State Mandated Benefits: Defrayal of Costs Overview

State Defrayal of Costs of Mandated Benefits Presentation to: Health Insurance Reform Commission Julie Blauvelt Virginia Bureau of Insurance November 23, 2021 Confidential

Background BOI Review of State Mandates Formula and Enteral Nutrition Mandate Market Segmentation Issue BOI Position Decisions for HIRC Agenda Confidential

Background Benefits originally included in the state s benchmark plan are essential health benefits (EHB), whether or not mandated. State can require benefits in addition to EHB but if so, must make payments to defray the cost. Any benefit required by state action taking place on or after January 1, 2012, other than for purposes of compliance with federal requirements, is considered in addition to EHB. New federal rules require states to report all state-mandated benefits by July 1, 2022 and annually after. Confidential

BOIs Change in Understanding BOI s prior understanding of state- mandated benefits in addition to EHB BOI s new understanding of state- mandated benefits in addition to EHB What BOI will do with this information Legislative options HIRC may want to recommend Confidential

BOI reviewed state mandates applying new understanding. Not considered in addition to EHB: Mandates enacted prior to 2012 Mandated provider or cost-sharing requirements Technical corrections not related to the benefit Mandates related to method of delivery (telemedicine) Mandates enacted to comply with federal law (ACA, MHPAEA) 38.2-3418.18 (Formula and Enteral Nutrition) is the only benefit mandate that the BOI determined requires defrayal under our new understanding. BOI Review of State Mandates Confidential

Original benchmark covered infusion services, including enteral nutrition therapy, and infusion of special medical formulas as the primary source of nutrition for persons with certain inborn errors of metabolism. New mandate covers: Inherited metabolic disorders Formula taken orally, not just enterally Formula required as a critical source of nutrition, but not the primary source of nutrition Even though this benefit in some form has been an EHB since the beginning, with the new mandate the entire benefit becomes in addition to EHB. A preliminary estimate of the costs of this mandate is $350,000 - $700,000 annually, if the state must defray the costs. Formula and Enteral Nutrition Benefit Mandate Confidential

Virginia law (38.2-6506 A 1) tries to protect the state from defrayal costs by prohibiting QHPs (plans offered through the Exchange) from providing state mandated benefits that are not included as EHB. CMS indicated that 38.2-6506 A 1 may violate discrimination standards. Benefit requirements must be uniform within a market for QHPs and non-QHPs: If a state requires non-QHPs in a market to provide benefits, it must require QHPs in that same market to provide the same benefits. The state would then be required to defray the cost of the benefit provided by QHPs related to a state mandate that was enacted after 2011. Market Segmentation Issue Confidential

38.2-3418.18, effective January 1, 2021, is in addition to EHB. BOI Position on Formula and Enteral Nutrition Mandate With this new understanding, effective for 2023 plans, BOI will follow Virginia law in 38.2-6506 A 1: QHPs are prohibited from providing this benefit that is no longer included in the EHB package. To allow the mandated benefit to be provided could mean the state must defray the entire cost of the benefit this was not anticipated when the benefit was enacted. This action will segment the individual and small group markets, which could result in state defrayal if federal law pre-empts this law. Confidential

HIRC May Choose to Recommend Legislation Desired Outcome Action Defrayal Cost to State? Coverage applies to: Require all regulated plans to provide all state mandated benefits; no discrimination Remove impediments by amending 38.2-6506 A 1 or other laws that require a different set of benefits for different plans in a market Yes All regulated plans State will not be required to defray costs; must eliminate discrimination Make new and existing problematic mandates only applicable to large group plans, Medicaid and/or state employee plans. For existing mandates, remove/amend requirements that segment the market in 38.2- 6506 A 1. No Large group plans and possibly Medicaid or state employee plans (For enteral nutrition, the benefit would revert back to original EHB) Require individual and small group market plans to cover new benefits without state defrayal Explore changes to the EHB benchmark plan and make legislative changes to remove problematic mandates or market segmentation No All individual and small group health insurance coverage State will not be penalized for discriminatory laws that segment a market Remove/amend requirements that segment the market in 38.2-6506 A 1 Yes or No, depending on the change Individual and small group markets Confidential

If a mandate is in addition to EHB and causes the state to defray costs, that mandate does not apply to any plans in the individual or small group market. Texas and Nebraska Examples of State Actions Apply mandates only to the large group market, Medicaid or state employee plan Consider revising benchmark plan for individual and small group New Mexico Employ a HIRC-like process Maine no new mandates or expanded existing mandates have passed other than as allowed Confidential

The CMS reporting requirement could again be deferred. Reporting was originally required to begin in 2021; the most recent rules deferred the reporting to 2022. The annual rules could defer the reporting requirement again. States make the determination of whether a benefit is in addition to EHB. Keep in mind CMS is aware of Virginia s laws that segment the market and has not yet acted to pre-empt them. CMS hasn t indicated there will be retroactive penalties assessed if a state did not defray when required. However, earlier federal guidance indicated that HHS could rescind up to 1% of payments otherwise due to a state per year until corrective actions are taken for serious misconduct with respect to compliance. Confidential

The Bureau will prohibit QHPs from including any formula or enteral nutrition benefit in 2023 plans (filed Spring 2022) unless Virginia law is changed. Non QHPs (solely off-exchange) will be required to offer this benefit market will be segmented. State defrayal is unknown because 38.2-6506 A 1 segments the market, contrary to federal rules. HIRC may want to recommend legislative change(s) to provide remedies for this and future mandates. Conclusion Confidential

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