The Centers for Medicare & Medicaid Services (CMS) issued a pre-publication version of a final rule addressing a broad range of health plan issues under Medicaid and the Children’s Health Insurance Program (CHIP). The official Federal Register version will be published on May 6, 2016.
In the final rule, the agency finalizes the basic structure and many of the provisions in the proposed rule published May 26, 2015. When implemented, the rule will affect the full range of Medicaid health plan operations and achieve greater alignment of regulatory standards for plans that operate in Medicaid, Medicare Advantage, and the Exchange Markets. However, in response to comments, CMS has made a number of changes in the final rule, has decided not to finalize certain proposals, and has adopted a range of implementation dates for different provisions.
Elements of the final rule include the following:
- Actuarial Soundness: The rule includes a variety of new Federal standards for actuarially sound capitation rates, including the documentation states must submit to CMS for rate reviews. As proposed, only withhold arrangements with reasonably achievable targets are counted for actuarial soundness purposes. The rule also retains the proposal allowing states to require plans to adopt a minimum fee schedule for network providers.
- Medical Loss Ratio (MLR): The rule requires each Medicaid health plan to calculate and report an MLR for contracts starting on or after July 1, 2017. (For multi-year contracts that do not start in 2017, the reporting is required for rate periods that begin in 2017.) The minimum federal standard is 85 percent, although states can establish a higher MLR. States must establish capitated rates such that plans would be reasonably expected to achieve an MLR of 85 percent no later than the rating period for contracts starting on or after July 1, 2019. CMS decided not to move forward with its proposal to include costs of fraud prevention activities in the numerator of the MLR calculation, until a similar change is made for the private market.
- Network Adequacy: The rule requires states to develop time and distance standards for primary and specialty care providers and assess the adequacy of the provider network at least annually. Under the rule states retain the flexibility to establish specific standards.
- Quality Ratings: The rule gives CMS the authority to implement a Medicaid health plan quality rating system similar to that in the Marketplace.
- Enrollment Period: CMS has decided not to adopt a proposal that would have required a new 14-day period during which beneficiaries residing in areas implementing managed care programs must remain in the FFS program while considering plan options. States however retain the option to mandate such period.
- Supplemental Payments:Under the final rule, states will be permitted to pass-through supplemental payments in a plan’s capitated rate, but the pass-through will be phased out over a period of years.
- Provider Screening and Enrollment: The rule requires states to screen and enroll all plan network providers, including those not otherwise enrolled with the state to provide services to FFS Medicaid beneficiaries. However, plans may execute provider agreements for up to 120 days pending the outcome of the state screening and enrollment process.
- Payments for Patients in Institutions for Mental Disease (IMD): The rule allows states to make capitated payments to Medicaid health plans in certain circumstances for enrollees who are patients in IMDs. For example, an institution must meet certain conditions and the enrollee’s length of stay cannot exceed 15 days in the payment month.
The proposed rule also addresses a number of other issues including codifying standards for Medicaid health plan managed long term services and supports programs and adopting new grievance and appeals requirements intended to align with Medicare requirements. The following are links to a CMS press release and a CMS blog post. CMS summaries of key provisions of the final rule can be found at this webpage by clicking on the “Final Rule” arrow.