CMS Announces Proposed Rules to Improve Exchange Oversight, Reduce Fraud

On February 9, the Centers for Medicare & Medicaid Services (CMS) announced proposed regulations aimed at lowering healthcare costs, promoting competition, and strengthening program integrity in the Federal and State-Based Health Insurance (Exchanges).

According to a CMS news release, the proposed Notice of Benefit and Payment Parameters for 2027 would crack down on fraud and misleading practices by agents and brokers, restore accountability for taxpayer-funded subsidies, and remove federal barriers that have limited plan innovation and driven up premiums.

Key proposals, if finalized, would:

• Allow issuers to offer catastrophic plans with terms of either one year or multiple consecutive years, up to ten years, encouraging plans to focus on the long-term health of Americans.
• Repeal standardized plan options and related limit requirements, giving issuers greater flexibility to design plans that meet consumer demand. 
• Permit low-deductible plans with higher maximum out-of-pocket limits to broaden affordable options.
• Better align affordability and coverage incentives across catastrophic and metal-level plans.
• Expand hardship exemptions for certain individuals aged 30 and older nationwide, increasing access to more affordable catastrophic coverage.
• Permit innovative, non-network plans to receive Qualified Health Plan certification by demonstrating sufficient provider choice.

Furthermore, CMS proposes stricter eligibility and income verification, along with improved enforcement policies. According to CMS, additional income checks will help reduce and prevent fraud across the Exchanges. The proposed rule would also update Exchange policies to reflect new legal requirements that limit eligibility for premium tax credits, cost-sharing reductions, and advance payments of those benefits to individuals who meet immigration eligibility standards and require Exchanges to verify that eligibility.

Additionally, CMS highlighted that the proposed rule would strengthen standards of conduct for insurance agents, brokers, and web-brokers by clarifying prohibited marketing practices and reinforcing oversight to deter fraud and misleading conduct.

CMS also proposes updates to align the Exchange policy with the statutory intent better and address key cost drivers, including:

• Restoring fiscal discipline around Essential Health Benefits to ensure federal subsidies are not used to finance state-mandated benefits that increase costs for both consumers and taxpayers.
• Modernizing network adequacy and provider access reviews to improve transparency while reducing duplicative oversight.