SubG

Medicare Plus Choice (M+C): Interim Final Rule

Subpart G–Premiums and Cost-Sharing

Sec. 422.300 Basis and scope.

(a) General. This subpart is based on
section 1854 of the Act. It sets forth the requirements and
limitations for payments by and on behalf of Medicare beneficiaries
who elect an M+C plan.

(b) Transition period. For contract
periods beginning before January 1, [[Page 35094]] 2002, HCFA applies
the following special rules. (1) M+C organizations may, with HCFA’s
agreement, modify an M+C plan offered prior to January 1, 2002 by–
(i) Adding benefits at no additional cost to the M+C plan enrollee;
and (ii) Lowering the premiums approved through the ACR process;
(iii) Lowering other cost-sharing amounts approved through the ACR
process. (2) For contracts beginning on a date other than January 1
(according to Sec. 422.504(d)), M+C organizations may submit ACRs on
a date other than May 1 approved by HCFA.

Sec. 422.302 Terminology.

As used in this subpart, unless specified otherwise–

• Additional revenues are revenues collected or expected to be
  collected from charges for M+C plans offered by an M+C
  organization in excess of costs actually incurred or expected to
  be incurred. Additional revenues would include such things as
  revenues in excess of expenses of an M+C plan, profits,
  contribution to surplus, risk margins, contributions to risk
  reserves, assessments by a related entity that do not represent a
  direct medical or related administrative cost, and any other
  premium component not reflected in direct medical care costs and
  administrative costs.

• APR stands for the M+C plan’s average per capita rates of
  payment. The APR is the average amount the M+C organization
  estimates HCFA will pay (without any needed offsets or reductions,
  such as, those required by Sec. 422.250(a)(2)(ii) for M+C MSA plan
  enrollees) for the period covered by the ACR for all of the
  Medicare beneficiaries electing the M+C plan.

• M+C monthly basic beneficiary premium means, with respect to
  an M+C coordinated care plan, the amount authorized to be charged
  under Sec. 422.308(a)(1) for the plan, or, with respect to a M+C
  private fee- for-service plan, the amount filed under Sec.
  422.306(d)(1).

• M+C monthly supplemental beneficiary premium means, with
  respect to an M+C coordinated care plan, the amount authorized to
  be charged under Sec. 422.308(a)(2) for the M+C plan, or, with
  respect to an MSA or an M+C private fee-for-service plan, the
  amount filed under Sec. 422.306(c)(2) or Sec. 422.306(d)(2).

• M+C monthly MSA premium means, with respect to an M+C plan,
  the amount of such premium filed under Sec.
  422.306(c)(1).

Sec. 422.304 Rules governing premiums and cost-sharing.

(a) Monthly premiums. The monthly
premium charged to the beneficiary is– (1) For an individual
enrolled in an M+C plan (other than an M+C MSA plan) offered by an
M+C organization, the sum of the M+C monthly basic beneficiary
premium plus the M+C monthly supplemental beneficiary premium (if
any); or (2) For an individual enrolled in an M+C MSA plan offered by
an M+C organization, the M+C monthly supplemental beneficiary premium
(if any).

(b) Uniformity. The M+C monthly basic
beneficiary premium, the M+C monthly supplemental beneficiary
premiums, and the M+C monthly MSA premium of an M+C organization may
not vary among individuals enrolled in the M+C plan. In addition, the
M+C organization may not vary the level of copayments, coinsurance,
or deductibles charged for basic benefits or supplemental benefits
(if any), among individuals enrolled in the M+C plan.

(c) Timing of payments. The M+C
organization must permit payments of M+C monthly basic and
supplemental beneficiary premium on a monthly basis and may not
terminate coverage for failure to make timely payments except as
provided in Sec. 422.74(b)(1).

(d) Monetary inducements prohibited.
An M+C organization may not provide for cash or other monetary
rebates as an inducement for enrollment or for any other reason or
purpose.

Sec. 422.306 Submission of proposed premiums and related
information.

(a) General rule. (1) Not later than
May 1 of each year, each M+C organization and any organization
intending to contract as an M+C organization in the subsequent year
must submit to HCFA, in the manner and form prescribed by HCFA, for
each M+C plan it intends to offer in the following year– (i) The
information specified in paragraph (b), (c), or paragraph (d) of this
section for the type of M+C plan involved; and (ii) The service area
and enrollment capacity (if any). (2) If the submission is not
complete, timely, or accurate, HCFA has the authority to impose
sanctions under Subpart O of this part or may choose not to renew the
contract.

(b) Information required for coordinated
care plans–(1) Basic benefits. For basic benefits, the
following information is required: (i) The ACR as specified in Sec.
422.310. (ii) The M+C monthly basic beneficiary premium. (iii) A
description of cost-sharing to be imposed under the plan, and its
actuarial value. (iv) A description of any additional benefits to be
provided pursuant to Sec. 422.312 and the actuarial value determined
for those benefits. (v) Amounts collected in the previous contract
period for basic benefits. (2) Supplemental benefits. For
supplemental benefits, the following information is required: (i) The
ACR. (ii) The M+C monthly supplemental beneficiary premium. (iii) A
description of supplemental benefits being offered, the cost sharing
to be imposed, and their actuarial value. (iv) Amounts collected in
the previous contract period for supplemental benefits.

(c) Information required for MSA
plans. (1) The monthly MSA premium for basic benefits. (2) The
M+C monthly supplementary beneficiary premium for supplemental
benefits. (3) A description of all benefits offered under the M+C MSA
plan. (4) The amount of the deductible imposed under the plan. (5)
Amounts collected in the previous contract period for supplemental
benefits.

(d) Information required for M+C private
fee-for-service plans. (1) The information specified under
paragraph (b)(1) of this section. (2) The amount of the M+C monthly
supplemental beneficiary premium. (3) A description of all benefits
offered under the plan. (4) Amounts collected in the previous
contract period for basic and supplemental benefits.

(e) HCFA review–(1) Basic rule.
Except as specified in paragraph (e)(2) of this section, HCFA reviews
and approves or disapproves the information submitted under this
section. (2) Exception. HCFA does not review or approve or disapprove
the following information: (i) Any amounts submitted with respect to
M+C MSA plans. (ii) The M+C monthly basic and supplementary
beneficiary premiums for M+C private fee-for-service
plans.

Sec. 422.308 Limits on premiums and cost sharing amounts.

(a) Rules for coordinated care
plans--(1) For basic benefits, the M+C monthly basic
beneficiary premium (multiplied by 12) charged, plus the actuarial
value of the cost-sharing applicable, on average, to beneficiaries
enrolled under this part may not exceed the annual actuarial value of
the deductibles and [[Page 35095]] coinsurance that would be
applicable, on average, to beneficiaries entitled to Medicare Part A
and enrolled in Medicare Part B if they were not enrollees of an M+C
organization as determined in the ACR under Sec. 422.310. For those
M+C plan enrollees that are enrolled in Medicare Part B only, the M+C
monthly basic beneficiary premium (multiplied by 12) charged, plus
the actuarial value of the deductibles, coinsurance and copayments
applicable, on average, to those beneficiaries enrolled under this
part may not exceed the annual actuarial value of the deductibles and
coinsurance that would be applicable, on average, to beneficiaries
enrolled in Medicare Part B if they were not enrollees of an M+C
organization as determined in the ACR under Sec. 422.310. (2) For
supplemental benefits, the M+C monthly supplemental beneficiary
premium (multiplied by 12) charged, plus the actuarial value of its
cost-sharing, may not exceed the amounts approved in the ACR for
those benefits, as determined under Sec. 422.310 on an annual basis.
(3) Coverage of Part A services for Part B-only Medicare enrollees.
If an M+C organization furnishes coverage of Medicare Part A-type
services to a Medicare enrollee entitled to Part B only, the M+C
plan’s premium plus the actuarial value of its cost-sharing for these
services may not exceed the lesser of– (i) The APR that is payable
for these services for those beneficiaries entitled to Part A plus
the actuarial value of Medicare deductibles and Coinsurance for the
services; (ii) or the ACR for such services.

(b) Rule for M+C private fee-for-service
plans. The average actuarial value of the cost-sharing for
basic benefits may not exceed the actuarial value of the cost-sharing
that would apply, on average, to beneficiaries entitled to Medicare
Part A and enrolled in Medicare Part B if they were not enrolled in
an M+C plan as determined in the ACR under Sec. 422.310.

(c) Special rules for determination of
actuarial value. If HCFA determines that adequate data are not
available to determine actuarial value under paragraph (a) or (b) of
this section, HCFA may make the determination with respect to all M+C
eligible individuals in the same geographic area or State or in the
United States, or on the basis of other appropriate
data.

Sec. 422.309 Incorrect collections of premiums and
cost-sharing.

(a) Definitions. As used in this
section– (1) Amounts incorrectly collected (i) Means amounts that:
(A) Exceed the limits imposed by Sec. 422.308; (B) In the case of a
M+C private fee-for-service plan, exceed the M+C monthly basic
beneficiary premium or the M+C monthly supplemental premium submitted
under Sec. 422.306; and (C) In the case of a M+C MSA plan, exceed the
M+C monthly supplemental premium submitted under Sec. 422.306 and the
deductible for basic benefits; and (ii) Includes amounts collected
from an enrollee who was believed not entitled to Medicare benefits
but was later found 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 M+C plan; or (ii) Initially
denied but, upon appeal, found to be services the enrollee was
entitled to have furnished by the M+C organization.

(b) Basic commitments. An M+C
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 M+C 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 M+C
organization is going out of business or terminating its M+C contract
for an M+C 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 M+C
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 M+C organization
must make the refund in accordance with State law.

(d) Reduction by HCFA. If the M+C
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 an enrollee, HCFA reduces
the premium the M+C organization is allowed to charge an M+C plan
enrollee by the amounts incorrectly collected or otherwise due. In
addition, the M+C organization would be subject to sanction under
Subpart O for failure to refund amounts incorrectly collected from
M+C plan enrollees.

Sec. 422.310 Adjusted community rate (ACR) approval
process.

(a) General rule. (1) Except with
respect to M+C MSA plans, each M+C organization must compute a
separate ACR for each M+C coordinated care or private fee-for-service
plan offered to Medicare beneficiaries. In computing the ACR, the M+C
organization calculates an initial rate (for years after 1999, using
the methods described in paragraph (b), for 1999, under Sec.
417.594(b)) that represents the “commercial premium” the M+C
organization would charge its general non-Medicare eligible
enrollment population for the basic benefits, and any mandatory
supplemental benefits covered under the M+C plan. The M+C
organization should also calculate a separate initial rate (using the
same approach) for each optional supplemental benefit package it
offers under an M+C plan. For years after 1999 the M+C organization
then either adjusts that rate by the factors specified in paragraph
(c) of this section or requests that HCFA adjust the rate in
accordance with the procedures specified in paragraph (c)(6) of this
section. For 1999, adjustments are made under section 417.594(c). All
data submitted as part of the ACR process is subject to audit by HCFA
or any person or organization designated by HCFA. (2) To calculate
the adjusted excess described in section 422.312, the M+C
organization or HCFA further reduces the rate for Medicare- covered
services by the actuarial value of applicable Medicare coinsurance
and deductibles. (3) Separate ACRs must be calculated for Part A and
Part B enrollees and Part B-only enrollees for each M+C plan offered,
and for each optional supplemental benefit option. (4) In calculating
its initial rate, the M+C organization must identify and take into
account anticipated revenue collectible from other payers for those
services for which Medicare is not the primary payer as described in
Sec. 422.108. (5) Except as provided in paragraph (a)(6) of this
section, the M+C organization must have an adequate accounting system
that is accrual based and uses generally-accepted accounting
principles to develop its ACR. (6) For M+C organizations that are
part of a government entity that uses a cash basis of accounting, ACR
cost data [[Page 35096]] developed on this basis is acceptable.
However, only depreciation on capital assets, rather than the
expenditure for the asset, is acceptable.

(b) Initial rate calculation for years after
1999. (1) The M+C organization’s initial rate for each M+C
plan is calculated on a 12- month basis for non-Medicare enrollees,
using either, at the M+C organization’s election– (i) A community
rating system (as defined in section 1308(8) of the PHS Act, other
than subparagraph (C)); or (ii) A system, approved by HCFA, under
which the M+C organization develops an aggregate premium for each M+C
plan for all enrollees of that M+C plan that is weighted by the size
of the various enrolled groups and individuals that compose the M+C
organization’s enrollment in that M+C plan. For purposes of this
section, enrolled groups are defined as employee groups or other
bodies of subscribers (including individual subscribers) that enroll
in the M+C plan on a premium basis. (2) Regardless of which method
the M+C organization uses to calculate its initial rate, the initial
rate must be equal to the premium the M+C organization would charge
its non-Medicare enrollees on a yearly basis for services included in
the M+C plan. (3) Except as provided in paragraph (b)(4) of this
section, the M+C organization must identify in its initial rate
calculation for an M+C plan, the following components whose rates
must be consistent with rates used by the M+C organization in
calculating premiums for non- Medicare enrollees: (i) Direct medical
care. (ii) Administration. (iii) Additional Revenues. (iv) Enrollee
cost sharing (for example, deductibles, coinsurance, or copayments)
for Medicare-covered services and for additional and supplemental
benefits. (4) An M+C organization that does not usually separate its
premium components as described in paragraph (b)(3) of this section
may calculate its initial rate with the methods it uses for its other
enrolled groups if the M+C organization provides HCFA with the
documentation necessary to support any adjustments the M+C
organization makes to the initial rate in accordance with paragraph
(c)(5) of this section. (5) The initial rate calculation must not
carry forward any losses experienced by the M+C organization during
prior contract periods. The M+C organization must submit supporting
documentation to assure HCFA that ACR values do not include past
losses but only premiums for covered services, additional services,
and supplemental benefits for the upcoming 12-month period.

(c) Adjustment factors for years after
1999. Adjustment factors are designed to adjust on a component
basis the initial rate calculated under paragraph (b) of this section
to reflect differences in utilization characteristics of the M+C
organization’s Medicare enrollees electing an M+C plan using a
relative cost ratio. Adjustment factors are as follows: (1) Direct
medical care. The relative cost ratio for direct medical care for an
M+C plan is determined by comparing the direct medical care costs
actually incurred on an accrual basis during the most recently ended
calendar year prior to submission of the ACR for Medicare enrollees
that elected the M+C plan to the direct medical care costs of
non-Medicare enrollees incurred over the same period. The
non-Medicare enrollees included in this computation must be
consistent with the non- Medicare enrollees included in the initial
rate computation. (2) Administration. The relative cost ratio for
Administration for an M+C plan is determined by comparing the
administrative costs actually incurred on an accrual basis during the
most recently ended calendar year prior to submission of the ACR for
Medicare enrollees that elected the M+C plan to the administrative
costs of non-Medicare enrollees incurred over the same period. The
non-Medicare enrollees included in this computation must be
consistent with the non-Medicare enrollees included in the initial
rate computation. (3) Additional revenues. The relative cost ratio
for additional revenues for an M+C plan is determined by comparing
the additional revenues collected on an accrual basis during the most
recently ended calendar year prior to submission of the ACR for
Medicare enrollees that elected the M+C plan to the additional
revenues of non-Medicare enrollees collected over the same period.
The non-Medicare enrollees included in this computation must be
consistent with the non-Medicare enrollees included in the initial
rate computation. (4) Additional adjustments. Additional adjustments
may be necessary if the M+C organization, with agreement of HCFA,
determines that the adjustment of the initial rate by the relative
cost ratios does not represent an accurate ACR value of the initial
rate component. Adjustments will be allowed that are designed to
reduce ACR values to equal the actuarial value of the M+C plan charge
structure. (5) Supporting documentation. All adjustments made by the
M+C organization must be accompanied by adequate supporting data. If
an M+C organization does not have sufficient enrollment experience to
develop this data, it may, during its initial contract period use
reasonable estimates acceptable to HCFA to establish its ACR values.
(6) Adjustment by HCFA. If it is determined that the M+C organization
does not have adequate data to adjust the initial rate calculated
under paragraph (b) of this section to reflect the utilization
characteristics of Medicare enrollees, HCFA adjusts the initial rate.
HCFA adjusts the rate on the basis of differences in the utilization
characteristics of– (i) Medicare and non-Medicare enrollees in other
M+C plans; or (ii) Medicare beneficiaries in the M+C organization’s
area, State, or the United States who are eligible to elect an M+C
plan and other individuals in that same area, State, or the United
States.

(d) Special rules for certain
organizations. An M+C organization that does not have
non-Medicare enrollees or sufficient Medicare enrollment experience
to adequately calculate ACR values may calculate its ACR using
estimates described in paragraphs (a)(1) and (a)(2) of this section
as an additional adjustment described in paragraph (c)(4) of this
section. (1) The M+C organization may use an estimate of the ACR
value for the direct medical and administrative components of a
service or services offered using generally-accepted accounting
principles. (2) The M+C organization may use an estimate of the ACR
value for the additional revenue component of a service or services
offered based on the lesser of (if the information is available)–
(i) The average of additional revenues received through risk payments
for health services contracted to be furnished to an enrolled
population of other organizations; (ii) The average of additional
revenues received for health services furnished; or (iii) A
reasonable estimate of additional revenues of other M+C organizations
in the general marketplace.

(e) Adjustment by HCFA. If HCFA finds
that there is insufficient enrollment experience to determine the APR
or ACR for a M+C plan at the beginning of a contract period, HCFA
may– (1) Determine the APR based on the enrollment experience of
other M+C organizations; [[Page 35097]] (2) Determine ACR using data
in the general commercial marketplace; or (3) Determine either or
both rates using the best available information, which may include
enrollment experience of other M+C organizations and section 1876
risk contractors.

(f) HCFA review. (1) The M+C
organization’s methodology and computation of its ACR are subject to
review and approval by HCFA. When the M+C organization submits the
ACR computation, it must include adequate supporting data. Except as
provided in Sec. 422.306(e)(2), HCFA authorizes the M+C organization
to collect premiums and other cost sharing amounts described in Sec.
422.306 that are equal to the amounts calculated in the ACR. (2) If
the M+C organization is dissatisfied with an HCFA determination that
the M+C organization’s computation is not acceptable, the M+C
organization may within 2 weeks after the date of receipt of
notification of this determination, file a request for a hearing with
HCFA. The request must state why the M+C organization believes the
determination is incorrect and must be accompanied by any supporting
evidence the M+C organization wishes to submit. The hearing is
conducted by a hearing officer designated by HCFA under the hearing
procedures described in subpart N.

Sec. 422.312 Requirement for additional benefits.

(a) Definitions. As used in this
section– (1) Excess amount is the amount by which the APR exceeds
the actuarial value of the Medicare covered services required under
Sec. 422.101(a), as determined on the basis of the ACR determined
under Sec. 422.310, as reduced for the actuarial value of the
cost-sharing under Medicare Parts A and B. A separate excess amount
must be determined for Part B-only enrollees. (2) Adjusted excess
amount is the excess amount minus any amount withheld and reserved
for the organization in a stabilization fund, as provided in
paragraph (c) of this section.

(b) Requirement for additional benefits.
If there is an adjusted excess amount for the plan it offers,
the M+C organization must– (1) Provide additional benefits with an
actuarial value (less the actuarial value of any copayment or
coinsurance associated with the benefit) which HCFA determines is at
least equal to the adjusted excess amount; and (2) Provide those
benefits uniformly for all Medicare enrollees electing the plan.

(c) Stabilization fund. (1) An M+C
organization may request for part of an excess amount to be withheld
and reserved, for a specified number of contract periods, in the
Federal Hospital Insurance Trust Fund, or the Federal Supplementary
Insurance Trust Fund in the proportions that HCFA determines to be
appropriate. (2) The reserved funds are to be used to stabilize and
prevent undue fluctuations in the additional benefits that are
required under this section and are provided during subsequent
contract periods. (3) Any amounts not provided as additional benefits
during the period specified by the M+C organization for which the
stabilization fund is established, reverts for the use of the trust
funds. (4) Establishment of a stabilization fund. An M+C
organization’s request to have monies withheld in a stabilization
fund for a specific M+C plan must be made when the M+C organization
notifies HCFA under Sec. 422.306 of its proposed premiums, other
cost-sharing amounts, and related information in preparation for its
next contract period. (i) Limit per contract period. Except as
provided in paragraph (c)(4)(iii) of this section, HCFA does not
withhold in a stabilization fund more than 15 percent of the excess
amount for a given contract period. (ii) Cumulative limit. If HCFA
has established a stabilization fund for an M+C plan, it does not
approve a request for withholding made by that M+C organization for a
subsequent contract period that would cause the total value of the
stabilization fund to exceed 25 percent of the excess amount
applicable to the M+C plan for that subsequent contract period. (iii)
Exception. HCFA may grant an exception to the limit described in
paragraph (c)(3)(i) of this section if the M+C organization can
demonstrate to HCFA’s satisfaction that the value of the additional
benefits it provides to its Medicare enrollees electing this M+C plan
fluctuates substantially in excess of 15 percent from one contract
period to another. (iv) Interest. The amounts withheld in a
stabilization fund are accounted for by HCFA in accounts for which
interest does not accrue to the M+C organization. (5) Withdrawal from
a stabilization fund. An M+C organization’s request to make a
withdrawal from the stabilization fund established for an M+C plan to
be used during a contract period must be made when the M+C
organization notifies HCFA under Sec. 422.306 of its proposed
premiums, cost-sharing amounts, and related information in
preparation for its next contract period. (i) Notification
requirements. An M+C organization must– (A) Indicate how it intends
to use the withdrawn amounts; (B) Justify the need for the withdrawal
in terms of stabilizing the additional benefits it provides to
Medicare enrollees; (C) Document the M+C plan’s experience with
fluctuations of revenue requirements relative to the additional
benefits it provides to Medicare enrollees; and (D) Document its
experience during the contract period previous to the one for which
it requests withdrawal to ensure that the M+C organization will not
be using the withdrawn amounts to refinance losses suffered during
that previous contract period. (ii) Criteria for HCFA approval. HCFA
approves a request for a withdrawal from a benefit stabilization fund
for use during the next contract period only if– (A) The average of
the APR for the M+C plan’s next contract period of the M+C plan is
less than that of the previous contract period; (B) The M+C plan’s
ACR for the next contract period is significantly higher than that of
the previous contract period; (C) The M+C plan’s revenue requirements
for the next contract period for providing the additional benefits it
provided during the previous contract period is significantly higher
than the requirements for that previous period; or (D) The ACR for
the next contract period results in additional benefits that are
significantly less in total value than that of the previous contract
period. (iii) Basis for denial. HCFA does not approve a request for a
withdrawal from a stabilization fund if the withdrawal would allow
the M+C organization to refinance prior contract period losses or to
avoid losses in the upcoming contract period. (iv) Form of payment.
Payment of monies withdrawn from a stabilization fund is made, in
equal parts, as an additional amount to the monthly advance payment
made to the M+C organization for Medicare beneficiaries electing the
M+C plan during the period of the contract.

(d) Construction. Nothing in this
section may be construed as preventing an M+C organization from
providing supplemental benefits in addition to those required under
this section and [[Page 35098]] from imposing a premium for those
supplemental benefits.

---

Health Hippo ©1996-2015