CMS continues to reshape the Marketplace with the PY 2027 final rule

On Friday, May 15, CMS published the Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program – more commonly known as the Marketplace final rule. The rule largely carries through many of the items CMS had previously proposed in February of this year.

Some of the bigger-ticket items, like adjusting MLR requirements and allowing state-based exchanges to select web-brokers like HealthSherpa as their sole eligibility and enrollment mechanism, didn’t make the cut.

But other items, nominally designed to drive down premium costs, did. We break it down below:

Agent and broker compliance will change over the next few years.

Several marketing practices of agents and brokers will be outlawed. CMS is codifying several new guide rails. Agents and brokers may not:

• Offer inducements, like cash, rebates, or cash equivalents to enroll in a plan (gifts not tied to enrollment are okay)
• Falsely assert all customers will qualify for $0 premiums or zero-dollar insurance
• Misrepresent enrollment timelines to create a false sense of urgency; however, truthful communication about nearing the end of a valid enrollment period is acceptable
• Use fictional citations or representations of public figures (e.g., AI deepfakes) to promote their agency or a specific product

Additionally, agents and brokers can be held responsible for marketing content generated by another entity on their behalf. So, if an ad agency runs misleading ads in your name, you can end up in the hot seat.

Finally, CMS will now require agents and brokers to retain copies of all marketing materials and to produce them upon request for monitoring, audit, and enforcement. While this does not yet rise to the level of scrutiny that CMS puts on the Medicare market – where preapproval is often required – agents should be mindful of this new requirement.

FFM certification will only be available through CMS. CMS will sunset the vendor training program, effectively cutting organizations like HealthSherpa out of the certification process. It has not yet been determined whether CEs will be granted for completing this certification.

Beginning in plan year 2028, agents and brokers must use a standardized form to document consent and application review. While CMS currently requires agents and brokers to document consumer consent and review of their Marketplace application updates, the agency has allowed a great deal of documentation flexibility.

HHS will soon release a required standardized form. All agents must use this regardless of how the enrollment is done beginning in 2028. New consent forms must be collected even if previous forms granted consent beyond December 31, 2027.

States get a little less leeway in mandating more benefits, but more leeway in otherwise regulating plans

CMS will require states to defray the costs of additional mandated benefits beyond the ACA’s initial 10 Essential Health Benefits. Since the ACA went into effect, many states have required insurers to cover benefits beyond the initial 10 benefits named in the ACA. Examples include Michigan’s requirement to cover overdose reversal drugs and Virginia’s requirement to cover doula services, among others. These benefits had been included in the states’ benchmark plans, and were treated as Essential Health Benefits for those purposes.

The final rule now classifies any of these benefits for both individuals and small groups as “in addition to EHB,” putting states on the hook for defraying the cost of these additional benefits. This is true even if the benefit is already established. Essentially, states will be faced with a key decision: Will they spend additional funds to support these benefits, or will they drop them from their packages?

In coinciding moves, CMS has paused review of states’ selection of new EHB-benchmark plans. Plans are also forbidden from including routine non-pediatric dental as an EHB.

CMS will make it easier for states to move to State-Based exchanges. CMS is repealing two transition requirements. States will no longer be required to spend a year as a State-Based Exchange – Federal Partnership before beginning operations as a State-Based Exchange. CMS also removes the requirement for states to submit progress updates on their transition, stating that transition plans are adequately outlined in a state’s initial application.

Plans on state-based exchanges will no longer be required to meet the same time and distance network adequacy standards as plans on federal exchanges. Instead, states must certify each plan provides “sufficient access” to providers for network-based plans.

States on the federal exchange will be permitted to conduct provider access reviews. In the past, CMS and the federal government have conducted all plan management and certification functions for states operating on the federal exchange. Under this new regulation, CMS will defer this authority to states, so long as the state demonstrates the ability to conduct an Effective Provider Access Review program, as defined by law. The same flexibility will also be applied to Essential Community Provider reviews.

Changes in APTC , SEP eligibility abound

CMS finalizes proposal to only allow PTCs, Basic Health Plan payments to be issued to “eligible aliens”, as defined by Public Law 119-21. Effectively, only some groups of lawfully present noncitizens will be eligible for APTCs, or for their states to receive Basic Health Plan payments in lieu of APTCs. Only the people below qualify as eligible aliens:

• Lawful permanent residents, or green card holders
• Cuban or Haitian migrants
• COFA migrants, or those who are residing in the U.S. under the Compacts of Free Association

Other categories of lawfully present noncitizens, such as asylees, DACA recipients, survivors or victims of human trafficking, or those with Temporary Protected Status, are no longer eligible for Premium Tax Credits. Eligible alien status must be verified each year.

CMS also finalizes its proposal that PTCs are no longer allowed for lawfully present noncitizens who were ineligible for Medicaid due to immigration status and have a household income below 100% of FPL.

The 150 percent FPL SEP will be formally eliminated for PY 2027 and beyond. Prior to the 2025 Marketplace Integrity and Affordability rule, exchanges were permitted to grant year-long SEPs for consumers earning under 150 percent of FPL. That SEP has now been permanently eliminated.

All exchanges will need to conduct Special Enrollment Period Verification (SEPV) for at least 75 percent of new enrollments. Previously, exchanges on the federal platform were only required to conduct SEPV for Loss of Minimum Essential Coverage. Now, SEPV will be required for more SEPs. And, conditional eligibility for APTCs is also eliminated. Consumers will need to have documentation supporting their SEP (think birth certificates, marriage licenses, and death certificates) at the time of enrollment.

Beginning in PY 2027, all exchanges will be required to indefinitely continue income verification as outlined in the 2025 Marketplace Integrity and Affordability final rule. Specifically, Marketplaces will continue to create Data Matching Issues (DMIs) when tax data or other trusted sources show that consumer income is under 100% of FPL. Marketplaces will also no longer accept annual household income attestations when no tax data is available. This provision has no sunset date.

Consumers will need to take a more active role in their coverage

Exchanges on the federal platform will use a one-year policy for the file and reconcile process. Individuals will be ineligible for APTCs if they or their spouses used tax data to verify their APTC eligibility and then failed to file and reconcile that same year’s APTCs come tax time. State-based exchanges may use the two-year policy in 2027, but all exchanges will use a one-year policy beginning in 2028.

Beginning in PY2027, premium payments will be required in full each month. This sounds like a no-brainer, but in the past, carriers were allowed to adopt either a fixed-dollar or gross-premium threshold flexibility before moving towards grace periods and termination of an enrollment. Often, these flexibilities were used when consumers received a large premium tax credit and had little out-of-pocket responsibility of their own. Such flexibility allowed these consumers to avoid being disenrolled – but that will no longer be the case.

CMS permits more plan variety on the Marketplaces in 2027 and beyond

Non-network plans will be allowed to hit exchanges beginning in 2027. State-based exchanges may begin to offer non-network plans next year. In PY 2028, such plans can be offered on federal exchanges, too.

The theory goes that, since these plans do not have to pay to administer a network, they will be able to offer lower premiums. However, they must certify that enough providers within their service area will accept their benefit amount as payment in full. That number must include Essential Community Providers, as well as hospitals, PCPs, and specialists.

We should note, though, that no state or issuer will be required to offer such plans. It’s simply a possibility that they may appear on exchanges.

Individual market bronze plans may exceed the statutory out-of-pocket maximum. As medical costs continue to climb, it has become a mathematical impossibility for bronze plans to provide their intended actuarial value while also limiting cost-sharing to legal limits. Beginning in PY 2027, bronze plans will be permitted to exceed the statutory cap by up to 130%.

Catastrophic plans will see a significant rework. CMS will allow catastrophic plans to have terms of up to 10 plan years. Plans with terms of two years or more may provide some benefits before the deductible, pursuant to current guidelines. Additionally, to maintain the intended cost hierarchy between bronze and catastrophic plans, their maximum out-of-pocket ranges will be adjusted beyond the bronze cap. That will go officially into effect in 2028, though, to give all stakeholders time to update their IT systems, quoting software, and actuarial value calculators.

Speaking of catastrophic plans…

Eligibility for the hardship exemption is permanently expanded. Individuals ineligible for APTCs and/or CSRs whose income is projected to be below 100% of FPL or above 250% of FPL will qualify for a hardship exemption, regardless of age. Therefore, as long as these consumers are eligible to enroll in a Marketplace plan, they may continue to enroll in catastrophic plans.

Requirements for standardized plan offerings are eliminated. Beginning in 2027, standardized plans will no longer be required, and such labels will be eliminated. Caps on the number of plans issuers may offer will also be removed.

CMS commits to more scrutiny of all exchanges, plans

State-based exchanges will be required to measure and report improper payments of Advanced Premium Tax Credits. The Payment Integrity Information Act of 2019 requires Federal agencies to annually review programs susceptible to improper payments. This update requires state-based exchanges to produce an auditable record of APTCs they pay, which will allow HHS to examine them for inconsistencies. Significant improper payments may face action from HHS.

Plan compliance reviews will be annual. Previously, compliance reviews helping with APTCs, CSRs, and user fees were only conducted on an ad hoc basis – whenever a reasonable motivation to do so existed. New regulations allow for annual reviews, adding another degree of transparency to the system.

In related moves, CMS also asserts its authority to issue Civil Monetary Penalties to issuers as an enforcement remedy. These payments can be collected during regular payment and collection cycles. It will also allow administrative law judges to issue subpoenas in cases related to these instances.

Behind-the-scenes financials for carriers get a refresh

CMS finalizes modifications to risk adjustment models. The risk adjustment model will be recalibrated using the 2021, 2022, and 2023 enrollee- level edge data. The risk adjustment user fee is also finalized at $0.18 per member per month.

User fees will be lower than anticipated. CMS has finalized even lower user fees. FFE states will face a fee of 1.9% of premiums, while SBE-FP states will face a fee of 1.5% of monthly premiums. These lower rates are meant to help put downward pressure on premiums overall.

CMS formally gives Silver Loading its blessing, but will require more plan data. Since HHS stopped funding Cost-Sharing Reductions for eligible enrollees, carriers have often loaded their silver-level premiums to help offset extra costs. CMS will continue to permit this practice, but will require carriers to submit information about how much they are loading their rates. This intends to bring more transparency to the process, thereby guarding against unnecessary rate –and premium tax credit – increases.

What got left on the cutting room floor?

CMS will not allow states to designate web-brokers as the sole eligibility and enrollment pathway on their exchanges. This proposal would have allowed states to designate websites like HealthSherpa as the only way to enroll in coverage through their exchanges. Paper applications and state-funded websites, such as Pennie, may have been prohibited in those states.

Multi-year catastrophic plans cannot adjust index rates over the course of the plan term. And, cost-sharing cannot be limited by the first-year’s figures, or determined instead by an average over the life of the contract. Instead, cost-sharing figures will continue to be revised each year, just as they are now.

CMS will not adjust any MLR requirements at this time. The agency had sought comment on whether adjustments to Medical Loss Ratio requirements, especially on a state-by-state basis, would encourage more issuers to remain in the Marketplaces. While it appreciates the comments it collected, it will not make any such changes for PY 2027.

2300 words later…

We know. That’s a long, long summary. But what we said when this rule was first proposed in February still rings true: these represent the most significant shifts in the Marketplace since its inception.

While compliance shifts deserve your immediate attention, the regulations regarding changes in APTC and SEP eligibility require some careful consumer education. Moreover, the 40% of consumers now in bronze plans – or even those opting for the catastrophic plans -- will need support in mitigating their soon-to-be-even-larger out-of-pocket deductibles and out-of-pocket maximums.

We’ll keep you updated as the market continues to evolve.