b).
[10] Katie Keith, Kevin Lucia, and Sabrina Corlette, Implementing the Affordable Care Act: State Action on the Early Market Reforms (Commonwealth Fund, 2012)
[11] Katie Keith, Kevin Lucia, and Sabrina Corlette, Implementing the Affordable Care Act: State Action on the 2014 Market Reforms (Commonwealth Fund, 2013)
[12] March 1 guidance, p. 5.
[13] Id.
[14] Id., p. 6.
[15] Id.
[16] Id.
[17] Id., p. 9.
[18] Id., p. 7.
[19] Id.
[20] Id., p. 8.
[21] Id.
[22] See Medicaid and CHIP Payment and Access Commission, Report to Congress (March, 2011) Ch. 4

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