Final 2025 Payment Notice: Marketplace Standards And Insurance Reforms
By Sabrina Corlette and Jason Levitis
On April 2, 2024 the U.S. Department of Health & Human Services (HHS) released the final “Notice of Benefit and Payment Parameters” (Payment Notice) for plan year 2025. The annual rule sets standards and requirements for the Affordable Care Act (ACA) Marketplaces and health insurers. Concurrent with the Payment Notice, HHS released the 2025 Actuarial Value Calculator and methodology.
HHS’ stated goals with the 2025 Payment Notice are to improve consumers’ access to quality, affordable coverage and ensure program integrity. The administration also has prioritized changes that increase transparency, advance health equity, and mitigate health disparities. The final rule includes proposals designed to expand Marketplace enrollment, establish minimum standards for Marketplaces nationwide, and improve the consumer experience. The agency received 220 comments on the proposed rule, which was published in November 2023.
In this article we focus on Marketplace and insurance reforms and policies related to the Advance Premium Tax Credits (APTCs). An article by Matthew Fiedler will review HHS’ changes to the ACA’s risk adjustment program.
National Standards For Health Insurance Marketplaces
Eighteen states and the District of Columbia (D.C.) now operate their own state-based Marketplace (SBM), an increase from 11 states and D.C. in 2017. Georgia, Illinois, and Oregon are now in the process of transitioning from a federally facilitated Marketplace (FFM) to one that is state operated. As other states consider a similar shift, HHS has moved to improve the process for states to undertake the transition and set minimum national standards for operating an SBM.
A Two-Step Transition
HHS is finalizing a proposal that a state wishing to operate an SBM must first operate as an SBM using the federal platform (SBM-FP) for at least one year, including during an open enrollment period. This interim step is intended to ensure states have sufficient time to create, staff, and structure an SBM, and to provide for adequate engagement with partner agencies and organizations such as Medicaid, the department of insurance, consumer assisters, and participating insurers.
A majority of public comments supported the requirement for transitioning states to spend at least one year as an SBM-FP, with several noting that establishing a successful Marketplace requires establishing and testing technical operations and providing sufficient opportunities for public engagement. Some commenters argued that the interim step was unnecessary, but HHS responded that spending time as an SBM-FP allows states to test out key Marketplace functions such as operating a Navigator program and developing plan management capabilities.
An Enhanced Approval Process
HHS is finalizing a proposal requiring that states wishing to transition to an SBM submit supporting documentation through the Exchange Blueprint process. The Blueprint outlines the state’s plans for standing up and operating an SBM and must be approved by HHS. Under the new process, states will need to provide detailed plans regarding SBM functionality and consumer assistance programs and activities, and respond to HHS requests for evidence necessary to assess the state’s ability to meet requirements for SBM functionality.
To improve the transparency of the transition process, a state must also provide the public with notice of its intent to transition to an SBM and publish a copy of its Blueprint application. States will also be required to hold periodic public engagements, so that stakeholders can learn and provide input into the process. In addition, HHS will publicly post states’ Blueprint applications within 30 days of receipt.
Most public comments supported a more rigorous and transparent approval process, arguing that it would help states better implement and operate an SBM. A few commenters disagreed, arguing that HHS lacks authority to impose these additional requirements and that they are not necessary. HHS responded that it is required by statute to set standards for establishing a state Marketplace, giving it clear authority to establish the process for doing so. The agency further argued that the above rule changes simply codify existing practice and do not materially change what the agency has been asking of transitioning states.
New Call Center Standards
Under the ACA, all SBMs must operate an accessible, toll-free call center. In this Payment Notice, HHS will require those call centers to provide guaranteed access to a live representative during published hours of operation. Those representatives further must be able to help consumers with their Marketplace applications and respond to questions about subsidy eligibility and plan options. HHS believes that all current SBMs already meet these standards but wants to ensure that future SBMs do not rely solely on an automated telephone system to operate their call centers. The agency argues that SBM call centers should all have “a basic level of customer service” to help consumers with Marketplace applications.
Several comments approved of the new standards, noting that it would help ensure consumer understanding of the eligibility and enrollment process, particularly for those with limited health insurance or computer literacy. Some commenters also asked HHS to also require call centers to provide dedicated lines for people with disabilities and/or limited English proficiency. The agency declined to do so, noting that they already review SBM call centers to ensure that they provide a TTY line service, a Spanish version of their website, and a dedicated line for oral translation services in at least 105 languages.
A Centralized Eligibility And Enrollment Platform
In its proposed rule, HHS raised concerns that some future SBMs may seek to operate a disaggregated Marketplace in which consumers would sign up for plans and financial assistance through brokers and insurers, rather than through a centralized website. It is thus finalizing a proposal to require that SBMs operate a centralized eligibility and enrollment platform on their own website, so that consumers can submit a single, streamlined application for Marketplace enrollment and financial assistance. The agency is also clarifying that the SBM must make the final determination of a consumer’s eligibility for Marketplace coverage and financial help, even if the consumer initiates their enrollment through a Direct Enrollment (DE) platform, insurer, or broker. HHS is concerned that if a DE entity, broker, or insurer conducts eligibility determinations, consumers could be given incorrect or inconsistent results. A non-centralized eligibility and enrollment program poses financial and security risks, as well as an increased risk of inaccurate APTC payments, leaving consumers at risk for tax liability when they reconcile their APTC in their tax filing.
Although many commenters supported these requirements, several opposed them, arguing that they undermine state flexibility. HHS disagreed, arguing that the standard will better ensure SBM accountability for eligibility determinations without preventing states from allowing consumers access to DE platforms, should they choose.
National Standards For Web Brokers
HHS has established a set of standards for web-brokers that assist consumers with applications for the FFM and SBM-FPs. HHS notes that there is “increased interest” among SBMs in using web-brokers to facilitate enrollments. To ensure that agents or brokers who use a web-broker’s platform to help consumers enroll in Marketplace coverage comply with safeguards related to transparency, oversight, and consumer support, the agency is finalizing rules that extend the FFM’s standards for web-brokers to those operating in SBMs. Specifically, HHS’ standards for web-broker displays of plan information, disclaimer language, information about financial assistance, operational readiness, standards of conduct, and the behavior of downstream agents and brokers will apply across all Marketplaces, whether state- or federally run.
HHS argues that a standardized framework and set of requirements across states will help reduce burdens on web-brokers that operate in multiple states. However, the agency also observes that state flexibility is important. Therefore, HHS establishes a general requirement that SBMs set operational readiness and other standards for participating web-brokers, but SBMs will have the flexibility to determine the details of those standards.
Most commenters were broadly supportive of establishing a minimum set of national standards. Some noted that the changes could enable SBMs to leverage the FFM’s operational readiness reviews, which would relieve compliance burdens for both SBMs and web-brokers. However, other commenters broadly opposed the changes, arguing that SBMs should have greater flexibility to set their own standards. In response, HHS indicated that it was balancing the need for a baseline set of consumer protections while maximizing opportunities for state flexibility.
National Standards For DE Entities
The FFM’s DE program is a significant source of enrollment. In 2023, 81 percent of agent- or broker-assisted Marketplace plan selections were through the DE program. None of the SBMs operate a DE program, although some current and future SBMs are considering doing so. Under this final rule, HHS will extend its FFM/SBM-FP standards for DE entities to SBMs. In particular, HHS’s changes will require DE entities to make website updates designed to simplify the plan selection process and increase consumer understanding of plan benefits, cost-sharing responsibilities, and eligibility for financial assistance. SBMs that choose to implement a DE program will also need to require their DE entities to prominently display website changes that are consistent with changes on the SBM’s website. HHS will rely on the SBMs to enforce compliance with these requirements.
The final Payment Notice also extends to SBMs standards for DE entities that govern the marketing and display of QHPs and non-QHPs, the provision of correct information to consumers and the avoidance of certain marketing of non-QHPs, website disclaimer language, and operational readiness. For example, just as in the FFM, DE entities operating in SBMs will be required to limit their marketing of non-QHPs during the open enrollment period. HHS is also encouraging, but not requiring, SBMs to require DE entities to engage a third-party auditor to assess operational readiness.
Most public comments supported HHS’ new requirements, and the extension of those requirements, to SBMs. Commenters noted that the standards would enhance “consumer protection, accuracy, efficiency, and consistency” across the FFM and SBMs. Some commenters also noted that the new standards could help SBMs leverage HHS’ existing processes for DE entities, reducing duplication of efforts. Several opposed these proposals, arguing that SBMs should be accorded greater flexibility. However, HHS believes that these national standards will help ensure critical consumer protections while also maintaining some flexibility for SBMs that wish to establish a DE program.
A Standardized Open Enrollment Period
HHS finalizes a proposal that SBMs adopt a standard open enrollment period that begins on November 1 of each year and ends no earlier than January 15, with the option of extending the open enrollment beyond January 15 if they choose. However, in response to comments the agency agreed to “grandfather” in Idaho’s SBM, which begins its open enrollment period in October and ends in December.
Many commenters supported a more standardized open enrollment period because it helps maximize the time consumers have to enroll, creates a more consistent window for consumer outreach, and provides consumers with more time to learn about premium changes in January before making a plan selection. Others, however, argued that SBMs should be able to set their own open enrollment periods.
Special Enrollment Periods: Standardizing Coverage Dates
HHS is finalizing a proposal requiring all SBMs to align their coverage effective dates for special enrollments. Currently, in the FFM, SBM-FPs, and several SBMs, if a consumer selects a Marketplace plan during a special enrollment period (SEP), their coverage will start on the first of the month after their plan selection. For example, if a consumer selects a Marketplace plan on March 31, their coverage will start on April 1. However, in some SBMs, if a consumer selects a plan after the 15th of the month, their coverage effective date will not start until the first day of the second month after plan selection. In other words, if a consumer selects a plan on March 16, their coverage won’t begin until May 1.
Because such a late start date can expose people to coverage gaps, all SBMs will now be required to provide a coverage effective date of the first of the month following the date of plan selection. There was widespread support for this proposal from many commenters, including providers, insurers, patient and consumer advocacy groups, and SBMs.
Minimum Standards For Network Adequacy
HHS is finalizing a proposal to require SBMs and SBM-FPs to establish quantitative time and distance network adequacy standards that are “at least as stringent” as those required of insurers in the FFM. SBMs and SBM-FPs will also be required to conduct reviews of plans’ network adequacy before certifying those plans for Marketplace participation. SBMs and SBM-FPs will be prohibited from merely accepting an insurers’ attestation as the only means of ensuring compliance. And, similar to the FFM, SBM and SBM-FPs will be required to provide insurers that cannot meet the network adequacy standards a “justification process” that allows them to explain why they failed to do so and how they intend to ensure enrollees’ access to services.
If an SBM or SBM-FP has quantitative network adequacy standards that are different from the FFMs, HHS will permit those states to seek an exception, but they must be able to demonstrate that their standards ensure a level of access to providers that is as adequate as that in the FFM. HHS is also finalizing a proposal requiring all Marketplace insurers to submit information to SBMs and SBM-FPs about whether their networks offer telehealth services. To give the SBMs and SBM-FPs more time to implement these new requirements, HHS is extending the implementation date to January 1, 2026.
Many of the public comments supported these provisions, particularly the requirement that all SBMs and SBM-FPs conduct a quantitative analysis of, and objectively monitor, plan network adequacy. Many other commenters opposed the proposal, arguing that states should have flexibility to set network adequacy standards and monitor access to services; they also noted that the requirements raise the potential for conflicting or duplicating regulations and increase administrative burdens for states and insurers. HHS disagreed with these commenters, stating that its requirements are intended to create an “effective national baseline” of network adequacy standards and ensure that consumers have reasonable, timely access to health care services.
Selecting And Updating Essential Health Benefits
Health insurers in the individual and small group markets must offer plans with benefits that are equivalent to those offered in a typical employer plan and cover, at a minimum, ten essential categories of benefits. States may adopt benefit mandates in addition to the essential health benefits (EHB), but if they do, the ACA requires them to defray the additional associated premium costs.
States have the primary responsibility of identifying and updating an EHB “benchmark” plan. Under federal rules, any state benefit mandates enacted prior to December 31, 2011 are considered part of EHB and their costs do not have to be defrayed by the state. States would have to defray the cost of benefit mandates in addition to EHB enacted after that date. In addition to adopting changes to the EHB defrayal and benchmark updating process, HHS is also finalizing proposals designed to strengthen and modernize health benefits.
Changes To The ACA’s “Defrayal” Policy
HHS is finalizing, as proposed, a provision stating that if a covered benefit is included in a state’s EHB-benchmark plan, it will be considered EHB and not subject to state defrayal. In other words, if a state enacts a new benefit mandate requiring a Marketplace plan to cover a health care item or service, it will not be required to defray the cost of that new item or service if the benefit is already included in the state’s EHB-benchmark plan. HHS argues that this change will facilitate state compliance with the defrayal requirements by making it easier and more intuitive to identify benefits that have been mandated in addition to the EHB.
Most commenters supported the updates to HHS’ defrayal policy, with state officials noting that there has been confusion about how to operationalize the defrayal policy and that the changes would help state regulators ensure that consumers receive EHB protections. Several commenters opposed the proposal, expressing concern that it would increase costs by making it easier for states to avoid defraying the cost of additional benefits, simply by updating their EHB-benchmark plan. While HHS agreed that this provision may lead to increased costs, it believes that states will “appropriately balance” the need for coverage of a specific benefit with the potential impact it could have on costs.
State Selection Of An EHB-Benchmark Plan
HHS finalizes, largely as proposed, changes to the standards and process for states to select a new or revised EHB-benchmark plan. Previous federal rules required states to meet two standards:
The typicality standard: The proposed EHB-benchmark plan must provide a scope of benefits equal to those provided under a typical employer plan, which could be either one of the state’s 10 base-benchmark plan options from the 2017 plan year or the largest health insurance plan by enrollment within one of the five largest large group health insurance options.
The generosity standard: The proposed EHB-benchmark plan must provide a scope of benefits that does not exceed the generosity of the most generous plan among a set of comparison plans used for the 2017 plan year.
Under this final rule, HHS is consolidating the options for states to change their EHB-benchmark plan. Under the typicality standard, the scope of benefits of a typical employer plan would be defined as any scope of benefits that is as or more generous than the scope of benefits in the state’s least generous employer plan (among the 10 base-benchmark plan options), and as or less generous than the scope of benefits in the state’s most generous employer plan. Under this policy, states will need to assess only two typical employer plan options (the least and most generous) to establish a range for the scope of benefits within which the EHB-benchmark plan must fall. HHS is removing the generosity standard. HHS is also lifting the requirement that states submit a formulary drug list as part of their documentation of EHB-benchmark plan changes, if they are not proposing any changes to the prescription drug benefit. In response to comments from states, HHS has moved up the effective date of these changes from January 1, 2027 to January 1, 2026.
Many of the public comments supported these changes, noting that simplifying the process would reduce burdens on states seeking to update their EHB-benchmark plans. These commenters believe a streamlined process could help states expand coverage for critical services such as maternity care, substance use disorder care, obesity care, and chronic disease management.
Many other commenters opposed the proposal, arguing that the updated process and removal of the generosity standard could expose federal taxpayers to increased costs, to the extent that states are more frequently adding benefits to their benchmark plan. However, HHS notes that under its new streamlined approach, there will be an “upper bound” for EHB-benchmark plans that more closely tracks how a “typical” employer plan changes over time.
EHB Benefit Updates—Dental Coverage
The final Payment Notice lifts a regulatory prohibition on insurers including routine adult dental benefits as part of EHB. This would enable states to add routine adult dental benefits to their EHB-benchmark plans. This change will be effective beginning January 1, 2027.
Most commenters supported this change, noting that oral health plays a critical role in overall health and quality of life. Several observed that oral health has an impact on chronic conditions such as diabetes, HIV/AIDS, and cancer. Many also noted that access to oral health services is particularly challenging among marginalized communities such as people of color and people with low incomes.
Some commenters opposed the proposal, arguing that it would increase costs and raises operational concerns. In response, HHS acknowledged challenges associated with covering routine adult oral services for insurers that have not previously done so, such as building a provider network and paying dental claims. The agency encourages states considering adding such coverage to their EHB-benchmark plans to work through these operational issues with insurers.
EHB Benefit Updates—Prescription Drugs
HHS is finalizing a provision stating that insurers voluntarily covering prescription drugs in excess of the EHB rule’s drug count standards, if they are covered by a state’s EHB-benchmark plan, must consider them EHB. As a result, they would be subject to the ACA’s annual limitation on enrollee cost-sharing and the restrictions on annual and lifetime dollar limits.
Most commenters supported this provision, noting that when plans or insurers designate certain drugs as “non-EHB,” consumers lose the ACA’s cost-sharing protections and could face annual or lifetime dollar limits. At the same time, HHS notes that it is not clear on what basis plans or insurers decide when a drug is EHB or “non-EHB.”
A few commenters reported that the practice of declaring drugs to be “non-EHB” is most common in self-insured and large-group market health plans. While the final Payment Notice applies to individual and small-group market insurers, HHS, along with the U.S. Departments of Labor and Treasury, concurrently released new guidance signaling their intent to promulgate new rules on the application of this policy to self-funded and large-group market health plans.
Pharmacy And Therapeutics Committee Standards
The final Payment Notice requires insurers’ Pharmacy & Therapeutics Committees to include at least one patient representative. Such patient representatives must have relevant experience or be part of a patient or community-based organization, demonstrate the ability to integrate data interpretations with practical patient considerations, and have a broad understanding of more than one condition or disease, treatment options, and research.
Several public comments expressed concerns that patient representatives could be, in fact, fronts for pharmaceutical manufacturers and urged HHS to adopt provisions to ensure that an individual has no link, direct or indirect, with a drug manufacturer. In response to these concerns, HHS modified its proposal to require patient representatives to disclose any financial interests on conflict-of-interest statements.
Improving The Enrollment Experience
The final rule includes provisions to expand enrollment opportunities, reduce paperwork burdens, and simplify the process of applying for and enrolling in Marketplace coverage.
Monthly SEPs For Low-Income Individuals
The 2022 Payment Notice created a monthly SEP for people at or below 150 percent of the federal poverty level (or $21,870 for a single individual in plan year 2024), but only as long as premium tax credits are available such that their premium contribution percentage is set at 0 percent. HHS cites data suggesting that the low-income SEP has been successful, noting that the percentage of eligible individuals enrolled in FFM or SBM-FP states has grown from 41.8 percent in 2022 to 46.9 percent in 2023. In addition, HHS’ analysis of the potential for adverse selection under this policy finds that the risk may be lower than expected.
The premium tax credit enhancements under the Inflation Reduction Act, which set the premium contribution percentage for people between 100-150 percent of the federal poverty level at 0 percent, are slated to expire at the end of 2025. Unless they are extended, absent regulatory action, this SEP would also have expired. The 2025 Payment Notice thus removes the limitation in the 2022 Payment Notice, so that people at or below 150 percent of the federal poverty level can continue to access a monthly SEP, even if the enhanced premium tax credits under the Inflation Reduction Act expire. Many commenters agreed with this policy change.
Advance Notice Of APTC Risk Due To Failure To Reconcile
HHS finalizes with clarifications its proposal to require Marketplaces to give enrollees advance notice that they are at risk of losing eligibility for APTC due to failing to file a tax return and reconcile APTC. Under HHS regulations from 2012, individuals who fail to reconcile for a year are generally denied APTC for future years, a rule referred to as “FTR.” The 2024 Payment Notice modified FTR rules to deny APTC only after two consecutive years of failing to reconcile APTC. But the 2024 Payment Notice did not address how the Marketplace should notify consumers of their risk of losing APTC due to FTR status. In the proposed 2025 Payment Notice, HHS proposed that Marketplaces notify consumers of the risk to eligibility after one year of failing to reconcile APTC—a year in advance of APTC loss.
While most commenters supported the proposal, some expressed concern about SBMs’ capacity to send notices of FTR status that comply with federal tax privacy laws. Some requested additional guidance about the content of notices and technical assistance to develop notices and support enrollees. Others expressed concern that the FTR policy remains confusing for consumers and could lead to coverage loss.
After considering comments, HHS is finalizing the proposed notice requirement with clarifications. First, the final rule clarifies that Marketplaces have the choice to either send notices specifying a failure to reconcile directly to the tax filer (if they can do so in keeping with tax privacy rules) or send more general notices that warn of potential APTC loss without specifying the reason—an approach that sidesteps tax privacy rules because such notices do not count as protected tax information. HHS also clarifies that they will provide state-based Marketplaces with additional implementation guidance and model notice language. HHS declines to reconsider the underlying FTR rule as modified in the 2024 Payment Notice, arguing that, with the notice requirements, it strikes an appropriate balance.
Standardized Plan Options
HHS is making only modest changes to the standardized plan options it finalized in its 2024 Payment Notice. It has updated plan designs for 2025 to ensure that these plans have actuarial values within the permissible de minimis range for each metal level. In its proposed rule, HHS also asked for comments on whether they should require states to adopt standardized plans as one condition of a transition from the FFM to an SBM.
Commenters were split on whether to require insurers to offer standardized plans in the SBMs. Many supported such a requirement to help reduce consumer choice overload and optimize plan selection, while others argued it would unnecessarily constrain states’ flexibility.
Limits On Non-Standard Plans
HHS is finalizing a proposal to create an exceptions process for insurers who want to offer more than the allowable number of non-standardized plans. Due to current limits on non-standard plans in FFM and SBM-FP states, HHS estimates that the number of plan options available to the average Marketplace consumer will decline from 99.5 in 2024 to 76.6 in 2025.
Under the exceptions process, insurers must demonstrate that these plans have specific design features to benefit consumers with chronic and high-cost conditions. Specifically, insurers must show that the plans provide a 25 percent reduction in cost-sharing for benefits pertaining to the treatment of a chronic and high-cost condition. Insurers will need to submit an actuarial memorandum documenting the underlying assumptions, including an actuarial opinion confirming that the plan meets HHS’ specifications.
Many commenters supported an exceptions process, with several noting that the limit on non-standardized plans could cause some insurers to discontinue plans with low enrollment, which would likely be plans more attractive to a small number of enrollees with high-cost health needs. Other commenters opposed the exceptions process, expressing concerns that it would allow insurers to bypass the cap on non-standardized plans and stymie HHS’ efforts to reduce plan proliferation. HHS responded by amending its proposal to limit insurers to just one exception per chronic and high-cost condition, in each product network type, metal level, inclusion of dental and/or vision benefit coverage, and service area. The agency argues that this modification will prevent insurers from offering duplicative exceptions plans with only minor differences in cost-sharing.
Additional Flexibility For Basic Health Program (BHP) Effectuation Dates
HHS is finalizing with modifications its proposal to give states with BHPs flexibility to set coverage effective dates. Under current rules, states must choose a uniform set of rules for determining the effective date of all BHP coverage—either the Medicaid rules or the Marketplace rules. The Medicaid rules generally allow for the earliest possible effective date for enrollees, but some states find it infeasible to adopt these rules. The Marketplace rules, on the other hand, may substantially delay enrollment for some consumers.
To help speed effectuation in states that are unable to adopt the Medicaid rule, HHS proposed to permit states to choose a middle ground, where all coverage is effective on the first day of the month after the eligibility determination is made.
Comments on this proposal were generally supportive, but some commenters said that additional flexibility would be helpful to allow states to set effective dates as early as possible within their operational constraints. To address this concern, they suggested allowing states to establish their own effective date policies so long as they are no more restrictive than existing rules.
In the final rule, HHS adopts this suggestion, permitting states to set their own effective dates subject to HHS approval, so long as the proposed dates are no later than what would be permitted under existing rules. HHS also finalizes the state option in the proposed rule. As a result, BHP states will now have four options for effective date rules: the Medicaid rules, the Marketplace rules, the first of the month following the eligibility determination, or a state-developed rule approved by HHS.
Increase State Flexibility To Use Income And Resource Disregards For Non-MAGI Medicaid Eligibility
HHS is holding off on finalizing a proposal to permit state Medicaid programs to target their use of income and resource disregards to specific populations given commenters’ concerns that this proposal could lead to states narrowing eligibility in some cases.
Under the ACA, eligibility for Medicaid is generally based on modified adjusted gross income (MAGI). But individuals’ financial assets may still be considered for certain eligibility categories, including individuals who are aged 65 years or older, are blind or disabled, or are being evaluated for coverage as medically needy. Under these non-MAGI rules, states may “disregard” specified amounts of income and resources for purposes of these asset tests. Long-standing regulations limit states’ ability to target these disregards to specific populations. If a state provides a certain disregard for a certain eligibility group, it must generally do so for all individuals in that group, rather than, for example, limiting the disregard to individuals with a cognitive impairment. These restrictions may limit states’ ability to target assistance to those most in need.
In the proposed rule, HHS proposed to increase states’ flexibility to target disregards to discrete subpopulations so long as the classification was reasonable and non-discriminatory. But HHS noted that this flexibility could potentially permit states to narrow eligibility by scaling back existing disregards and requested comments on the likely impact. Consistent with these concerns, many commenters argued that the proposal created substantial risk that states would use the new flexibility to narrow eligibility. These commenters suggested that HHS impose additional guardrails—potentially including some sort of hold-harmless requirement—if the proposal were finalized. In the final rule, HHS indicates it is not finalizing this proposal at this time while it considers how to address commenters’ concerns.
Flexibility To Accept Attestation As To Incarceration Status
HHS finalizes its proposal to permit Marketplaces to accept applicants’ attestation that they are not incarcerated to establish eligibility, rather than requiring a search of third-party data. Marketplaces using the Federal eligibility and enrollment platform (FFMs and SBM-FPs), which currently use the incarceration verification data source offered through the Federal Data Services Hub (the “Hub”), will adopt this approach. A state Marketplace may still propose using an electronic data source for verifying incarceration status, subject to HHS approval that the alternative data source will maintain accuracy and minimize administrative costs, delays, and burdens on individuals.
HHS notes that many commenters supported this proposal, given its potential to expand coverage for eligible people, reduce administrative burdens, and mitigate racial inequities. While some commenters argued that the proposal violates Government Accountability Office (GAO) guidance on accepting self-attestation, HHS notes that the extensive cost-benefit analysis supporting the proposed rule satisfies GAO’s guidance. HHS offered evidence that third-party data contained numerous inaccuracies that lead to many unnecessary “data matching issue” (DMI), requiring applicant to take submit additional documentation to demonstrate that lack of incarceration. It noted that using such data led to many erroneous coverage denials but identified very few ineligible applicants and thus provided little benefit, while also aggravating racial inequities.
Periodic Data Matching During A Benefit Year
HHS is finalizing as proposed a requirement that Marketplaces conduct periodic data matching (PDM) for evidence of enrollee death twice per year. Long-standing regulations require Marketplaces to conduct PDM to identify individuals enrolled in Medicare, Medicaid, CHIP, or BHP coverage (where applicable) no less than twice per year. Marketplaces must also check for evidence of enrollee death, but the frequency of these checks is not specified. The FFMs and SBM-FPs currently conduct PDM for death twice per year, but many SBMs do so less often. HHS proposed to require PDMs for death to follow the same twice-a-year cadence as other PDM, noting that all SBMs have PDM systems in place, so running the check more frequently should not impose a substantial burden.
Commenters were mostly supportive of this change. A few objected that it limited SBM flexibility or was unlikely to identify inappropriate enrollments. HHS responded that the experience of the federal Marketplace shows a substantial benefit.
HHS also finalized a proposal to give the Secretary authority to temporarily suspend PDM requirements in situations when PDM data are less available, such as a declared national public health emergency. The final rule tweaks the proposal to clarify that it applies when data have limited availability, not just when they are unavailable.
Auto Re-Enrollment For People With Catastrophic Coverage
HHS finalizes, with modifications, a proposal to require SBMs to automatically re-enroll catastrophic coverage enrollees whose plans terminate or who are no longer eligible. Long-standing rules require Marketplaces to do this for enrollees in other plans (metal-level plans), but not enrollees in catastrophic coverage. The FFM and some SBMs already do this for catastrophic enrollees, but other SBMs do not. The proposal generally required the Marketplace to select a bronze plan in the same product, with a network similar to the individual’s current plan. If no bronze plans were available through the same product, the Marketplace would re-enroll the individual into a plan with the lowest coverage level offered under the same product, and with the most similar network as the individual’s current plan. At the same time, HHS also proposed prohibiting a Marketplace from auto re-enrolling someone who is enrolled in a metal level plan (bronze, silver, gold, or platinum) into a catastrophic level plan.
Many commenters favored the proposal, noting that it would support continuity of coverage. A few commenters suggested different rules or opposed the proposal on the grounds that it limits state flexibility, could be difficult for states to implement, or is without a clear justification. CMS responded that it considers the likely coverage effects to be a strong rationale and that long-standing procedures permit states to seek approval for alternative approaches.
One commenter noted that Connecticut law prohibits this practice. In response, HHS qualified the regulatory language to indicate that states must comply with the requirement “to the extent permitted by applicable State law,” consistent with the approach taken in other HHS regulations.
Premium Payment Deadline Extensions
HHS is finalizing a proposal to clarify that Marketplaces may permit insurers to provide reasonable extensions to deadlines for making premium payments in certain circumstances. The 2018 Payment Notice clarified that Marketplaces have authority to permit insurers to extend payment deadlines when they are “experiencing billing or enrollment problems due to high volume or technical errors”—but only for a “binder payment,” which is the first monthly premium payment that effectuates enrollment. However, HHS has interpreted this flexibility to also apply to additional payments and circumstances. For example, in response to the COVID-19 pandemic, HHS released guidance in March of 2020 permitting insurers to extend premium deadlines generally. The proposed Payment Notice proposed to modify the regulations to reflect this scope, clarifying that insurers may permit deadline extensions for all premium payments and in additional circumstances—namely, where insurers are directed to provide extensions by federal or state authorities.
Commenters were generally supportive of this proposal, and HHS is finalizing it without change.
Permitting Retroactive Termination In Cases Of Retroactive Medicare Enrollment
HHS is finalizing with modifications a proposal to permit Marketplaces to allow consumers to retroactively terminate coverage to avoid duplicate coverage in situations where Medicare Part A or Part B coverage takes effect retroactively. The modifications limit the scope of the proposal in several ways, reflecting concerns expressed in comments.
HHS currently permits retroactive termination of Marketplace coverage in only very limited circumstances: where new or ongoing enrollment was due to a mistake or malfeasance outside the enrollee’s control. In addition, SBMs and SBM-FP also have the option to permit retroactive termination in cases of retroactive Medicaid enrollment; the FFMs do not permit this. The tight limits reflect concerns about the challenges of unwinding coverage and recovering paid claims, about providers being left with unpaid bills, and about individuals with little utilization terminating coverage to recover premiums paid, creating adverse selection.
Notwithstanding these concerns, HHS proposed to permit retroactive Marketplace termination where a consumer has been retroactively enrolled in Medicare Part A or B. Retroactive Medicare enrollment may occur where an individual turning 65 is not automatically enrolled and does not immediately enroll themselves. It may also happen where an individual is retroactively approved for SSDI benefits extending back more than 25 months (in which case the Medicare coverage may be effective retroactive to the 25th month). In such cases, a consumer may have had no way to know at the time that they would be Medicare-eligible and thus may reasonably want their Marketplace premiums refunded. HHS proposed that the FFMs would permit this retroactive termination, and SBMs could decide whether to do so as well.
HHS received a mix of comments on this proposal. Some praised it for protecting consumers and the federal fisc from paying for double coverage. Others expressed familiar concerns about operational challenges and adverse selection.
In response to these comments, HHS finalized the policy with several limitations. First, HHS limits the span of retroactive termination to six months. Second, they clarify that retroactive termination does not apply to stand-alone dental plans, since Medicare doesn’t generally provide dental coverage. Third, they give themselves authority to implement this provision for Marketplaces using the Federal platform, but defer on deciding whether they will do so. The policy is optional for SBMs, as under the proposed rule.
Other Provisions
The final 2025 Payment Notice includes additional provisions establishing 2025 user fee rates, updating notice requirements for Section 1332 waivers, requiring states to pay for a federal data service, updating loan requirements for CO-OP plans, clarifying the entity responsible for handling brokers’ requests for reconsideration, updating payment parameters, and aligning payment and collections processes with federal independent dispute resolution rules under the No Surprises Act.
User Fees
HHS is finalizing the 2025 Marketplace user fees at 1.5 percent for FFMs and 1.2 percent for SBM-FPs. These are both substantially lower than the proposed values, which were 2.2 percent for FFMs and 1.8 percent for SBM-FPs.
User fees are paid by Marketplace issuers to support the operations of the FFM and federal platform, including eligibility and enrollment processes; outreach and education; managing navigators, agents, and brokers; consumer assistance tools; and certification and oversight of Marketplace plans. The fee is calculated as a percentage of Marketplace premiums collected.
HHS explains that it is finalizing the user fees at lower levels because it has revised upwards its enrollment estimates given unexpectedly high enrollment in 2024. Higher enrollment means more revenue at a given user fee rate. They note that the proposed rule indicated that the proposed rates would be changed if events significantly changed their estimates around costs, premiums, or enrollment.
Some commenter suggested that the proposed rates be increased to allow greater spending on FFM functions. HHS responds that the final levels are sufficient to fully fund Marketplace activities.
1332 Waivers
The final rule finalizes a proposal from HHS and the Treasury Department (the Departments) to permit states to hold required public meetings related to section 1332 waivers either virtually or hybrid (in-person and virtual) without any special permission. Section 1332 regulations finalized in 2012 require that both the state hearings preceding submission of a 1332 application and the post-approval annual forums be conducted in-person. In response to the COVID-19 pandemic, the Departments issued emergency regulations, since made permanent, allowing states to ask permission to make these meetings virtual.
In the proposed rule, the Departments proposed to permit these public meetings to be virtual or hybrid at state option. The Departments noted that states report that virtual hearings have worked well, do not seem to have adversely affected attendance, and address some concerns about accessibility. Other federal programs have also moved towards virtual or hybrid public meetings in recent years. The now-finalized proposal does not change requirements for public notice, comment periods, or consultation with Indian tribes.
Many commenters supported this proposal. Several others expressed concerns that virtual or hybrid meetings could pose accessibility challenges to people with disabilities, people with limited English proficiency, and people with limited broadband access. In response to these comments, HHS noted that states must comply with applicable civil rights laws and encouraged them to take accessibility into account to ensure meaningful opportunity to comment.
Verification Process For Eligibility For Insurance Affordability Programs
HHS is finalizing, generally as proposed, a requirement that state Marketplaces and Medicaid agencies pay to use an optional private data service for eligibility determinations. The final rule changes the plan for operationalizing the proposal.
Through the federal Data Services Hub, HHS makes available to states a private service providing recent income information, referred to as “Verify Current Income” (VCI). State agencies can use VCI to supplement federal tax information and other free sources of income data in making eligibility determinations. As of June 2023, 32 states plus the District of Columbia and Puerto Rico used VCI Hub for their Medicaid and CHIP programs, and 10 of those States also used the service for their SBMs.
HHS has historically paid for VCI for SBMs and Medicaid agencies. But, as explained in the proposed Payment Notice, HHS has determined that federal law appropriately requires state agencies opting to use the service to pay for their access. Accordingly, HHS proposed to change Marketplace regulations to clarify that state Marketplaces must bear the cost, effective July 1, 2024. Medicaid agencies would also be required to pay, though such expenses qualify for a 75 percent federal match. HHS also proposed procedures by which state agencies would pay for the service, which would still be available through the Hub.
Several commenters raised concerns about this proposal. Some worried that it would cause state agencies to reduce their use of VCI, interfering with automatic (“ex parte”) re-enrollment processes, increasing consumer burdens, and leading to coverage loss or excess APTC. HHS responded that it did not expect a significant impact on consumers, noting that state agencies have other data sources available (for example, quarterly wage data) and could potentially increase Marketplace user fees to bear the cost. Commenters also complained that the effective date provided insufficient time for agencies to adjust budgets and seek alternative data sources. HHS declined to change the effective date, noting again that use of VCI is optional, that states have alternative data sources, and that HHS has been working with States to prepare for this transition since before the proposed rule was published. Commenters also complained that the proposal would create operational and budgetary problems for state agencies and imposes an unfair cost burden on State Marketplaces, especially newly established ones. HHS responds that, given its legal interpretation around the cost of VCI, it is appropriate for state agencies to bear the cost, and that it does not expect the change to meaningfully discourage states from establishing or maintaining state Marketplaces.
Several commenters also complained about the procedures HHS proposed to operationalize the new policy, under which states would make annual advanced payments which would then be reconciled based on their actual VCI use. They generally preferred an alternative approach discussed in the proposed rule, under which HHS would bill states monthly for their actual usage. The final rule adopts this alternative rule. A few commenters preferred the approach that was proposed, but HHS said it is unable to support both options and believes the finalized approach will be less burdensome.
CO-OP Loan Terms
The final Payment Notice permits CO-OP plans to voluntarily terminate their loan agreements with CMS so they can pursue new business plans that do not meet the ACA’s governance and business standards for CO-OPs. HHS believes this will enable CO-OPs to expand their operations and offer additional health insurance products.
Reconsideration Entity For Agents, Brokers, And Web-Brokers
The final Payment Notice clarifies that agents, brokers, and web-brokers who seek a redetermination of a Marketplace decision to terminate their agreements for cause should do so through the CMS Administrator.
Independent Dispute Resolution (IDR) Administrative Fees
The final Payment Notice includes a provision to ensure that the administrative fees for using the No Surprises Act IDR process are subject to netting as part of HHS’ integrated monthly payment and collections cycle.
Sabrina Corlette and Jason Levitis, “Final 2025 Payment Notice: Marketplace Standards And Insurance Reforms,” Health Affairs Forefront, April 8, 2024, https://www.healthaffairs.org/content/forefront/final-2025-payment-notice-marketplace-standards-and-insurance-reforms. Copyright © 2024 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
