CMS Proposes Its Best NBPP Yet

The Trump administration deserves enormous credit for a wide range of important reforms proposed in the 2027 Notice of Benefit and Payment Parameters (NBPP) rule. This rule allows the Centers for Medicare and Medicaid Services (CMS) to update regulations governing the Affordable Care Act (ACA) exchanges. I worked on three of these rules when I served at the White House’s National Economic Council from 2017 to 2019. The 2027 NBPP is CMS’s best one.

If finalized as proposed, it would significantly expand consumer options in the individual market, increase competition, address longstanding distortions that have raised premiums, and implement key reforms to strengthen program integrity and better ensure that the lawfully entitled subsidy amounts are paid. While the Paragon comment letter (which I summarize below) offers suggestions for how to improve the rule, the proposal shows policy innovation and greater respect for people’s ability to choose the coverage that works best for them, as well as for taxpayers.

Improving the Affordable Care Act’s Problematic Individual Market

Several deep structural problems with the ACA have become clear. Premiums remain extremely high, leaving many middle-income households without affordable options. The market is increasingly dominated by plans with extremely narrow provider networks that limit patient choice and access to care. And taxpayer costs have exploded. Yesterday, Fox News extensively covered my views on why the ACA needs reform and not more taxpayer money.

The Biden administration’s enrollment-at-any-cost strategy, combined with large COVID-era subsidies to health insurers, fueled improper and phantom enrollment. Weak eligibility verification and opportunities to profit at taxpayers’ expense allowed brokers and enrollment entities to enroll individuals who are not eligible for subsidies or who may not even realize they were enrolled. These practices inflated enrollment numbers, increased federal spending on premium tax credits (PTCs), and undermined the integrity of the program.

Pricing distortions have compounded these problems. Practices such as silver loading have artificially inflated benchmark premiums and increased federal subsidy spending well beyond what is necessary to finance cost-sharing reduction obligations.

The 2027 NBPP includes several important reforms that address these problems directly. By expanding consumer choice, increasing competition, and strengthening program integrity, the rule would put downward pressure on premiums while reducing federal spending.

Expanding Catastrophic Coverage + Making It Long-Term

The NBPP proposes to expand access to catastrophic coverage. Under the ACA’s current framework, individuals over age 30 generally cannot enroll in catastrophic plans unless they qualify for a hardship exemption. CMS proposes expanding hardship exemptions so that many individuals over age 30—particularly those who do not qualify for premium subsidies—can purchase catastrophic coverage. This action would put earlier CMS guidance into regulation.

Catastrophic plans provide lower-premium protection against major medical expenses while allowing consumers to retain greater control over routine health care spending. Expanding access to these plans would provide an important coverage option for individuals and families who have been priced out of traditional exchange plans.

CMS also proposes allowing longer-term catastrophic coverage options for up to ten years. Longer-term insurance contracts are common features of most other insurance markets and would incentivize insurers to engage in cost-effective preventive services. Moreover, longer-term contracts mean less administrative hassle with the annual process of selecting new coverage.

Non-Network Qualified Health Plans

Perhaps the most significant pro-competition reform in the proposed rule is the proposal to allow non-network plans to be certified as Qualified Health Plans (QHPs). Allowing non-network plans introduces a transparent coverage model in which insurers pay the same defined amount for services at every provider. These plans allow consumers to see price differences across providers, and many allow consumers to share in savings. Greater price transparency encourages both patients and providers to respond to price signals and compete on cost and efficiency, which will put downward pressure on health care prices and premiums.

Some critics raise balance billing risks with non-network plans. While plans will work to minimize those risks, the truth is that many consumers will prefer a non-network option with lower premiums, even with some balance billing exposure, particularly when the alternative is a narrow-network ACA plan that purports to be comprehensive but still effectively blocks access to preferred physicians and hospitals. Expanding innovative coverage options would help restore competition in the individual market and provide many consumers with coverage choices that better meet their needs.

In our view, CMS’s proposed certification standard for non-network plans is unnecessarily restrictive. The rule would require a certain number of providers to accept the plan’s payment amount as payment in full. This requirement could significantly limit the development of these models. In our comment letter, we propose a less restrictive metric for CMS to consider.

Addressing Silver Loading

The proposed rule also takes steps to address distortions created by silver loading, the practice of increasing premiums on silver-tier plans to recover the cost of cost-sharing reduction payments with increased federal premium subsidies. (For more background on this, see here.) Silver loading has significantly inflated benchmark premiums and increased PTC costs. Premiums should reflect actuarial differences across metal tiers, not artificial increases designed to maximize federal subsidies. Ending these pricing distortions would help reduce premiums and lower federal spending.

Strengthening Program Integrity

The rule includes several important reforms aimed at reducing improper and phantom enrollment in the exchanges. Evidence increasingly suggests that these problems have become widespread, allowing insurers to collect federal subsidies for individuals who are not eligible for coverage, who may not even realize they were enrolled, or who are fictitious. The Government Accountability Office successfully enrolled 23 of 24 fictitious applicants into exchange coverage. CMS has reported that, in 2024, 35 percent of all enrollees and 40 percent of enrollees in fully subsidized plans made no claims. We have estimated that 6.4 million people are improperly enrolled in fully subsidized plans.

Key program integrity reforms in the NBPP, several of which implemented reforms included in the One Big Beautiful Bill (OBBB), include:

• Eliminating the special enrollment period for individuals with incomes between 100 and 150 percent of the federal poverty level.
• Strengthening income verification when applicant attestations conflict with federal data.
• Requiring stronger pre-enrollment eligibility verification.
• Restoring failure-to-reconcile requirements for individuals receiving advance premium tax credits.
• Requiring consumers to affirmatively confirm eligibility before receiving subsidies.
• Increasing oversight of brokers and enrollment entities.

Together, these policies would help ensure that federal subsidies go only to eligible individuals.

One Needed Change: Limiting Enhanced Direct Enrollment

The one proposal in the rule that CMS should reconsider is the expansion of enhanced direct enrollment (EDE) into states that operate state-based exchanges (SBEs) by permitting EDEs to serve as the sole consumer-facing intake and enrollment pathway. Currently, EDE platforms operate only in states that use healthcare.gov, the federal exchange platform. EDEs allow private web brokers and enrollment entities to handle key parts of the eligibility and enrollment process outside centralized exchange systems.

Experience over the past several years clearly shows that EDEs in a heavily subsidized market can significantly weaken oversight and contribute to improper and phantom enrollment. Many of the largest improper enrollment schemes have occurred through third-party and web-broker platforms operating outside centralized exchange eligibility systems—with much greater improper enrollment in states that used EDE than in states that did not. SBEs were designed to maintain centralized eligibility verification and oversight.

Allowing EDE entities to operate alongside those systems undermines those safeguards and increases opportunities for fraudulent or improper enrollment. Prohibiting EDE in states with SBEs would strengthen program integrity, reduce improper and phantom enrollment, and better ensure the accurate payment of federal subsidies.

A Terrific NBPP

Overall, the proposed rule represents an important opportunity to expand consumer choice, strengthen competition, and improve program integrity in the ACA exchanges. By expanding catastrophic coverage, allowing innovative plan designs such as non-network plans, addressing silver-loading distortions, and tightening eligibility verification, these reforms could put downward pressure on premiums while reducing federal spending and limiting improper enrollment. Moreover, reducing improper enrollment and more accurately pricing plans would likely reduce the ten-year federal deficit by more than $150 billion, including savings associated with implementing key provisions of the OBBB.