42 C.F.R. Subpart F-Submission of Bids, Premiums, and Related Information and Plan Approval
Title 42 - Public Health
Source: 70 FR 4725, Jan. 28, 2005, unless otherwise noted.
This subpart is based largely on section 1854 of the Act, but also includes provisions from section 1853 and section 1858 of the Act. It sets forth the requirements for the Medicare Advantage bidding payment methodology, including CMS' calculation of benchmarks, submission of plan bids by Medicare Advantage (MA) organizations, establishment of beneficiary premiums and rebates through comparison of plan bids and benchmarks, and negotiation and approval of bids by CMS. Annual MA capitation rate means a county payment rate for an MA local area (county) for a calendar year. The terms “per capita rate” and “capitation rate” are used interchangeably to refer to the annual MA capitation rate. MA local area means a payment area consisting of county or equivalent area specified by CMS. MA monthly basic beneficiary premium means the premium amount an MA plan (except an MSA plan) charges an enrollee for benefits under the original Medicare fee-for-service program option (if any), and is calculated as described at §422.262. MA monthly MSA premium means the amount of the plan premium for coverage of benefits under the original Medicare program through an MSA plan, as set forth at §422.254(e). MA monthly prescription drug beneficiary premium is the MA-PD plan base beneficiary premium, defined at section 1860D–13(a)(2) of the Act, as adjusted to reflect the difference between the plan's bid and the national average bid (as described in §422.256(c)) less the amount of rebate the MA-PD plan elects to apply, as described at §422.266(b)(2). MA monthly supplemental beneficiary premium is the portion of the plan bid attributable to mandatory and/or optional supplemental health care benefits described under §422.102, less the amount of beneficiary rebate the plan elects to apply to a mandatory supplemental benefit, as described at §422.266(b)(1). MA-PD plan means an MA local or regional plan that provides prescription drug coverage under Part D of Title XVIII of the Social Security Act. Monthly aggregate bid amount means the total monthly plan bid amount for coverage of an MA eligible beneficiary with a nationally average risk profile for the factors described in §422.308(c), and this amount is comprised of the following: (1) The unadjusted MA statutory non-drug monthly bid amount for coverage of original Medicare benefits; (2) The amount for coverage of basic prescription drug benefits under Part D (if any); and (3) The amount for provision of supplemental health care benefits (if any). Plan basic cost sharing means cost sharing that would be charged by a plan for benefits under the original Medicare FFS program option before any reductions resulting from mandatory supplemental benefits. Unadjusted MA area-specific non-drug monthly benchmark amount means, for local MA plans serving one county, the county capitation rate CMS publishes annually, and for local MA plans serving multiple counties it is the weighted average of county rates in a plan's service area, weighted by the plan's projected enrollment per county. Unadjusted MA region-specific non-drug monthly benchmark amount means, for MA regional plans, the amount described at §422.258(b). Unadjusted MA statutory non-drug monthly bid amount means a plan's estimate of its average monthly required revenue to provide coverage of original Medicare benefits to an MA eligible beneficiary with a nationally average risk profile for the risk factors CMS applies to payment calculations as set forth at §422.308(c). 63 FR 35085, June 26, 1998, as amended at 70 FR 52026, Sept. 1, 2005] (a) General rules. (1) Not later than the first Monday in June, each MA organization must submit to CMS an aggregate monthly bid amount for each MA plan (other than an MSA plan) the organization intends to offer in the upcoming year in the service area (or segment of such an area if permitted under §422.262(c)(2)) that meets the requirements in paragraph (b) of this section. With each bid submitted, the MA organization must provide the information required in paragraph (c) of this section and, for plans with rebates as described at §422.266(a), the MA organization must provide the information required in paragraph (d) of this section. (2) CMS has the authority to determine whether and when it is appropriate to apply the bidding methodology described in this section to ESRD MA enrollees. (3) If the bid submission described in paragraphs (a)(1) and (2) of this section is not complete, timely, or accurate, CMS has the authority to impose sanctions under subpart O of this part or may choose not to renew the contract. (b) Bid requirements. (1) The monthly aggregate bid amount submitted by an MA organization for each plan is the organization's estimate of the revenue required for the following categories for providing coverage to an MA eligible beneficiary with a national average risk profile for the factors described in §422.308(c): (i) The unadjusted MA statutory non-drug monthly bid amount, which is the MA plan's estimated average monthly required revenue for providing benefits under the original Medicare fee-for-service program option (as defined in §422.252). (ii) The amount to provide basic prescription drug coverage, if any (defined at section 1860D–2(a)(3) of the Act). (iii) The amount to provide supplemental health care benefits, if any. (2) Each bid is for a uniform benefit package for the service area. (3) Each bid submission must contain all estimated revenue required by the plan, including administrative costs and return on investment. (4) The bid amount is for plan payments only but must be based on plan assumptions about the amount of revenue required from enrollee cost-sharing. The estimate of plan cost-sharing for the unadjusted MA statutory non-drug monthly bid amount for coverage of original Medicare benefits must reflect the requirement that the level of cost sharing MA plans charge to enrollees must be actuarially equivalent to the level of cost sharing (deductible, copayments, or coinsurance) charged to beneficiaries under the original Medicare program option. The actuarially equivalent level of cost sharing reflected in a regional plan's unadjusted MA statutory non-drug monthly bid amount does not include cost sharing for out-of-network Medicare benefits, as described at §422.101(d). (c) Information required for coordinated care plans and MA private fee-for-service plans. MA organizations' submission of bids for coordinated care plans, including regional MA plans and specialized MA plans for special needs beneficiaries (described at §422.4(a)(1)(iv)), and for MA private fee-for-service plans must include the following information: (1) The plan type for each plan. (2) The monthly aggregate bid amount for the provision of all items and services under the plan, as defined in §422.252 and discussed in paragraph (a) of this section. (3) The proportions of the bid amount attributable to- (i) The provision of benefits under the original Medicare fee-for-service program option (as defined at §422.100(c)); (ii) The provision of basic prescription drug coverage (as defined at section 1860D–2(a)(3) of the Act; and (iii) The provision of supplemental health care benefits (as defined §422.102). (4) The projected number of enrollees in each MA local area used in calculation of the bid amount, and the enrollment capacity, if any, for the plan. (5) The actuarial basis for determining the amount under paragraph (c)(2) of this section, the proportions under paragraph (c)(3) of this section, the amount under paragraph (b)(4) of this section, and additional information as CMS may require to verify actuarial bases and the projected number of enrollees. (6) A description of deductibles, coinsurance, and copayments applicable under the plan and the actuarial value of the deductibles, coinsurance, and copayments. (7) For qualified prescription drug coverage, the information required under section 1860D–11(b) of the Act with respect to coverage. (8) For the purposes of calculation of risk corridors under §422.458, MA organizations offering regional MA plans in 2006 and/or 2007 must submit the following information developed using the appropriate actuarial bases. (i) Projected allowable costs (defined in §422.458(a)). (ii) The portion of projected allowable costs attributable to administrative expenses incurred in providing these benefits. (iii) The total projected costs for providing rebatable integrated benefits (as defined in §422.458(a)) and the portion of costs that is attributable to administrative expenses. (9) For regional plans, as determined by CMS, the relative cost factors for the counties in a plan's service area, for the purposes of adjusting payment under §422.308(d) for intra-area variations in an MA organization's local payment rates. (d) Beneficiary rebate information. In the case of a plan required to provide a monthly rebate under §422.266 for a year, the MA organization offering the plan must inform CMS how the plan will distribute the beneficiary rebate among the options described at §422.266(b). (e) Information required for MSA plans. MA organizations intending to offer MA MSA plans must submit— (1) The enrollment capacity (if any) for the plan; (2) The amount of the MSA monthly premium for basic benefits under the original Medicare fee-for-service program option; (3) The amount of the plan deductible; and (4) The amount of the beneficiary supplemental premium, if any. (f) Separate bids must be submitted for Part A and Part B enrollees and Part B-only enrollees for each MA plan offered. 63 FR 35085, June 26, 1998, as amended at 70 FR 52026, Sept. 1, 2005] (a) Authority. Subject to paragraphs (a)(2), (d), and (e) of this section, CMS has the authority to review the aggregate bid amounts submitted under §422.252 and conduct negotiations with MA organizations regarding these bids (including the supplemental benefits) and the proportions of the aggregate bid attributable to basic benefits, supplemental benefits, and prescription drug benefits. (1) When negotiating bid amounts and proportions, CMS has authority similar to that provided the Director of the Office of Personnel Management for negotiating health benefits plans under 5 U.S.C. chapter 89. (2) Noninterference. (i) In carrying out Parts C and D under this title, CMS may not require any MA organization to contract with a particular hospital, physician, or other entity or individual to furnish items and services. (ii) CMS may not require a particular price structure for payment under such a contract, with the exception of payments to Federally qualified health centers as set forth at §422.316. (b) Standards of bid review. Subject to paragraphs (d) and (e) of this section, CMS can only accept bid amounts or proportions described in paragraph (a) of this section if CMS determines the following standards have been met: (1) The bid amount and proportions are supported by the actuarial bases provided by MA organizations under §422.254. (2) The bid amount and proportions reasonably and equitably reflects the plan's estimated revenue requirements for providing the benefits under that plan, as the term revenue requirements is used for purposes of section 1302(8) of the Public Health Service Act. (3) Limitation on enrollee cost sharing. For coordinated care plans (including regional MA plans and specialized MA plans) and private fee-for-service plans: (i) The actuarial value of plan basic cost sharing, reduced by any supplemental benefits, may not exceed— (ii) The actuarial value of deductibles, coinsurance, and copayments that would be applicable for the benefits to individuals entitled to benefits under Part A and enrolled under Part B in the plan's service area with a national average risk profile for the factors described in §422.308(c) if they were not members of an MA organization for the year, except that cost sharing for non-network Medicare services in a regional MA plan is not counted under the amount described in paragraph (b)(2)(i) of this section. (c) Negotiation process. The negotiation process may include the resubmission of information to allow MA organizations to modify their initial bid submissions to account for the outcome of CMS' regional benchmark calculations required under §422.258(c) and the outcome of CMS' calculation of the national average monthly bid amount required under section 1860D–13(a)(4) of the Act. (d) Exception for private fee-for-service plans. For private fee-for-service plans defined at §422.4(a)(3), CMS will not review, negotiate, or approve the bid amount, proportions of the bid, or the amounts of the basic beneficiary premium and supplemental premium. (e) Exception for MSA plans. CMS does not review, negotiate, or approve amounts submitted with respect to MA MSA plans, except to determine that the deductible does not exceed the statutory maximum, defined at §422.103(d). 63 FR 35085, June 26, 1998, as amended at 70 FR 52026, Sept. 1, 2005; 70 FR 76198, Dec. 23, 2005] (a) The term “MA area-specific non-drug monthly benchmark amount” means, for a month in a year: (1) For MA local plans with service areas entirely within a single MA local area, 1/12th of the annual MA capitation rate (described at §422.306) for the area, adjusted as appropriate for the purpose of risk adjustment. (2) For MA local plans with service areas including more than one MA local area, an amount equal to the weighted average of annual capitation rates for each local area (county) in the plan's service area, using as weights the projected number of enrollees in each MA local area that the plan used to calculate the bid amount, and adjusted as appropriate for the purpose of risk adjustment. (b) For MA regional plans, the term “MA region-specific non-drug monthly benchmark amount” is: (1) The sum of two components: the statutory component (based on a weighted average of local benchmarks in the region, as described in paragraph (c)(3) of this section; and the plan bid component (based on a weighted average of regional plan bids in the region as described in paragraph (c)(4) of this section). (2) Announced before November 15 of each year, but after CMS has received the plan bids. (c) Calculation of MA regional non-drug benchmark amount. CMS calculates the monthly regional non-drug benchmark amount for each MA region as follows: (1) Reference month. For all calculations that follow, CMS will determine the number of MA eligible individuals in each local area, in each region, and nationally as of the reference month, which is a month in the previous calendar year CMS identifies. (2) Statutory market share. CMS will determine the statutory national market share percentage as the proportion of the MA eligible individuals nationally who were not enrolled in an MA plan. (3) Statutory component of the region-specific benchmark. (i) CMS calculates the unadjusted region-specific non-drug amount by multiplying the county capitation rate by the county's share of the MA eligible individuals residing in the region (the number of MA eligible individuals in the county divided by the number of MA eligible individuals in the region), and then adding all the enrollment-weighted county rates to a sum for the region. (ii) CMS then multiplies the unadjusted region-specific non-drug amount from paragraph (c)(3)(i) of this section by the statutory market share to determine the statutory component of the regional benchmark. (4) Plan-bid component of the region-specific benchmark. For each regional plan offered in a region, CMS will multiply the plan's unadjusted region-specific non-drug bid amount by the plan's share of enrollment (as determined under paragraph (c)(5) of this section) and then sum these products across all plans offered in the region. CMS then multiples this by 1 minus the statutory market share to determine the plan-bid component of the regional benchmark. (5) Plan's share of enrollment. CMS will calculate the plan's share of MA enrollment in the region as follows: (i) In the first year that any MA regional plan is being offered in an MA region, and more than one MA regional plan is being offered, CMS will determine each regional plan's share of enrollment based on one of two possible approaches. CMS may base this factor on equal division among plans, so that each plan's share will be 1 divided by the number of plans offered. Alternatively, CMS may base this factor on each regional plan's estimate of projected enrollment. Plan enrollment projections are subject to review and adjustment by CMS to assure reasonableness. (ii) If two or more regional plans are offered in a region and were offered in the reference month: The plan's share of enrollment will be the number of MA eligible individuals enrolled in the plan divided by the number of MA eligible individuals enrolled in all of the plans in the region, as of the reference month. (iii) If a single regional plan is being offered in the region: The plan's share of enrollment is equal to 1. (a) Determination of MA monthly basic beneficiary premium. (1) For an MA plan with an unadjusted statutory non-drug bid amount that is less than the relevant unadjusted non-drug benchmark amount, the basic beneficiary premium is zero. (2) For an MA plan with an unadjusted statutory non-drug bid amount that is equal to or greater than the relevant unadjusted non-drug benchmark amount, the basic beneficiary premium is the amount by which (if any) the bid amount exceeds the benchmark amount. All approved basic premiums must be charged; they cannot be waived. (b) Consolidated monthly premiums. Except as specified in paragraph (b)(2) of this section, MA organizations must charge enrollees a consolidated monthly MA premium. (1) The consolidated monthly premium for an MA plan (other than a MSA plan) is the sum of the MA monthly basic beneficiary premium (if any), the MA monthly supplementary beneficiary premium (if any), and the MA monthly prescription drug beneficiary premium (if any). (2) Special rule for MSA plans. For an individual enrolled in an MSA plan offered by an MA organization, the monthly beneficiary premium is the supplemental premium (if any). (c) Uniformity of premiums—(1) General rule. Except as permitted for supplemental premiums pursuant to §422.106(d), for MA contracts with employers and labor organizations, the MA monthly bid amount submitted under §422.254, the MA monthly basic beneficiary premium, the MA monthly supplemental beneficiary premium, the MA monthly prescription drug premium, and the monthly MSA premium of an MA organization may not vary among individuals enrolled in an MA plan (or segment of the plan as provided for local MA plans under paragraph (c)(2) of this section). In addition, the MA organization cannot vary the level of cost-sharing charged for basic benefits or supplemental benefits (if any) among individuals enrolled in an MA plan (or segment of the plan). (2) Segmented service area option. An MA organization may apply the uniformity requirements in paragraph (c)(1) of this section to segments of an MA local plan service area (rather than to the entire service area) as long as such a segment is composed of one or more MA payment areas. The information specified under §422.254 is submitted separately for each segment. This provision does not apply to MA regional plans. (d) Monetary inducement prohibited. An MA organization may not provide for cash or other monetary rebates as an inducement for enrollment or for any other reason or purpose. (e) Timing of payments. The MA organization must permit payments of MA monthly basic and supplemental beneficiary premiums and monthly prescription drug beneficiary premiums on a monthly basis and may not terminate coverage for failure to make timely payments except as provided in §422.74(b). (f) Beneficiary payment options. An MA organization must permit each enrollee, at the enrollee's option, to make payment of premiums (if any) under this part to the organization through- (1) Withholding from the enrollee's Social Security benefit payments, or benefit payments by the Railroad Retirement Board or the Office of Personnel Management, in the manner that the Part B premium is withheld; (2) An electronic funds transfer mechanism (such as automatic charges of an account at a financial institution or a credit or debit card account); (3) According to other means that CMS may specify, including payment by an employer or under employment-based retiree health coverage on behalf of an employee, former employee (or dependent), or by other third parties such as a State. (i) Regarding the option in paragraph (f)(1) of this section, MA organizations may not impose a charge on beneficiaries for the election of this option. (ii) An enrollee may opt to make a direct payment of premium to the plan. (a) Computation of risk adjusted bids and benchmarks. (1) The risk adjusted MA statutory non-drug monthly bid amount is the unadjusted plan bid amount for coverage of original Medicare benefits (defined at §422.254), adjusted using the factors described in paragraph (c) of this section for local plans and paragraph (e) of this section for regional plans. (2) The risk adjusted MA area-specific non-drug monthly benchmark amount is the unadjusted benchmark amount for coverage of original Medicare benefits by a local MA plan (defined at §422.258), adjusted using the factors described in paragraph (c) of this section. (3) The risk adjusted MA region-specific non-drug monthly benchmark amount is the unadjusted benchmark for coverage of original Medicare benefits amount by a regional MA plan (defined at §422.258) adjusted using the factors described in paragraph (e) of this section. (b) Computation of savings for MA local plans. The average per capita monthly savings for an MA local plan is 100 percent of the difference between the plan's risk-adjusted statutory non-drug monthly bid amount (described in paragraph (a)(1) of this section) and the plan's risk-adjusted area-specific non-drug monthly benchmark amount (described in paragraph (a)(2) of this section). Plans with bids equal to or greater than plan benchmarks will have zero savings. (c) Risk adjustment factors for determination of savings for local plans. CMS will publish the first Monday in April before the upcoming calendar year the risk adjustment factors described in paragraph (c)(1) or (c)(2) of this section determined for the purpose of calculating savings amounts for MA local plans. (1) For the purpose of calculating savings for MA local plans CMS has the authority to apply risk adjustment factors that are plan-specific average risk adjustment factors, Statewide average risk adjustment factors, or factors determined on a basis other than plan-specific factors or Statewide average factors. (2) In the event that CMS applies Statewide average risk adjustment factors, the statewide factor for each State is the average of the risk factors calculated under §422.308(c), based on all enrollees in MA local plans in that State in the previous year. In the case of a State in which no local MA plan was offered in the previous year, CMS will estimate an average and may base this average on average risk adjustment factors applied to comparable States or applied on a national basis. (d) Computation of savings for MA regional plans. The average per capita monthly savings for an MA regional plan and year is 100 percent of the difference between the plan's risk-adjusted statutory non-drug monthly bid amount (described in paragraph (a)(1) of this section) and the plan's risk-adjusted region-specific non-drug monthly benchmark amount (described in paragraph (a)(3) of this section), using the risk adjustment factors described in paragraph (e) of this section. Plans with bids equal to or greater than plan benchmarks will have zero savings. (e) Risk adjustment factors for determination of savings for regional plans. CMS will publish the first Monday in April before the upcoming calendar year the risk adjustment factors described in paragraph (e)(1)and (e)(2) of this section determined for the purpose of calculating savings amounts for MA regional plans. (1) For the purpose of calculating savings for MA regional plans, CMS has the authority to apply risk adjustment factors that are plan-specific average risk adjustment factors, Region-wide average risk adjustment factors, or factors determined on a basis other than MA regions. (2) In the event that CMS applies region-wide average risk adjustment factors, the region-wide factor for each MA region is the average of the risk factors calculated under §422.308(c), based on all enrollees in MA regional plans in that region in the previous year. In the case of a region in which no regional plan was offered in the previous year, CMS will estimate an average and may base this average on average risk adjustment factors applied to comparable regions or applied on a national basis. (a) General rule. An MA organization must provide to the enrollee a monthly rebate equal to 75 percent of the average per capita savings (if any) described in §422.264(b) for MA local plans and §422.264(d) for MA regional plans. (b) Form of rebate. The rebate required under this paragraph must be provided by crediting the rebate amount to one or more of the following: (1) Supplemental health care benefits. MA organizations may apply all or some portion of the rebate for a plan toward payment for non-drug supplemental health care benefits for enrollees as described in §422.102, which may include the reduction of cost sharing for benefits under original Medicare and additional health care benefits that are not benefits under original Medicare. MA organizations also may apply all or some portion of the rebate for a plan toward payment for supplemental drug coverage described at §423.104(f)(1)(ii), which may include reduction in cost sharing and coverage of drugs not covered under Part D. The rebate, or portion of rebate, applied toward supplemental benefits may only be applied to a mandatory supplemental benefit, and cannot be used to fund an optional supplemental benefit. (2) Payment of premium for prescription drug coverage. MA organizations that offer a prescription drug benefit may credit some or all of the rebate toward reduction of the MA monthly prescription drug beneficiary premium. (3) Payment toward Part B premium. MA organizations may credit some or all of the rebate toward reduction of the Medicare Part B premium (determined without regard to the application of subsections (b), (h), and (i) of section 1839 of the Act). (c) Disclosure relating to rebates. MA organizations must disclose to CMS information on the amount of the rebate provided, as required at §422.254(d). MA organizations must distinguish, for each MA plan, the amount of rebate applied to enhance original Medicare benefits from the amount of rebate applied to enhance Part D benefits. (a) Definitions. As used in this section- (1) Amounts incorrectly collected- (i) Means amounts that- (A) Exceed the limits approved under §422.262; (B) In the case of an MA private fee-for-service plan, exceed the MA monthly basic beneficiary premium or the MA monthly supplemental premium submitted under §422.262; and (C) In the case of an MA MSA plan, exceed the MA monthly beneficiary supplemental premium submitted under §422.262, or exceed permissible cost sharing amounts after the deductible has been met per §422.103; and (ii) Includes amounts collected from an enrollee who was believed to be entitled to Medicare benefits but was later found not to be entitled. (2) Other amounts due are amounts due for services that were— (i) Emergency, urgently needed services, or other services obtained outside the MA plan; or (ii) Initially denied but, upon appeal, found to be services the enrollee was entitled to have furnished by the MA organization. (b) Basic commitments. An MA organization must agree to refund all amounts incorrectly collected from its Medicare enrollees, or from others on behalf of the enrollees, and to pay any other amounts due the enrollees or others on their behalf. (c) Refund methods—(1) Lump-sum payment. The MA organization must use lump-sum payments for the following: (i) Amounts incorrectly collected that were not collected as premiums. (ii) Other amounts due. (iii) All amounts due if the MA organization is going out of business or terminating its MA contract for an MA plan(s). (2) Premium adjustment or lump-sum payment, or both. If the amounts incorrectly collected were in the form of premiums, or included premiums as well as other charges, the MA organization may refund by adjustment of future premiums or by a combination of premium adjustment and lump-sum payments. (3) Refund when enrollee has died or cannot be located. If an enrollee has died or cannot be located after reasonable effort, the MA organization must make the refund in accordance with State law. (d) Reduction by CMS. If the MA organization does not make the refund required under this section by the end of the contract period following the contract period during which an amount was determined to be due to an enrollee, CMS will reduce the premium the MA organization is allowed to charge an MA plan enrollee by the amounts incorrectly collected or otherwise due. In addition, the MA organization would be subject to sanction under subpart O of this part for failure to refund amounts incorrectly collected from MA plan enrollees.
Title 42: Public Health
PART 422—MEDICARE ADVANTAGE PROGRAM
Subpart F-Submission of Bids, Premiums, and Related Information and Plan Approval
§ 422.250 Basis and scope.
§ 422.252 Terminology.
§ 422.254 Submission of bids.
§ 422.256 Review, negotiation, and approval of bids.
§ 422.258 Calculation of benchmarks.
§ 422.262 Beneficiary premiums.
§ 422.264 Calculation of savings.
§ 422.266 Beneficiary rebates.
§ 422.270 Incorrect collections of premiums and cost-sharing.
