Early Retiree Reinsurance Program, 24450-24470 [2010-10658]
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Federal Register / Vol. 75, No. 86 / Wednesday, May 5, 2010 / Rules and Regulations
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of the Secretary
45 CFR Part 149
RIN 0991–AB64
Early Retiree Reinsurance Program
Office of the Secretary, HHS.
Interim final rule with comment
AGENCY:
ACTION:
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period.
SUMMARY: This interim final rule with
comment period (IFC) implements the
Early Retiree Reinsurance Program,
which was established by section 1102
of the Patient Protection and Affordable
Care Act (the Affordable Care Act). The
Congress appropriated funding of $5
billion for the temporary program.
Section 1102(a)(1) requires the Secretary
to establish this temporary program not
later than 90 days after enactment of the
statute, which is June 21, 2010. The
program ends no later than January 1,
2014. The program provides
reimbursement to participating
employment-based plans for a portion of
the cost of health benefits for early
retirees and their spouses, surviving
spouses and dependents. The Secretary
will reimburse plans for certain claims
between $15,000 and $90,000 (with
those amounts being indexed for plan
years starting on or after October 1,
2011). The purpose of the
reimbursement is to make health
benefits more affordable for plan
participants and sponsors so that health
benefits are accessible to more
Americans than they would otherwise
be without this program.
DATES: Effective Date: These regulations
are effective on June 1, 2010.
Comment date: To be assured
consideration, comments must be
received at one of the addresses
provided below, no later than 5 p.m.
EST on June 4, 2010.
ADDRESSES: In commenting, please refer
to file code DHHS–9996–IFC. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed).
• Electronically. You may submit
electronic comments on this regulation
to https://www.regulations.gov. Follow
the instructions on the home page.
• By regular mail. You may mail
written comments to the following
address only: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
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DHHS–9996–IFC, P.O. Box 8014,
Baltimore, MD 21244–8014.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
• By express or overnight mail. You
may send written comments to the
following address only: Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, Attention: DHHS–9996–IFC,
Mail Stop C4–26–05, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
• By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments before the close
of the comment period to either of the
following addresses:
a. For delivery in Washington, DC—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Room 445–G, Hubert
H. Humphrey Building, 200
Independence Avenue, SW.,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not
readily available to persons without
Federal government identification,
commenters are encouraged to leave
their comments in the CMS drop slots
located in the main lobby of the
building. A stamp-in clock is available
for persons wishing to retain a proof of
filing by stamping in and retaining an
extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call telephone number (410) 786–
9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
Submission of comments on
paperwork requirements. You may
submit comments on this document’s
paperwork requirements by following
the instructions at the end of the
‘‘Collection of Information
Requirements’’ section in this document.
For information on viewing public
comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
James Slade, (410) 786–1073, for
information regarding the Purpose and
Basis, Requirements for Eligible
Employment-Based Plans, Use of
Reimbursement Amounts, Appeals, and
Disclosure of Data Inaccuracies.
David Mlawsky, (410) 786–6851, for
information regarding the Definitions,
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Reinsurance Amounts, Reimbursement
Methods, Including Provision of
Necessary Information, and Change of
Ownership Requirements.
SUPPLEMENTARY INFORMATION: Inspection
of Public Comments. All comments
received before the close of the
comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all electronic
comments received before the close of
the comment period on the following
public Web site as soon as possible after
they have been received: https://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will be
available for public inspection as they
are received, generally beginning
approximately 3 weeks after publication
of a document, at Room 445–G,
Department of Health and Human
Services, Hubert H. Humphrey Building,
200 Independence Avenue, SW.,
Washington, DC 20201, Monday
through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an
appointment to view public comments,
call 1–800–743–3951.
I. Background
A. Overview of the Early Retiree
Reinsurance Program Enacted as Part of
the Patient Protection and Affordable
Care Act
On March 21, 2010, the Congress
passed the Patient Protection and
Affordable Care Act (the Affordable Care
Act) (Pub. L. 111–148), which was
signed into law on March 23, 2010.
Included in this health insurance reform
law is a provision that establishes the
temporary Early Retiree Reinsurance
Program. This provision addresses the
recent erosion in the number of
employers providing health coverage to
early retirees. People in the early retiree
age group often face difficulties
obtaining insurance in the individual
market because of advanced age or
chronic conditions that make coverage
unaffordable and inaccessible. The Early
Retiree Reinsurance Program provides
needed financial help for employerbased plans to continue to provide
valuable coverage to plan participants,
and provides financial relief to plan
participants.
The Early Retiree Reinsurance
Program provides reimbursement to
participating sponsors for a portion of
the costs of providing health coverage to
early retirees (and eligible spouses,
surviving spouses, and dependents of
such retirees). Section 1102(a)(2)(B) of
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the Affordable Care Act defines
‘‘employment-based plan’’ to include a
group benefits plan providing health
benefits that is maintained by private
employers, State or local governments,
employee organizations, voluntary
employees’ beneficiary association, a
committee or board of individuals
appointed to administer such plan, or a
multiemployer plan (as defined by
Employee Retirement Income Security
Act or ERISA). Section 1102 does not
differentiate between health benefits
provided by self-funded plans or
through the purchase of insurance.
Section 1102(a)(1) requires the
Secretary of HHS (the Secretary) to
establish the program within 90 days of
enactment of the law, which is June 21,
2010. We expect this program to be
established by June 1, 2010. By law, the
program will expire on January 1, 2014.
Funding for the program is limited to $5
billion.
II. Provisions of the Interim Final Rule
This regulation establishes 45 CFR
part 149, ‘‘Requirements for the Early
Retiree Reinsurance Program.’’ This part
implements section 1102 of the
Affordable Care Act, which requires the
Secretary to provide reimbursement to
sponsors with certified plans for a
portion of the cost of health benefits for
early retirees and their spouses,
surviving spouses and dependents,
provided funds remain available. In part
149, we established new subparts A
through H. These new subparts set forth
the framework for implementing the
Early Retiree Reinsurance Program
effective June 1, 2010 through January 1,
2014. We are implementing the
statutory requirements of the program as
follows:
A. General Provisions (Subpart A)
1. Purpose and Basis (§ 149.1)
In this section, we provide the
statutory authority for promulgating the
regulation.
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2. Definitions (§ 149.2)
Section 1102(a) of the Affordable Care
Act (also referred to as the ‘‘statute’’)
provides definitions for three specific
terms. One of these terms is the term
‘‘employment-based plan’’, which the
statute defines as a ‘‘group benefits plan
providing health benefits’’ that satisfies
certain conditions. The statute at section
1102(a)(1) also specifies that under the
program, the Secretary shall provide
reimbursement to participating
employment-based plans. However, a
plan typically constitutes merely an
arrangement to provide benefits, as
opposed to a discrete entity to which
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payments can be directly made or sent.
Thus, the regulation interprets this
provision to require reimbursement
under the program to a ‘‘sponsor,’’ and
defines sponsor as that term is defined
in regulations promulgated for the
Retiree Drug Subsidy (RDS) Program at
42 CFR 423.882. That definition defines
sponsor as a plan sponsor as defined in
section 3(16)(B) of ERISA, 29 U.S.C.
1002(16)(B), except that, in the case of
a plan maintained jointly by one
employer and an employee organization
and for which the employer is the
primary source of financing, the term
means the employer. By defining the
term sponsor in the regulation, and by
specifying that sponsors are the entities
that apply for and get reimbursed under
the program, we believe we are
achieving two important objectives: (1)
We are ensuring that program
reimbursements can be made to actual
existing entities, and (2) We are
promoting consistency with the RDS
Program. This second objective is
critical, as we believe that many of the
entities that will apply for the Early
Retiree Reinsurance Program are entities
that participate in the RDS Program, as
these two programs have many
similarities. Thus, the common use of
terms across the two programs will
minimize confusion, and we believe
will help to maximize program
participation.
Although we drafted the regulation to
specify that a sponsor is the entity that
would be directly paid under the
program, there is still a need to use the
term ‘‘employment-based plan’’ in the
regulation. This is because the statute
envisions that the entity receiving
reimbursement have a benefits
arrangement (that is, a plan) in place
that satisfies certain criteria (for
example, implements programs and
procedures to generate cost-savings with
respect to participants with chronic and
high-cost conditions.) The statute
provides a definition of ‘‘employmentbased plan’’ as constituting a ‘‘group
benefits plan’’ that has certain
characteristics. Those characteristics
(for example, must be maintained by
one or more employers, can include a
multiemployer plan as defined in
section 3(37) of ERISA) borrow
components of the ERISA definition of
a ‘‘group health plan’’. For that reason,
we define ‘‘employment-based plan’’ as
meaning a ‘‘group health plan’’ as
defined in the RDS regulations at 42
CFR 423.882 that provides health
benefits to early retirees, but excludes
Federal governmental plans. (Unlike the
RDS statutory provisions, the Early
Retiree Reinsurance Program’s statutory
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provisions do not expressly include
Federal plans). The RDS regulatory
definition of ‘‘group health plan’’ largely
tracks the ERISA definition. For reasons
previously stated, we believe it is
beneficial to use the same or similar
terminology, and have the same or
similar requirements for the RDS
Program and the Early Retiree
Reinsurance Program, when
appropriate. Because the RDS program
requires a sponsor to have a benefits
arrangement that constitutes a group
health plan, we believe the benefits
arrangement must be in place for
purposes of the Early Retiree
Reinsurance Program (that is, an
employment-based plan), should also be
a group health plan (that is, an
employment-based plan, defined
generally as group health plan).
Generally, the regulation uses the term
‘‘sponsor’’ when referring to the entity
that applies for and receives
reimbursement under the program, and
uses the term ‘‘employment-based plan’’
when discussing the health benefits
arrangement the sponsor must offer.
In addition to introducing the
definition of ‘‘sponsor’’, the regulation
also defines other terms that are not
defined in the statute, including the
term ‘‘authorized representative.’’ We
define this term to mean an individual
with legal authority to sign and bind a
sponsor to the terms of a contract or
agreement. This term is important in the
regulatory provision relating to the
program application and the plan
sponsor agreement. The regulation
requires an authorized representative to
sign a plan sponsor agreement as part of
the program application.
We use the term ‘‘benefit option’’ in
the regulation when discussing the fact
that there is only one cost threshold and
cost limit per early retiree per plan,
regardless of how many benefit options
within that plan the early retiree is
enrolled in, in a given plan year. We
define ‘‘benefit option’’ as a particular
benefit design, category of benefits, or
cost-sharing arrangement offered within
an employment-based plan.
The statute at section 1102(b) requires
that an employment-based plan be
certified by the Secretary, and submit an
application for the program, before the
plan can participate in the program. As
stated above, under this regulation, the
entity that participates in (that is,
applies for) the program, is the plan
sponsor. We will not approve an
application unless the sponsor, and the
employment-based plan, meet their
respective requirements under the
statute and the regulation. Therefore, we
define the term ‘‘certified’’ as meaning
that the sponsor and its employment-
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based plan or plans meet the
requirements of this part and the
sponsor’s application to participate in
the program has been approved by the
Secretary. All elements of this
requirement must be satisfied before a
sponsor can participate in the program.
The statute at section 1102(b)(2)
requires employment-based plans to
have programs and procedures in place
to generate cost savings for participants
with chronic and high-cost conditions.
We define the term ‘‘chronic and highcost condition’’ to mean a condition for
which $15,000 or more in health benefit
claims are likely to be incurred during
a plan year by any one participant.
Sponsors participating in this program
are likely to be sponsors that have
offered the applicable plan in previous
years. Sponsors, therefore, will
recognize which conditions are likely to
result in $15,000 in claims in a plan
year for one participant. While we
expect that the employment-based plans
will have programs and procedures in
place that have generated or have the
potential to generate savings for
participants with these conditions,
which may vary across plans,
geographic regions and due to other
factors, we do not expect plans to have
programs and procedures in place for all
conditions for which claims are likely to
exceed $15,000 in a plan year for a plan
participant. To require that plans have
programs and procedures in place to
address all chronic and high-cost
conditions could exclude many
sponsors from participating in the
program and could be overly restrictive.
We expect sponsors to take a reasonable
approach when identifying such
conditions and selecting programs and
procedures to lower the cost of care, as
well as improve the quality of care, for
such conditions.
We define ‘‘claim’’ or ‘‘medical claim’’
in order to lay out in more detail what
is required on the claim to be
reimbursed under this program, and to
note that the terms ‘‘claim’’ or ‘‘medical
claim’’ include medical, surgical,
hospital, prescription drug and other
types of claims as determined by the
Secretary. The statute at section
1102(a)(2)(A) defines ‘‘health benefits’’
as medical, surgical, hospital,
prescription drug, and such other
benefits as shall be determined by the
Secretary whether self-funded, or
delivered through the purchase of
insurance or otherwise. The regulatory
definition of ‘‘health benefit’’ clarifies
that such benefits include benefits for
the diagnosis, cure, mitigation, or
prevention of physical or mental disease
or condition with respect to any
structure or function of the body. (As
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discussed below, health benefits do not
include benefits specified at 45 CFR
146.145(c)(2) through (4)). Therefore,
per the Secretary’s authority to
determine benefits for which claims
may be submitted, the terms ‘‘claim’’ or
‘‘medical claim’’ include claims for the
benefits set out in the definition of
‘‘health benefit.’’ This list of benefits, for
which the Secretary has the authority to
determine are appropriate under the
program, is not exhaustive.
The statute at section 1102(a)(2)(C)
defines ‘‘early retirees’’ as individuals
who are age 55 and older but are not
eligible for coverage under Medicare,
and who are not active employees of an
employer maintaining, or currently
contributing to, the employment-based
plan or of any employer that has made
substantial contributions to fund such
plan. We have incorporated this
definition into the regulation, and we
clarified that spouses, surviving
spouses, and dependents are also
included in the definition of early
retiree. This definition accommodates
the language in section 1102(a)(1) of the
statute, which states that reimbursement
under the program is made to cover a
portion of the costs of providing health
coverage to early retirees and to the
eligible spouses, surviving spouses, and
dependents of such retirees. This
definition accommodates the language
in section 1102(a)(1) in such a way that
reimbursement can be made under the
program for the health benefit costs of
eligible spouses, surviving spouses, and
dependents of such retirees, even if they
are under the age of 55, and/or are
eligible for Medicare. We believe the
statute can reasonably be interpreted to
provide reimbursement for the health
benefit costs of such individuals. This
interpretation will provide additional
assistance to sponsors, which will
encourage them to continue to offer
coverage to the spouses, surviving
spouses, and dependents of early
retirees.
The regulatory definition of early
retiree also clarifies that the
determination of whether an individual
is not an active employee is made by the
sponsor in accordance with the rules of
its plan. However, an individual is
presumed to be an active employee if,
under the Medicare Secondary Payer
(MSP) rules in 42 CFR 411.104 and
related Centers for Medicare & Medicaid
Services’ (CMS) guidance, the person is
considered to be receiving coverage by
reason of current employment status.
The presumption would apply whether
or not the MSP rules actually apply to
the sponsor. We also clarify that a
sponsor may treat a person receiving
coverage under its employment-based
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plan as a dependent in accordance with
the rules of its plan, regardless of
whether that person constitutes a
dependent for Federal or state tax
purposes. These two clarifications are
also found in the RDS regulation in the
definition of ‘‘qualifying covered
retiree,’’ under which, as that term
implies, an individual must be a retiree.
As previously stated, we believe that
regulatory terminology and concepts
should be the same or similar between
the RDS Program and the Early Retiree
Reinsurance Program when appropriate,
and we believe it is appropriate when
determining whether an individual is a
retiree under each program. Finally, in
the regulatory definition of ‘‘early
retiree,’’ we also clarify that for purposes
of this definition, the phrase ‘‘an
employer maintaining or currently
contributing to the employment-based
plan or any employer that has made
substantial contributions to fund such
plan,’’ which is also found in the
statutory definition of ‘‘early retiree,’’
means a plan sponsor. Under ERISA
(and the RDS Program regulation), a
plan sponsor is an entity (such as an
employer) that establishes or maintains
a group health plan. Thus, because this
part of the statutory definition of early
retiree in the Affordable Care Act speaks
to the relationship between the sponsor
(for example, the employer) and the
employment-based plan, we believe this
clarification is appropriate.
Section 149.610 of this regulation
permits the Secretary to reopen and
revise a reimbursement determination
upon the Secretary’s own motion or
upon the request of a sponsor within 1
year of the reimbursement
determination for any reason, within 4
years of the reimbursement
determination for good cause, or at any
time in instances of fraud or similar
fault. These three standards are the
same regulatory standards that apply
with respect to CMS’ ability to reopen
or revise an initial or reconsidered
determination under the RDS Program,
at 42 CFR 423.890(d). The RDS
regulatory provision provides examples
of what constitutes ‘‘good cause,’’ and
again, because of the similarity between
that program and the Early Retiree
Reinsurance Program, we believe those
examples would be appropriate for the
latter. Therefore, similar to the RDS
regulation, this regulation provides the
following examples of good cause: (1)
New and material evidence exists that
was not readily available at the time the
reimbursement determination was
made, (2) A clerical error in the
computation of the reimbursement
determination was made, or (3) The
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evidence that was considered in making
the reimbursement determination
clearly shows on its face that an error
was made. For example, if a sponsor
receives a post-point-of-sale price
concession that was not known at the
time a reimbursement determination
was made, good cause may be found
and the reimbursement determination
may be reopened and revised.
The statute at section 1102(a)(2)(A)
defines ‘‘health benefits’’ as medical,
surgical, hospital, prescription drug,
and such other benefits as shall be
determined by the Secretary, whether
self-funded, or delivered through the
purchase of insurance or otherwise. We
clarify in the regulatory definition that
such benefits include benefits for the
diagnosis, cure, mitigation, or
prevention of physical or mental disease
or condition with respect to any
structure or function of the body. This
is not an exhaustive list. We also specify
that health benefits do not include
certain benefits designated as excepted
benefits under the regulations
implementing the health insurance
portability provisions of the Health
Insurance Portability and
Accountability Act (HIPAA). Those
provisions impose certain requirements
on group health plans and group health
insurance issuers, but do not apply
those requirements to certain
arrangements that typically are not part
of a major medical plan (that is,
excepted benefits). For example, longterm care benefits are excepted benefits.
In the context of the Early Retiree
Reinsurance Program, we do not believe
it would be appropriate to consider
health benefits as including benefits
provided under such arrangements, as
we believe the best read of the statutory
phrase ‘‘medical, surgical, hospital,
[and] prescription drug’’ means such
major medical benefits.
In order to aid stakeholders in
understanding when the Secretary will
make reimbursement to a sponsor, we
define the term ‘‘incurred’’ to mean the
point in time when the sponsor, health
insurance issuer, group health plan or
plan participant, or a combination of
these or similar stakeholders, become
responsible for payment of the claim. In
short, the Secretary will not pay a
sponsor until a claim has been incurred
and paid, as the statute at section
1102(c)(1)(B) specifies that claims ‘‘shall
be based on the actual amount
expended.’’
We define a ‘‘negotiated price
concession’’ as any direct or indirect
remuneration that would serve to
decrease the costs incurred under the
employment-based plan. We set out
examples of what negotiated price
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concessions are, which include
discounts, rebates, coupons, and goods
in kind. The list at § 149.2,
‘‘Definitions,’’ describing what may
constitute a negotiated price concession
is not an exhaustive list.
Because the statute does not use the
terms ‘‘early retiree’’ and ‘‘plan
participant’’ interchangeably, we define
the term ‘‘plan participant’’ to include all
enrollees in a plan, including an early
and other retiree, an early and other
retiree’s spouse, surviving spouse, and
dependent, and an active employee and
an active employee’s spouse and
dependent.
The statute at section 1102(c)(1)(B)
specifies that claims submitted under
the program ‘‘shall be based on the
actual amount expended by the
participating employment-based plan
involved within the plan year’’ for the
health benefits provided to early retirees
and eligible spouses, surviving spouses,
and dependents. This regulation
includes a definition of plan year, and
defines plan year as the year that is
designated as the plan year in the plan
document of an employment-based
plan, except that if the plan document
does not designate a plan year, if the
plan year is not a 12-month plan year,
or if there is no plan document, the plan
year is: (1) The deductible or limit year
used under the plan, (2) the policy year,
if the plan does not impose deductibles
or limits on a 12-month basis: (3) the
sponsor’s taxable year, if the plan does
not impose deductibles or limits on a
12-month basis, and either the plan is
not insured or the insurance policy is
not renewed on a 12-month basis, or (4)
the calendar year, in any other case. We
define this term in such a way to give
deference to the plan year the sponsor
has already established for other
purposes. However, we balance that
deference with our belief that the intent
of the statute is to calculate
reimbursement amounts, and to apply
the cost threshold and cost limit, to
periods of time that are 12 months in
duration. We believe most sponsors’
plan years are in fact 12 months in
duration.
The term ‘‘post point-of-sale
negotiated price concession’’ is defined
because not all negotiated price
concessions occur at or before the point
of sale. The statute requires negotiated
price concessions to be excluded from
the calculation of reimbursement, which
causes reimbursement to be based on
the actual amounts paid, not an inflated
amount that may not reflect a price
concession. When post point-of-sale
negotiated price concessions occur they
may cause data submitted for
reimbursement to become inaccurate,
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resulting in ultimately, an inaccurate
reimbursement. Once these price
concessions are accounted for, a
sponsor’s reimbursement determination
may be reopened and revised.
For purposes of brevity, we defined
the term ‘‘program’’ to mean the Early
Retiree Reinsurance Program.
We define the term ‘‘Secretary’’ to
mean the Secretary of the Department of
Health & Human Services or the
Secretary’s designee. We include the
Secretary’s designee in the definition
because the Secretary will not actually
be performing the tasks set out in this
regulation, but will designate an
individual or entity to act on the
Secretary’s behalf.
The term ‘‘sponsor agreement’’ is
based on the definition of the term in
the RDS regulation. The sponsor
agreement is basically used to ensure
that the sponsor and Department are
bound to comply with the details of the
program that appear in the regulation
and in other guidance, and to address
any other points that must be addressed
in order to implement this program.
B. Requirements for Eligible
Employment-Based Plans (Subpart B)
1. General Requirement (§ 149.30)
In this section, we provide the
requirements that allow a sponsor to be
eligible to participate in the Early
Retiree Reinsurance Program.
2. Requirements to Participate (§ 149.35)
Section 1102(b)(2)(A) of the
Affordable Care Act requires that an
employment-based plan implement
programs and procedures to generate
cost-savings with respect to participants
with chronic and high-cost conditions.
We interpret this to mean that a plan
must have in place programs and
procedures that have generated or have
the potential to generate cost-savings for
these participants in order to participate
in the Early Retiree Reinsurance
Program, not necessarily that the
sponsor has to ensure that new
programs and procedures are put in
place just to participate in this program.
Proper management and treatment of
chronic and high-cost conditions may
be promoted by generating cost-savings
for plan participants with these
conditions because plan participants
may be more apt to seek out proper and
timely treatment and management
before a condition becomes critical if
treatment and management are
financially manageable. As an example
of a program and procedure to generate
cost savings for a participant with a
chronic condition, a sponsor may
determine that diabetes, if not managed
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properly, is likely to lead to claims in
excess of $15,000 for a plan year for one
plan participant. The sponsor may
ensure implementation of a diabetes
management program that includes
aggressive monitoring and behavioral
counseling to prevent complications
and unnecessary hospitalization. With
respect to generating cost savings for a
high-cost condition, a sponsor may
determine that cancer is a high-cost
condition for which it should generate
cost savings. The sponsor may ensure
that its plan covers all or a large portion
of the participant’s coinsurances or
copayments, and/or it could eliminate
or reduce the plan’s deductible for
treatment and visits related to the
condition. Sponsors may choose other
chronic and high-cost conditions to
address, but upon audit the sponsor
must be able to demonstrate that its
programs and procedures have
generated or had the potential to
generate cost savings, consistent with
the representations the sponsor made in
its program application.
We considered various options of how
best to implement this provision and
developed several options. The first
option was to further identify which
specific conditions meet the chronic
condition definition and which specific
conditions meet the high-cost condition
definition and identify these specific
conditions in sub-regulatory guidance to
be issued at the time of, or immediately
after, the issuance of this regulation.
Issues that arose with this option
consisted of:
(1) How best to define the terms
‘‘chronic and high-cost conditions’’,
which would likely involve a significant
amount of data analysis. Chronic and
high-cost conditions can vary
significantly across geographic regions,
age ranges, and due to other factors. We
do not think that specifying the chronic
and high-cost conditions to be
addressed could effectively occur
within the 90 days allowed for
establishment of this program; and
(2) Our belief that the Congress
intends this to be an inclusive program,
not a program that excludes potential
sponsors merely because they did not
develop programs to address the
specific conditions we might identify in
our guidance. Had the Congress
narrowly defined the types of plans for
which sponsors might be reimbursed,
we might have thought that this
program is not an inclusive program.
Instead Congress defined the term
‘‘employment-based plan’’ broadly in the
statute at section 1102 (a)(2)(B). It
defines the term as a ‘‘group benefits
plan providing health benefits’’ as a plan
that ‘‘is * * * maintained by one or
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more current or former employers
(including without limitation any State
or local government or political
subdivision thereof), employee
organization, a voluntary employees’
beneficiary association, or a committee
or board of individuals appointed to
administer such plan; or * * * a
multiemployer plan * * * ’’ Therefore
the scope of sponsors eligible to receive
this reimbursement is extremely broad,
which shows intent on behalf of
Congress to be inclusive.
The inclusive nature of the program is
particularly important because this
program will involve plans with plan
years that began before the effective date
of the program, as will be discussed
below. This means that a plan may not
have a program in place to address
certain chronic and high-cost conditions
that we may have identified after the
plan year has started, which would then
exclude the sponsor from participation
in the program. In such cases, sponsors
would, in effect, be penalized if we
identified specific conditions. As stated
above, chronic and high-cost conditions
can vary significantly across geographic
regions, age ranges, and due to other
factors, so we expect that sponsors
might focus cost-saving programs and
procedures on conditions that effect
enrollees in their plan or plans. Our
intent is that the regulation takes into
account these differences.
The approach we decided to take was
to define the term ‘‘chronic and highcost condition’’ as specified in § 149.2—
Definitions. ‘‘Chronic and high-cost
condition’’ means a condition for which
$15,000 or more in applicable claims are
likely to be incurred during a plan year
by one participant. Therefore, a sponsor
must have programs and procedures in
place that generate or have the potential
to generate cost savings for plan
participants with conditions that are
likely to generate $15,000 in claims for
a plan year, in order to participate in
this program. We do not require that a
sponsor have programs and procedures
in place to address all conditions that
may result in claims exceeding $15,000
for one participant in a plan year. The
sponsor must take a reasonable
approach to identifying which
conditions it must address. We believe
this is a reasonable interpretation of the
statute because it will promote cost
savings for participants with chronic
and high-cost conditions, but due to the
approaches’ flexibility (that is, the fact
that sponsors may choose programs and
procedures that meet this requirement
that are applicable to their enrollees)
will serve to allow as many of the types
of sponsors referenced in the definition
of ‘‘employment-based plan’’ as possible
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to become certified to participate in the
program. Of course, this requirement
does not supersede requirements in
other Federal laws that may apply to
programs and procedures for chronic
and high-cost conditions, such as the
Americans with Disabilities Act.
In order to administer this program
and to audit the program as required by
section 1102(d), we are requiring the
sponsor to make records available for
these purposes. For example, when a
sponsor is audited, the auditors may
request a copy of the sponsor’s (or the
sponsor’s health insurance issuer or
group health plan’s, as applicable)
policies and procedures to detect fraud,
waste and abuse, and data to
substantiate the effectiveness of the
policies and procedures. Under this
provision, the sponsor is required to
ensure that the applicable policies and
procedures are produced.
We also require that the sponsor have
a written agreement with its health
insurance issuer (as defined in 45 CFR
160.103) or employment-based plan (as
defined in 45 CFR 149.2), as applicable,
requiring the health insurance issuer or
employment-based plan to disclose
information on behalf of the sponsor to
the Secretary. This requirement in part
exists to accommodate the HIPAA
Privacy Rule at 45 CFR part 160 and
subparts A and E of part 164 (‘‘Privacy
Rule’’). This rule applies to ‘‘covered
entities,’’ which include group health
plans (that is, employment-based plans)
and health insurance issuers, as defined
in 45 CFR 160.103. Third party
administrators would be business
associates, as defined in 45 CFR
160.103, of group health plans.
Sponsors would not become covered
entities by sponsoring a plan. Sponsors
typically do not perform administrative
activities for their group health plans
and therefore do not have access to the
claims information or similar protected
health information (PHI) we require in
this regulation to support program
reimbursement. Much of the data that
we would need to support program
reimbursements, as outlined above,
would be PHI held by group health
plans, health insurance issuers, or third
party administrators on behalf of group
health plans. The requirement for health
insurance issuers and employmentbased plans to disclose information to
the Secretary encompasses information
created or held by Business Associates
on behalf of the health insurance issuer
or group health plan.
We believe that we have the authority
to require the disclosure of the PHI in
accordance with section 1102(c)(1)(A),
which states that a participating plan
‘‘shall submit claims for reimbursement
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to the Secretary which shall contain
documentation of the actual costs of the
items and services for which each claim
is being submitted.’’ Additionally,
section 1102(d) requires the Secretary to
conduct audits of claims data submitted
by, or on behalf of, sponsors
participating in the program, to ensure
that such plans are in compliance with
the statute, and this simply cannot be
done without mandating disclosure of
PHI. Thus, covered entities can comply
with the mandate (without first
obtaining specific authorization from
individuals) pursuant to ‘‘the required
by law’’ provisions of the Privacy Rule
(45 CFR 164.512(a)).
As noted above, typically group
health plans and health insurance
issuers or third party administrators
acting on behalf of group health plans,
have PHI that the Secretary requires for
the submission of claims data for
reimbursement under the program
pursuant to the regulations. In these
situations, it may be unlawful, under
the Privacy Rule, for PHI to be shared
with the sponsors. This regulation does
not authorize disclosure of PHI to
sponsors. Therefore, for purposes of this
subpart, the sponsor must have a
written agreement with the group health
plan (that is, the employment-based
plan) or health insurance issuer, as
applicable, regarding disclosure of
records, and the plan or issuer must
disclose to us, on the sponsor’s behalf,
the information, data, documents, and
records necessary for the sponsor to
comply with this program, part, and
guidance, at a time and in a manner
specified by the Secretary. Sponsors of
self-funded plans with legal access to
such data will be able to either provide
this data to us themselves or have a
group health plan or insurer provide the
data to us on their behalf.
Section 1102 (c)(6) of the Affordable
Care Act requires the Secretary to
establish procedures to protect against
fraud, waste and abuse. In order to
implement this provision, the Secretary
will, for example, check the exclusions
lists developed by the HHS’ Office of
the Inspector General and the U.S.
General Services Administration before
allowing an entity to participate, or play
a role, in the program, and will take
other steps such as verifying the
identities of the early retirees for whom
claims are being submitted. The
Secretary may also verify the identities
of the individuals associated with the
sponsor and health insurance issuer, or
group health plan, as applicable, and
will examine claims before
reimbursement is made, to ensure,
among other things, that instances of
fraud, waste and abuse are minimized.
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Furthermore, the Secretary will perform
audits per section 1102(d) of the
Affordable Care Act. To aid the
Secretary in detecting and reducing
fraud, waste and abuse, we are requiring
that sponsors ensure that there are
policies and procedures in place to
detect and reduce fraud, waste and
abuse. While the policies and
procedures may be maintained by the
sponsor’s health insurance issuer or
group health plan, the sponsor will have
to attest that these policies and
procedures are in place in the
application. The sponsor must comply
with requests from the Secretary to
produce the policies and procedures
and any documents or data to
substantiate the implementation, and
the effectiveness, of the procedures. We
believe we meet the requirements of the
statute by taking actions to detect and
reduce fraud, waste, and abuse, by
requiring sponsors to have such policies
and procedures in place, and by
requiring a sponsor to produce the
policies and procedures upon request
(such as for the purposes of an audit).
If it is found that a sponsor committed
fraud, waste or abuse, or allowed fraud,
waste, and abuse to occur under its plan
or plans, the Secretary may recoup from
the sponsor some or all of the
reimbursements paid under the
program, and/or may revoke a sponsor’s
certification to participate in the
program. Of course, there are other laws
relating to fraud, waste, and abuse, with
which sponsors and their health
insurance issuers or group health plans
must comply.
3. Application (§ 149.40)
Section 1102(b)(1)(B) requires the
sponsor to submit ‘‘an application for
participation in the program, at such
time, in such manner, and containing
such information as the Secretary shall
require.’’ In order to implement this
provision, a sponsor must submit one
application per plan, and identify the
plan year cycle for which the sponsor is
applying (that is, starting month and
day, and ending month and day; no year
is required). One application must be
filed for each plan. Filing a different
application for each plan will aid in
tracking the plan as this program
progresses to ensure proper
reimbursement and compliance with
program requirements.
In order to verify the accuracy of the
information contained in the
application, the application will have to
be signed by an authorized
representative of the applicant and the
authorized representative will have to
certify that the information contained in
the application is true and accurate to
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24455
the best of the authorized
representative’s knowledge and belief,
among other certifications. We use the
term applicant in this section to refer to
any sponsor that has filed an
application that has not yet been
certified under the program. The term
applicant is used to clarify that the
applicant is not entitled to the privileges
of a certified sponsor, such as the ability
to submit a reimbursement request or
appeal a reimbursement determination.
Before a sponsor may submit claims and
make a reimbursement request, the
sponsor’s application must be approved
by the Secretary. Applications will be
processed in the order in which they are
received. Because funding for this
program is limited, we expect more
requests for reimbursement than there
are funds to pay the requests. Therefore
we expect an applicant to perform its
due diligence when applying, which
should result in the submission of a
complete application upon the first
submission. Because it is important that
applicants submit complete applications
the first time, we will be providing
assistance. If an application is
incomplete, it will be denied and the
applicant will have to submit a new
application, which will be processed
based on when the new application is
received. If we were to allow an
applicant to cure defects in the
application, it would likely result in an
extended application process, which
would hinder the efficient
implementation of this program. We
must be prepared to exercise our
authority under section 1102(f) to stop
accepting applications based on the
availability of the $5 billion
appropriated for the program. It is
therefore of paramount importance to
applicants that they submit complete
applications upon their first submission,
otherwise there may not be an
opportunity to submit a new and
complete application.
An application for a given plan does
not have to be submitted each year. To
require a separate application for a plan
each year would only complicate the
process and would place unneeded
burden on applicants and the Secretary.
The application will request the plan
year cycles (that is, the start month and
day and the end month and day; no year
required), which for our purposes will
provide the information we need to
calculate reimbursement based on
reimbursement requests. We do not
think that an annual application
approval is required. Once a plan is
certified, the application approved, and
the sponsor continues to meet the
requirements of the statute, this part,
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and applicable guidance, the plan and
sponsor will continue to be certified and
the application approved.
We set out in § 149.40 what we
believe we will need in order to approve
an application. The application must
include the applicant’s Tax
Identification Number, the applicant’s
name and address, and contact
information for the applicant. To ensure
compliance with the requirements of the
statute, an applicant must provide a
summary in its application of how it
will use the reimbursement to meet the
requirements of the program, including
how it will use the reimbursement to
reduce plan participant or sponsor
costs, or any combination of these costs,
and its plans to implement programs
and procedures to generate savings for
plan participants with chronic and highcost conditions. Because the statute
requires that the funds dispersed under
this program not be used as general
revenue, we are requiring sponsors to
maintain the level of effort in
contributing to support their applicable
plan or plans. Otherwise, sponsors
might circumvent the prohibition on
using the program funds as general
revenue by using, dollar for dollar,
sponsors’ funds not otherwise used for
health benefits due to the program
reimbursement, as general revenue. We
expect that sponsors will use the
reimbursement to pay for increases in,
for example, the sponsor’s premium, or
increases in other health benefit costs
(or to reduce plan participants’ costs).
Therefore the sponsor’s summary of
how it will use the program’s
reimbursement must also explain how
the reimbursement will be applied to
maintain the sponsor’s level of effort in
contributing to support the applicable
plan. We do not expect a sponsor to
explain every detail of their programs
and procedures and use of program
funds but to give us an idea of how it
will meet these requirements. We
understand that these submissions may
vary because applicants’ situations with
respect to their plans may vary widely.
For example, reimbursements received
in the first year that a sponsor
participates may be applied the second
year of participation because many
plans will have already been negotiated,
agreed to, and implemented upon the
effective date of this regulation. Other
sponsors may have more flexibility to
use these reimbursements immediately
to lower costs.
We will also require applicants to
project their reimbursement amounts for
the first two plan-year cycles in the
application so that we can project total
reimbursement amounts. To help us
with our funding projections, we will
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need sponsors to identify specific
projected reimbursement amounts for
each of the two plan-year cycles. This
assessment will help us determine if
and when we should stop accepting
applications due to funding limitations.
We will also require applicants to
identify all benefit options under the
employment-based plan that any early
retiree, for whom the applicant may
receive program reimbursement, may be
claimed. This is necessary for us to track
where funds are being spent and to
otherwise manage the program. We will
also require sponsors to attest that there
are fraud, waste and abuse policies and
procedures in place.
As is required in the RDS program, as
a condition of participation, the sponsor
will be required to sign a plan sponsor
agreement, which will include certain
assurances made by the sponsor.
Included in this agreement will be a
provision stating that reimbursement is
based on information and data
submitted by the sponsor and if the
information and data are found to be
inaccurate, incomplete or otherwise
incorrect, the Secretary may reopen and
revise a reimbursement determination,
including recouping reimbursement
from the sponsor. The sponsor will be
required to specifically agree to comply
with the terms and conditions for
participation in the program, and
acknowledge that information in the
application is being provided for the
purpose of obtaining federal funds. This
list of application requirements is not
exhaustive. Due to the compressed
timeline for implementing this program,
we may need to request additional
information in the application.
Finally, we allow the Secretary to
reopen a determination under which an
application had been approved or
denied so that if it is later determined
that a sponsor committed fraud or
otherwise was untruthful in the
application, the Secretary can revisit the
determination.
4. Consequences of Non-Compliance,
Fraud or Similar Fault (§ 149.41)
To clarify the actions the Secretary
may take in instances when noncompliance, fraud, waste, and abuse, or
similar fault are found, we include a
regulation that states that failure to
comply with the requirements of this
part, or if fraud, waste, and abuse, or
similar fault are found, the Secretary
may recoup or withhold funds,
terminate or deny an application, or
take any combination of these actions.
We include termination of an
application because, depending upon
the specific situation involved, if it is
found that a sponsor committed fraud or
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otherwise was untruthful in the
application, the determination to
approve an application can be revised
under § 149.40. We believe it is
important to set out what actions the
Secretary may take so that sponsors are
aware of the ramifications of noncompliance, fraud, waste and abuse, or
similar fault. This regulation does not,
of course, supersede other Federal laws
or consequences of non-compliance
fraud, waste and abuse, or similar fault.
5. Funding Limitation (§ 149.45)
Section 1102(f) authorizes the
Secretary to stop accepting applications
based on the availability of funds. We
clarify that a reimbursement request
made on behalf of a certified plan may
also be denied, in whole or in part, due
to limitation of funds. Determinations
based on funding limitations are final,
binding and cannot be appealed,
because any appeal, even if a sponsor is
successful, would not result in
reimbursement to a sponsor. Once the
program funds are exhausted there will
be no funds to reimburse a sponsor that
may have been successful upon appeal.
C. Reinsurance Amounts (Subpart C)
1. Amount of Reimbursement
(§ 149.100)
The statute at section 1102(c) requires
the Secretary, upon receipt of a valid
claim for health benefits, to make
reimbursement in an amount of 80
percent of the portion of the health
benefit costs (net of negotiated price
concessions) attributable to the claims
that exceed $15,000, but are below
$90,000. We interpret the statute to
mean that cumulative health benefits
incurred in a given plan year and paid
for a given early retiree, as defined in
§ 149.2, that fall between those amounts
will receive reimbursement, rather than
reimbursement being made only for
discrete health benefit items or services
whose reimbursement total falls
between those amounts. This
interpretation will get much needed
program funds to plan sponsors more
quickly. The statute also specifies that
in determining the amount of claims,
the costs paid by the early retiree (or his
or her spouse, surviving spouse, or
dependent) in the form of deductibles,
copayments, or coinsurance shall be
included in the amounts paid by the
participating employment-based plan.
As an initial matter, we clarify in the
regulation that reimbursement will be
made under the program only for claims
that are incurred during the applicable
plan year, and paid.
The regulation refers to the $15,000
lower limit and the $90,000 ceiling as
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the ‘‘cost threshold’’ and ‘‘cost limit’’,
respectively, and indicates that
reimbursement under the program is
calculated by first determining the costs
for health benefits net of negotiated
price concessions, within the applicable
plan year for each early retiree, and then
subtracting amounts below the cost
threshold and above the cost limit
within the applicable plan year for each
early retiree. We also clarify that for
purposes of determining the amounts
below the cost threshold and above the
cost limit for any given early retiree, all
costs for health benefits paid by the plan
or by the early retiree for all benefit
options the early retiree is enrolled in
with respect to a given certified
employment-based plan for a given plan
year, will be combined. We make this
clarification because the statute, at
section 1102(c)(3), specifies that ‘‘a
claim submitted by a participating
employment-based plan shall not be less
than $15,000 nor greater than $90,000’’
(emphasis added). For example, an early
retiree is simultaneously enrolled in two
different benefit options within one
group health plan—Option 1 as a
retiree, and Option 2 as a spouse of a
retiree. For purposes of determining
when the early retiree satisfies the cost
threshold, all claims incurred and paid
for that early retiree by both benefit
options within the applicable plan year,
will be counted. The claims for that
early retiree under each benefit option
will not be separately counted. For
purposes of determining if and when
the early enrollee has satisfied the cost
limit, the same principle applies. In
other words, within one employmentbased plan for a given plan year, there
is one threshold limit, and one cost
limit, per early retiree.
We also indicate that the
reimbursement formula specified in the
regulation applies to insured plans as
well as self-funded plans, and that with
respect to insured plans, costs for health
benefits means costs the insurer and the
early retiree pay for health benefits net
of negotiated price concessions the
insurer receives for health benefits.
Thus, for insured plans, the amount of
premium the sponsor pays (and the
amount of premium contribution the
early retiree pays) is irrelevant for
purposes of calculating reimbursement
under the program. We believe this is
the correct interpretation because
section 1102(c)(1)(A) states that claims
for reimbursement must ‘‘contain
documentation of actual costs of items
and services * * *.’’ Premiums are not
costs for items and services.
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2. Transition (§ 149.105)
The program becomes effective June
1, 2010. We carefully considered
whether to allow sponsors to participate
in the program for plan years that ended
before the program’s effective date, but
decided that such an approach would
seem inconsistent with the program’s
effective date. We also considered
whether to permit sponsors to
participate only for plan years that start
on or after the program’s effective date,
but decided that such an approach
would arbitrarily favor sponsors with
plan years that start soon after June 1,
2010. Therefore, we decided to allow
sponsors to apply for plan years that
start before June 1, 2010, provided they
end after that date (for example,
calendar year 2010 plans).1 This raised
the question of how claims incurred
during such a plan year, but before June
1, 2010, would be dealt with under the
program. Under one approach
considered, any such claims would
count toward the cost threshold, and
any such claims exceeding the
threshold, but below the cost limit,
would be eligible for program
reimbursement. We did not adopt that
approach, as it arguably would unfairly
favor sponsors with plan years that
started significantly before the
program’s effective date, especially in
light of the program’s limited funding.
We decided upon the following
approach. For claims incurred before
June 1, 2010, the amount of such claims
up to $15,000 count toward the cost
threshold and the cost limit. The
amount of claims incurred before June
1, 2010 that exceed $15,000 are not
eligible for reimbursement and do not
count toward the cost limit. The
reinsurance amount to be paid is based
solely on claims incurred on and after
June 1, 2010, and that fall between the
cost threshold and cost limit for the
plan year. As an example, for a plan
with a plan year that began July 1, 2009,
with an end date of June 30, 2010, with
an early retiree for which it has spent
$120,000 in health benefit claims before
June 1, 2010, and it then spends another
$30,000 in health benefit claims on the
early retiree between June 1, 2010 and
June 30, 2010, the sponsor would
receive credit for $15,000 in claims
incurred before June 1 and receive
reimbursement of 80 percent of the
$30,000 (for the claims incurred after
June 1, 2010), or $24,000. We believe
this is a reasonable approach because it
provides as much relief as possible as
soon as possible to sponsors, while
1 Sponsors can also apply for plan years that start
after June 1, 2010.
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24457
giving meaning to the effective date of
the program. A sponsor should therefore
not submit claims above the $15,000
cost threshold that were incurred before
June 1, 2010, for reimbursement, as
submission of such claims is outside the
scope of the regulation. Also, to submit
these claims for reimbursement will
make the reimbursement process more
complex than it needs to be.
3. Negotiated Price Concessions
(§ 149.110) and Cost Threshold and Cost
Limit (§ 149.115)
Section 1102(c)(1)(B) states that any
negotiated price concessions obtained
by an employment-based plan with
respect to a health benefit must be
reflected in claims submitted for
program reimbursement. We recognize
that sponsors and insurers sometimes
do not receive certain negotiated price
concessions until after payment is
made, and in many cases, after the plan
year during which the claim is incurred
and paid, has ended. For example, this
is typically the case with prescription
drug rebates. Thus, we specify in the
regulation that sponsors must disclose
such ‘‘post-point-of-sale’’ negotiated
price concessions, in a form and manner
to be specified by the Secretary. We
expect to specify the form and manner
of such disclosures in future guidance.
This will ensure that sponsors
ultimately submit accurate claims data,
and thus ultimately receive accurate
reimbursement.
Finally, the statute indicates that the
$15,000 and $90,000 figures shall be
adjusted each fiscal year based on the
percentage increase in the Medical Care
Component of the Consumer Price Index
for all urban consumers (rounded to the
nearest multiple of $1,000) for the year
involved. We specify in the regulations
that for plan years starting on or after
October 1, 2011, the figures will be so
adjusted.
D. Use of Reimbursements (Subpart D)
Use of Reimbursements (§ 149.200)
Section 1102(c)(4) requires that the
reimbursement ‘‘shall be used to lower
costs for the plan. Such payments may
be used to reduce premium costs for an
entity’’ receiving a reimbursement or to
reduce premium contributions, copayments, deductibles, co-insurance, or
other out-of-pocket costs for plan
participants. We encourage sponsors to
use their reimbursement under the
program for both of the following
purposes: (1) To reduce the sponsor’s
health benefit premiums or health
benefit costs, and (2) To reduce health
benefit premium contributions, copayments, deductibles, coinsurance, or
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other out-of-pocket costs, or any
combination of these costs, for plan
participants. We expect that sponsors
will continue to provide at least the
same level of contribution to support
the applicable plan, as it did before this
program. For example, for a sponsor that
pays a premium to an insurer, if the
premium increases, program funds may
be used to pay the sponsor’s share of the
premium increase from year to year,
which reduces the sponsor’s premium
costs. Section 1102(c)(4) sets forth the
requirements for use of reimbursements
under this section and envisions a role
for the Secretary in developing a
mechanism to monitor the appropriate
use of such reimbursements. Additional
information about this mechanism will
be disseminated as it is developed.
The statute does not appear to use the
terms ‘‘early retiree’’ and ‘‘plan
participants’’ interchangeably.
Therefore, we interpret this provision to
mean that a sponsor may only receive
program funds for claims of early
retirees or their spouses, surviving
spouses or dependents, but the funds
may be used to lower health benefit
costs for all participants in the plan,
including retirees, and their spouses
and dependents, and active employees
and their spouses and dependents. At
§ 149.200 (b), we clarify the statutory
prohibition on using the funds as
general revenue of the sponsor.
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E. Reimbursement Methods (Subpart E)
1. General Reimbursement Rules
(§ 149.300), Timing (§ 149.310),
Reimbursement Conditioned Upon
Available Funds (§ 149.315), Universe of
Claims That Must Be Submitted
(§ 149.320), Requirements for Eligibility
of Claims (§ 149.325), and Content of
Claims (§ 149.330)
Section 1102(c)(1) of the Affordable
Care Act states that a participating
employment-based plan shall submit
claims for reimbursement to the
Secretary which shall contain
documentation of the actual costs of the
items and services for which each claim
is being submitted. As noted above, we
define ‘‘claim’’ as documentation
specifying the health benefit provided,
the provider or supplier, the incurred
date, the individual for whom the health
benefit was provided, the date and
amount of payment net any known
negotiated price concessions, and the
employment-based plan and benefit
option under which the health benefit
was provided. The terms ‘‘claim’’ or
‘‘medical claim’’ include medical,
surgical, hospital, prescription drug and
other such claims as determined by the
Secretary. We clarify in the regulation
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that claims for benefits for the diagnosis,
cure, mitigation, or prevention of
physical or mental disease or condition
with respect to any structure or function
of the body, may be filed. This
clarification is not an exhaustive list of
claims that the Secretary may determine
are appropriate.
The regulation also specifies that
claims cannot be submitted for a given
plan year until the application that is
associated with the claim and that
references the applicable plan year cycle
has been approved. With respect to a
given early retiree, claims cannot be
submitted until the early retiree’s total
paid costs for health benefits incurred
for the plan year exceed the applicable
cost threshold. Once that threshold has
been reached, claims can be submitted,
but they must include all claims below
the applicable cost threshold for the
plan year in order to verify that the cost
threshold has been met. Claims must be
submitted based on the amounts
actually paid, which may include the
amounts paid by the early retiree. Once
the cumulative claims of an early
retiree, as defined in § 149.2, exceed
$90,000 for a plan year, a sponsor
should not submit claims above this
claims limit for that early retiree
because no reimbursement will be paid
on these claims.
2. Documentation of the Actual Cost of
Medical Claims Involved (§ 149.335),
Rule for Insured Plans (§ 149.340), and
Use of Information Provided (§ 149.345)
All claims submissions must include
a list of early retirees for whom claims
are being submitted. Both the
documentation of actual costs of claims
and the list of early retirees must be
submitted in a form and manner to be
specified by the Secretary. Claims
submissions will be processed on a firstin, first-out basis until program funding
is expended.
We also specify that with respect to
insured plans, the claims and the list of
early retirees can be submitted directly
to the Secretary by the insurer.
In order for a sponsor to receive credit
for the cost-sharing amounts paid by the
early retiree or the early retiree’s spouse,
surviving spouse or dependent, the
sponsor must provide prima facie
evidence that the early retiree or the
early retiree’s spouse, surviving spouse
or dependent, paid his or her portion of
the costs. Such evidence may include an
actual payment receipt. If a sponsor
cannot provide prima facie evidence, it
may receive credit under the program
only for the portion of the claim the
sponsor actually paid.
There may be instances when a
sponsor contracts with, for example, a
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staff-model health maintenance
organization, that either has its own
provider(s) on-staff or pays providers a
capitated payment to care for plan
participants. In these instances, claims
might not ordinarily be produced.
However, in order for the Secretary to
calculate reimbursement under this
program for such sponsors, the sponsor
will be required to ensure that the
insurer submit the information required
in a claim as specified in § 149.330 and
§ 149. 335. The information submitted
by the insurer must be reasonable in
light of the specific market that the
insurer is serving.
3. Maintenance of Records (§ 149.350)
The regulations also specify how the
Secretary may use the information
collected for purposes of the program,
and the records maintenance
requirements that apply to the sponsor.
The specified records must be
maintained for 6 years after the
expiration of the plan year in which the
costs were incurred, or longer if
otherwise required by law. The sponsor
must require its health insurance issuer
or employment-based health plan, as
applicable, to maintain and produce
upon request records to satisfy the
maintenance of records requirements.
F. Appeals (Subpart F)
1. Appeals (§ 149.500)
Section 1102(c)(6) of the Affordable
Care Act requires the Secretary to
establish an appeals process to permit
sponsors to appeal a determination
made by the Secretary with respect to
claims submitted under the program.
Due to the limited funding and
temporary nature of the program, we
have established a one-step appeal
process. A sponsor may appeal directly
to the Secretary within 15 calendar days
of receipt of the determination at issue.
Section 149.500 sets out what we
consider to be an adverse
reimbursement determination, which is
a determination relating to the amount
of reimbursement paid under the
program.
2. Content of Request for Appeal
(§ 149.510)
The request for appeal must specify
the findings or issues with which the
sponsor disagrees and the reasons for
the disagreements. The request for
appeal may include supporting
documentary evidence the sponsor
wishes the Secretary to consider.
Essentially the sponsor must provide
the Secretary with its issues and
arguments and any supporting
documentation that it has to support its
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arguments. The Secretary may accept
subsequent supporting documentation
if, for example, the sponsor did not have
time during the 15-day window to
perform a comprehensive data analysis
of the issue. It would be helpful in the
request for appeal if the sponsor notes
that further information will be
provided to support the request for
appeal and a date by which the
information will be received by the
Secretary.
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3. Review of Appeals (§ 149.520)
The regulation sets out generally the
process the Secretary will use when
reviewing the appeal and clarifies that
the Secretary’s decision will be final
and binding, unless fraud or similar
fault are involved. The Secretary will
not accept oral argument or oral
testimony, either in person or on the
telephone.
If all or part of a reimbursement
request is denied based on the
unavailability of funds, the sponsor may
not appeal because an appeal would
serve no purpose. If funds are
exhausted, there will be no funds to
reimburse a sponsor if it is found that
the sponsor should otherwise be eligible
for reimbursement. Allowing an appeal
when funds are exhausted only serves to
add burden to sponsors that have
received an adverse determination,
because, if we allow such an appeal, an
aggrieved sponsor may feel that it must
appeal in order to exhaust its remedies
and to protect its interests. Once the
funds for the program are exhausted,
there is no interest for the sponsor to
protect because there will be no chance
of reimbursement, even upon a
successful appeal. It will also serve to
increase the Secretary’s burden because
the Secretary will have to process and
respond to each of these appeals, when
there would be no possibility of a
reimbursement adjustment in favor of
the sponsor.
The Secretary will inform the sponsor
and the applicable HHS designee of the
Secretary’s decision. Because time is of
the essence with respect to funding, we
do not specify how the Secretary will
inform these stakeholders of the
decision because it may be in writing,
via electronic means or orally. The
response process will be further
reviewed to ensure that stakeholders
receive appropriate notice of a decision.
Of course, we do specify that if the
sponsor requests a written response, the
Secretary will provide a written
response.
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G. Disclosure of Data Inaccuracies
(Subpart G)
1. Sponsor’s Duty To Report Data
Inaccuracies (§ 149.600)
Claims submitted for reimbursement
may change after the 15-day appealrequest period has expired. For
example, if a provider reverses a claim
after the appeal-request period has
expired, data would need to be updated
to reflect the reversal. However, in order
to make accurate reimbursements
(reopen and revise reimbursement
determinations that have already been
made), sponsors are required to submit
accurate data for reimbursement
purposes. We understand that claims
may be reversed or otherwise altered
and that data that was accurate when
submitted for reimbursement under the
program may become inaccurate.
Furthermore, reimbursement under this
program is based on claims that are net
of negotiated price concessions. Because
negotiated price concessions include
post-point-of-sale price concessions,
data submitted for reimbursement may
become inaccurate once the price
concessions are finalized for a given
plan year.
We do not believe it is necessary to
require a sponsor to submit a formal
appeal under § 149.500 to the Secretary
merely because data changes due to the
natural course of business. Also, we
realize that certain changes in data due
to the normal course of business might
not become evident to a sponsor within
15 days after a reimbursement
determination. Therefore, we are
establishing a process that will give
sponsors the ability to update us on any
data inaccuracies and will allow us to
reopen and revise a reimbursement
determination as necessary, based on
the updated data. We believe this would
be the most efficient way to administer
this program, particularly because of the
limited nature of the program funds and
the uncertain length of time that an
appeal to the Secretary may involve.
2. Secretary’s Authority To Reopen and
Revise Reimbursement Determination
Amounts (§ 149.610)
While the details of this process will
be developed in sub-regulatory
guidance, we state that the Secretary
may reopen and revise a reimbursement
determination upon its own motion or
upon the request of a sponsor, within 1
year of a reimbursement determination,
for any reason, within 4 years of a
reimbursement determination for good
cause, or at any time in instances fraud
or similar fault. We define the term
‘‘good cause’’ in § 149.2, and discuss in
the regulation what we believe is not
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good cause for revising the
reimbursement. This regulation tracks
the language in the RDS and Part D
reconciliation reopening regulations at
§ 423.890 and § 423.346, respectively.
We specify in this section that the
Secretary may reopen and revise a
reimbursement determination on the
Secretary’s own motion. If the Secretary
becomes aware that a reimbursement
determination was made based upon
inaccurate data, this will allow the
Secretary to reopen and revise the
reimbursement determination without
the sponsor having to make a request.
Reimbursement determinations may be
reopened and revised to pay out more
funds to a sponsor assuming such funds
exist or to recoup funds that were
already paid, or to withhold funds from
a future reimbursement to offset a
sponsor’s liability.
H. Change of Ownership Requirements
(Subpart H)
1. Change of Ownership Requirements
(§ 149.700)
We include in this regulation
requirements for a sponsor to provide
the Secretary with advance notice of any
change of ownership of the sponsor.
Complying with this requirement is
critically important, as it helps to ensure
that program reimbursement is being
made only to legitimate entities, and
only to such entities that are actually
complying with the requirements of the
program. The requirements mirror the
change of ownership requirements that
are found in the RDS regulation, which
we believe are appropriate for the Early
Retiree Reinsurance Program, in light of
the fact that we expect many sponsors
to participate in both programs.
Complying with the change of
ownership requirements is especially
critical with respect to the Early Retiree
Reinsurance Program, in light of the
program’s limited funding.
The regulations define a change of
ownership as any of the following:
(1) The removal, addition, or
substitution of a partner, unless the
partners expressly agree otherwise as
permitted by applicable state law.
(2) Transfer of all or substantially all
of the assets of the sponsor to another
party.
(3) The merger of the sponsor’s
corporation into another corporation or
the consolidation of the sponsor’s
organization with one or more other
corporations, resulting in a new
corporate body.
Transfer of corporate stock or the
merger of another corporation into the
sponsor’s corporation, with the sponsor
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surviving, does not ordinarily constitute
change of ownership.
A sponsor that has a sponsor
agreement in effect and is considering or
negotiating a change in ownership must
notify the Secretary at least 60 days
before the anticipated effective date of
the change. When there is a change of
ownership that results in a transfer of
the liability for health benefit costs, the
existing sponsor agreement is
automatically assigned to the new
owner. This requirement is necessary
because there may be obligations under
the plan sponsor agreement that do not
surface until some time after the change
of ownership. The Secretary must
ensure that there is a party to the plan
sponsor agreement that can satisfy those
obligations, which may include the
return of program reimbursement. The
new owner to whom a sponsor
agreement is assigned is subject to all
applicable statutes, regulations, and
guidance, and to the terms and
conditions of the sponsor agreement.
Failure to notify the Secretary at least 60
days before the anticipated effective
date of the change may result in the
Secretary recovering funds paid under
the program.
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III. Waiver of Proposed Rulemaking
and Delay in Effective Date
A. Waiver of Notice-and-Comment
Procedure
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register and invite public comment on
the proposed rule. The notice of
proposed rulemaking includes a
reference to the legal authority under
which the rule is proposed, and the
terms and substances of the proposed
rule or a description of the subjects and
issues involved. This procedure can be
waived under section 553(b)(3)(B) of the
Administrative Procedure Act, however,
if an agency finds good cause that
notice-and-comment procedure is
impracticable, unnecessary, or contrary
to the public interest and incorporates a
statement of the finding and its reasons
in the rule issued. Below, we discuss
our reasons for the waiver of notice-andcomment procedure.
Section 1102(a)(1) of the Affordable
Care Act requires the Secretary, not later
than 90 days after enactment of the Act,
to establish a temporary Early Retiree
Reinsurance Program. The Affordable
Care Act was enacted on March 23,
2010, which means that the Secretary
must implement the Early Retiree
Reinsurance Program by June 21, 2010.
We believe this is insufficient time for
notice-and-comment rulemaking. The
90 days Congress specified does not
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allow for development of the rule, a
meaningful public comment period, and
agency analysis of, and response to,
those comments before this rule can be
made final. Moreover, we need to
actually establish a temporary Early
Retiree Reinsurance Program—not
simply issue this interim final rule—by
June 1, 2010, in order to align the
effective date of the program with some
sponsors’ plan year start dates and to
simplify accounting for sponsors and
the Secretary, as is discussed below. We
must finalize this rule in order to take
the multiple other steps necessary to
establish the program. Within the time
frame contemplated in the statute, we
need to have regulations effective in
time for applicants to be able to review
them and begin to put together their
information so that they can apply (once
the application process is finalized).
The application process cannot be
finalized until the regulations are close
to being finalized in this Interim Final
Rule. Furthermore, the Secretary needs
to have established the rules by which
she is going to implement this program
so that she can move forward with
actually administering it, which
includes contracting with a contractor to
aid with administering the program. The
regulations have to be close to finalized
before the Secretary can draft a
comprehensive scope of work for the
contract that will be issued to aid the
Secretary with administering this
program.
Therefore, we find good cause to
waive the notice of proposed
rulemaking and to issue this final rule
on an interim basis without prior
comment. While we are not providing
prior comment, we are providing a 30day public comment period.
B. Waiver of Delay of Effective Date
In addition, section 553(d) of the APA
ordinarily requires that a regulation be
effective no earlier than 30 days after
publication. Under section 553(d)(3)
this requirement can be waived for good
cause.
As explained above, Section
1102(a)(1) of the Affordable Care Act
requires the Secretary to establish the
Early Retiree Reinsurance Program by
June 21, 2010. In order to better align
the effective date of some sponsors’ plan
and/or fiscal years with the effective
date of the program, to allow sponsors
to be credited for claims starting at the
beginning of a month in order to
simplify accounting for sponsors and
the Secretary, and to allow sponsors to
be credited for claims incurred before
June 21, 2010, we need to actually
establish the program—not simply issue
this Interim Final Rule—by June 1,
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2010, as opposed to June 21, 2010. As
a result, we find good cause to waive the
30-day delay in effective date that
would otherwise apply under section
553(d) of the Administrative Procedure
Act (APA) for this rule implementing
the Early Retiree Reinsurance Program.
This Interim Final Rule will become
effective on June 1, 2010.
In addition, 5 U.S.C. 801 generally
requires that agencies submit major
rules to the Congress 60 days before the
rules are scheduled to become effective.
This delay does not apply, however,
when there has been a finding of good
cause for waiver of prior notice and
comment as set forth above.
IV. Collection of Information
Requirements
Under the Paperwork Reduction Act
of 1995, we are required to provide 30day notice in the Federal Register and
solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. In order to fairly evaluate
whether an information collection
should be approved by OMB, section
3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
We are soliciting public comment on
each of these issues for the following
sections of this document that contain
information collection requirements
(ICRs).
A. ICRs Regarding Requirements To
Participate (§ 149.35)
Section 149.35(b)(1) requires plan
sponsors to make available
documentation, data, and other
information related to this part and any
other records specified by the Secretary,
as stated in § 149.350. The burden
associated with this requirement is
detailed in our discussion of § 149.350.
Section 149.35(b)(2) states that a plan
sponsor must have a written agreement
with its health insurance issuer (as
defined in 45 CFR 160.103) or
employment-based plan (as applicable)
regarding disclosure of information,
data, documents, and records to the
Secretary, and the health insurance
issuer or employment-based plan must
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disclose to the Secretary, on behalf of
the sponsor, the information necessary
for the sponsor to comply with the
program, this part, and program
guidance. The burden associated with
this requirement is the time and effort
necessary for a plan sponsor to develop,
sign, and maintain the aforementioned
written agreement with its health
insurance issuer or employment-based
plan. We estimate that it will take 1
hour to develop, sign, and maintain one
such written agreement. We also
estimate that each plan sponsor on
average will need to maintain and sign
3 such agreements. Using the RDS
Program as a baseline, we estimate that
4,500 Early Retiree Reinsurance
Program plan sponsors must comply
with this requirement. The estimated
annual burden associated with this
requirement is 13,500 hours. The
estimate cost of compliance with this
requirement is $1,005,885, for the first
year of the program. For the subsequent
four years, we estimate that roughly
one-quarter of the 4,500 sponsors
(1,125) will contract with one different
entity each year to disclose information,
data, etc., to the Secretary. For each of
those years, the estimated cost of
compliance with this requirement is
$83,824.
Section 149.35(b)(3) requires plan
sponsors to have procedures to protect
against fraud, waste and abuse under
this program, and must comply timely
with requests from the Secretary to
produce the procedures and any
documents or data to substantiate the
implementation of the procedures and
their effectiveness. Additionally,
§ 149.35(b)(5) requires plan sponsors to
comply timely with requests from the
Secretary to produce the procedures and
any documents or data to substantiate
the implementation of the procedures
and their effectiveness. The burden
associated with the requirements in
§ 149.35(b)(3) is the time and effort
necessary to develop, implement, and
maintain procedures to protect against
fraud, waste and abuse under this
program. There is also burden
associated with producing the
procedures and any supporting
documentation up request by the
Secretary. We estimate that it will take
20 hours for each plan sponsor or
designee to develop, implement and
maintain one set of such policies and
procedures. We also estimate that with
respect to each plan sponsor, an average
of three separate sets of policies and
procedures will have to be developed,
implemented and maintained, to
account for the fact that many sponsors
will have multiple benefit options, each
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using a different entity that is
submitting claims to the program on
their behalf. However, we estimate that
one-third of the 4,500 expected plan
sponsors will be contracting with
entities that submit claims to the
program that already have fraud, waste
and abuse programs and procedures in
place. Therefore, we estimate that 3,000
plan sponsors will have to newly
develop, implement, and maintain such
program and procedures. The estimated
annual burden for these requirements is
20 hours per set of fraud, waste and
abuse procedures. The estimated cost
associated with this requirement is
$9,982,800 for the first year of the
program. For the subsequent four years
of the program, we estimate that roughly
one quarter of the estimated 4,500
sponsors (roughly 1,125) will contract
with one new entity each year, to
submit claims to the program on the
sponsor’s behalf. For each of those
years, the estimated annual burden
associated with this burden is 1,125
sponsors multiplied by 20 hours, or
22,500 hours, with estimated costs equal
to $1,247,850.
Section 149.35(b)(4) also requires plan
sponsors to submit an application to the
Secretary in the manner, and at the
time, required by the Secretary, as
specified in § 149.40. The burden
associated with this requirement is
detailed in our discussion of § 149.40.
B. ICRs Regarding Application
(§ 149.40)
Section 149.40 discusses the
application process for the early retiree
reinsurance program. As stated in
§ 149.40(a) requires an applicant to
submit an application to participate in
this program to the Secretary, which is
signed by an authorized representative
of the applicant who certifies that the
information contained in the
application is true and accurate to the
best of the authorized representative’s
knowledge and belief. Section 149.40(e)
states that an applicant must submit an
application for each plan for which it
will submit a reimbursement request.
Furthermore, as part of the application
process, every application must be
accompanied by the information listed
in § 149.40(f).
The burden associated with the
requirements in this section is the time
and effort necessary for a plan sponsor
or its designee to complete an
application for each plan for which it
will submit a reimbursement request. In
addition, there is burden associated
with compiling and submitting the
required ancillary information listed in
§ 149.40(f). We estimate that the
program will receive an average of 1
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24461
application each, from 4,500 plan
sponsors or their designees. We further
estimate that it will take 35 hours for a
plan sponsor or designee to complete
one application package. The total
estimated annual burden associated
with this requirement is 157,500 hours.
The total estimated annual cost
associated with this requirement is
$8,820,675. This is a one-time burden,
as sponsors are not required to submit
a new application for each plan year.
C. ICRs Regarding Documentation of
Actual Costs of Medical Claims Involved
(§ 149.335)
Section § 149.335 requires that
sponsors must submit claims, with each
submission consisting of a list of early
retirees for whom claims are being
submitted, and documentation of the
actual costs of the items and services for
each claim being submitted. These
material must be submitted in a form
and manner specified by the Secretary.
Additionally, in order for a sponsor to
receive reimbursement for the portion of
a claim that an early retiree paid, the
sponsor must submit prima facie
evidence that the early enrollee paid his
or her portion of the claim. The burden
associated with the requirements in this
section is the time and effort necessary
for sponsors to assemble and submit the
aforementioned information. We
estimate that it will take each sponsor
an average of 45 hours to comply with
these requirements, with the number of
hours varying based upon the number of
early retirees for whom claims are
submitted, the number of claims, the
technology used to generate the required
information, etc. We estimate that each
of the 4,500 participating sponsors will
make two submissions annually. The
total estimated annual burden
associated with this requirement is
405,000 hours. The total estimated
annual cost associated with these
requirements is $15,758,550.
D. ICRs Regarding Maintenance of
Records (§ 149.350)
Section 149.350(a) requires the
sponsor of the certified plan (or a
subcontractor, as applicable) must
maintain and furnish to the Secretary, or
its designee, upon request the records as
specified in § 149.350(b). The records
must be maintained for 6 years after the
expiration of the plan year in which the
costs were incurred, or longer if
otherwise required by law. Similarly, as
required by § 149.350(d), the sponsor
must require its health insurance issuer
or employment-based plan, as
applicable, to maintain and produce
upon request records to satisfy
subparagraph (c) of this regulation. The
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burden associated with the
requirements in this section is the time
and effort necessary to retain the
specified records. We estimate that each
of the estimated 4,500 sponsors will
require 6 hours to retain the records.
The total estimated annual burden
associated with this requirement is
27,000 hours. The total estimated
annual cost associated with this
requirement is $1,050,570.
E. ICRs Regarding Appeals (§ 149.500
and § 149.510)
Section 149.500(d) states that if a
sponsor appeals an adverse
reimbursement determination, the
sponsor must submit the appeal in
writing to the Secretary within 15 days
of receipt of the determination. Section
149.510 requires a request for appeal to
specify the findings or issues with
which the sponsor disagrees and the
reasons for the disagreements. In
addition, the request for appeal may
include supporting documentary
evidence the sponsor wishes the
Secretary to consider. The burden
associated with the aforementioned
requirements is the time and effort
necessary for a sponsor to draft and
submit an appeal, including supporting
documentation. While this requirement
is subject to the PRA, we believe the
associated burden is exempt under 5
CFR 1320.4. In this case, the
information associated with an appeal
would be collected subsequent to an
administrative action, that is, an adverse
reimbursement determination or an
application denial.
F. ICRs Regarding Sponsor’s Duty To
Report Data Inaccuracies (§ 149.600)
Section 149.600 requires a sponsor to
disclose any data inaccuracies on which
a reimbursement request has been made,
including inaccurate claims data and
negotiated price concessions, in a
manner and at a time specified by the
Secretary in guidance. The burden
associated with this requirement is the
time and effort necessary for a sponsor
to comply with the reporting
requirement. We estimate that 1,500
sponsors annually will be subject to this
requirement, and that burden associated
with this requirement is 32 hours per
sponsor (two disclosures per year per
sponsor, each disclosure having an
estimated burden of 16 hours). The
estimated annual burden associated
with this requirement is 48,000 hours.
The total estimated annual cost
associated with this burden is
$1,867,680.
G. ICRs Regarding Change of Ownership
Requirements (§ 149.700)
Section 149.700(c) requires a sponsor
that has a sponsor agreement in effect
under this part and is considering or
negotiating a change in ownership to
notify the Secretary at least 60 days
before the anticipated effective date of
the change. The burden associated with
the requirement is the time and effort
necessary for a sponsor to comply with
the reporting requirement. Based on our
experience with the RDS Program, we
estimate that it will take each sponsor
an average of 1 hour to comply with
these requirements, and that 50
sponsors per year will be subject to this
requirement. The total estimated annual
burden associated with this requirement
is 50 hours. The total estimated annual
cost associated with these requirements
is $2,773.
All of the information collection
requirements containing burden were
submitted to the Office of Management
and Budget (OMB) for emergency
review and approval as part of a single
information collection request (ICR). As
part of the emergency review and
approval process, OMB waived the
notification requirements. The ICR was
approved under OMB control number
0938–1087 with an expiration date of
October 31, 2010. However, we are still
seeking public comments on the
information collection requirements
discussed in this interim final rule with
comment. All comments will be
considered as we continue to develop
the ICR as we must resubmit the ICR to
obtain a standard 3-year approval.
TABLE 1—ANNUAL RECORDKEEPING AND REPORTING BURDEN
Responses
0938–1087
0938–1087
0938–1087
0938–1087
0938–1087
4,500
1,125
3,000
1,125
4,500
4,500
4,500
1,500
50
13,500
1,125
9,000
1,125
4,500
9,000
4,500
3,000
50
1
1
20
20
35
45
6
16
1
13,500
1,125
180,000
22,500
157,500
405,000
27,000
48,000
50
74.51
74.51
55.46
55.46
**
38.91
38.91
38.91
55.46
1,005,885
83,824
9,982,800
1,247,850
8,820,675
15,758,550
1,050,570
1,867,680
2,773
0
0
0
0
0
0
0
0
0
1,005,885
83,824
9,982,800
1,247,850
8,820,675
15,758,550
1,050,570
1,867,680
2,773
....................
11,300
45,800
....................
854,675
....................
....................
....................
39,820,607
Regulation section
§ 149.35(b)(2) ............................
0938–1087
§ 149.35(b)(3) ............................
0938–1087
§ 149.40 .....................................
§ 149.335 ...................................
§ 149.350 ...................................
§ 149.600 ...................................
§ 149.700(c) ...............................
Total ...................................
Respondents
Total burden
(hours)
Total
capital/
maintenance cost
($)
Time per response
(hours)
OMB Control No.
Hourly labor
cost ($)
Total labor
cost ($)
Total cost
($)
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**$74.51 per hour for 1 hour per response, $55.46 per hour for 34 hours per response.
If you comment on these information
collection and recordkeeping
requirements, please do either of the
following:
1. Submit your comments
electronically as specified in the
ADDRESSES section of this proposed rule;
or
2. Submit your comments to the
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Attn: CMS Desk Officer, CMS–
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9996–IFC, fax (202) 395–6974, or via
email OIRA_submission@omb.eop.gov.
respond to the comments in the
preamble to that document.
V. Response to Comments
VI. Regulatory Impact Analysis
Because of the large number of public
comments we normally receive on
Federal Register documents, we are not
able to acknowledge or respond to them
individually. We will consider all
comments we receive by the date and
time specified in the DATES section of
this preamble, and, when we proceed
with a subsequent document, we will
A. Overall Impact
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We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), the
Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, section 202 of the Unfunded
E:\FR\FM\05MYR1.SGM
05MYR1
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Federal Register / Vol. 75, No. 86 / Wednesday, May 5, 2010 / Rules and Regulations
Mandates Reform Act of 1995 (Pub. L.
104–4), Executive Order 13132 on
Federalism (August 4, 1999), and the
Congressional Review Act (5 U.S.C.
804(2)).
Executive Order 12866 directs
agencies to assess all costs and benefits
of available regulatory alternatives and,
if regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). A regulatory impact
analysis (RIA) must be prepared for
major rules with economically
significant effects ($100 million or more
in any 1 year). This rule will be
economically significant because it sets
out the requirements that sponsors will
need to meet in order to participate in
the Early Retiree Reinsurance Program
and obtain a portion of the $5 billion the
Congress appropriated for this program.
While a small portion of the funds will
be used to administer the program, the
remainder of the $5 billion will be paid
to eligible sponsors over the life of the
program, resulting in economically
significant net positive transfers to
sponsors. We believe that the costs
imposed on sponsors that want to
receive the early retiree reimbursement
will not be significant relative to the
payments received. The costs will
consist of staff or contractor time to
complete the application to participate,
to file claims for reimbursement, and to
comply with program requirements
such as any requests related to an audit,
as well as any supplies necessary to
perform these tasks summarized in
Table 1 above. As a result this
rulemaking is ‘‘economically significant’’
as measured by the $100 million
threshold, and hence also a major rule
under the Congressional Review Act.
Accordingly, we have prepared a
regulatory impact analysis that to the
best of our ability presents the costs and
benefits of the rulemaking.
The RFA requires agencies to analyze
options for regulatory relief of small
businesses, if a rule has a significant
impact on a substantial number of small
entities. According to the Kaiser Family
Foundation and Health Research &
Educational Trust’s 2009 Employer
Health Benefits Survey, 5 percent of
surveyed businesses with 3 to 199
workers offered retiree health benefits.
See pg. 166 of the Survey. https://
ehbs.kff.org/pdf/2009/7936.pdf. It is
unclear how many offered health
benefits to early retirees, but since there
were about 3.3 million such firms (page
15 of the survey), even if only 5 percent
provided such benefits, over 150,000
such firms would be eligible for the
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program. However, we estimate that the
number of sponsors that will actually
participate in the Early Retiree
Reinsurance Program, will be similar to
the number that participate in the
Retiree Drug Subsidy Program. For
purposes of the RFA, we estimate that
5 percent of sponsors are small entities
as that term is used in the RFA
(including small businesses, nonprofit
organizations, and small governmental
jurisdictions). Ultimately, the number of
small businesses affected will depend
upon how many small businesses apply
for the reimbursement, which we do not
currently know. What we do know is
that we have made, and will make, the
application and claims submission
processes as simple as possible, while
still protecting the integrity of the
program. Therefore, if small businesses
want to participate, they may do so.
Turning to small business providers,
the great majority of hospitals and most
other health care providers and
suppliers are small entities, either by
being nonprofit organizations or by
meeting the Small Business
Administration (SBA) definition of a
small business (having revenues of less
than $7.0 million to $34.5 million in
any 1 year). While this rule does not
directly impact providers (unless they
apply to be sponsors), it does increase
access to health insurance, which may
then cause more individuals to be able
to afford health care and therefore be
able to utilize providers’ services and
products more often. Therefore, health
care providers may see an increase in
patients and may not be required to
deliver health care free of charge or at
reduced rates in as many instances as
they may currently do.
Because much of the effect on health
care providers depends upon where
plan participants choose to receive these
services, which must be from a provider
that accepts the plan participant’s
coverage, the term ‘‘health care
provider’’ is likely to include health care
entities operated by small governmental
entities such as counties or towns.
Small governmental health care entities
may include county hospitals, clinics or
other such entities. Regardless of the
entity, we expect a positive effect on
these entities. For purposes of the RFA,
a significant number of health care
providers indirectly affected by the
program are considered small
businesses according to the SBA’s size
standards with total revenues of $7
million to $34.5 million or less in any
1 year and an undetermined percent are
nonprofit organizations. Individuals and
States are not included in the definition
of a small entity. Uncertainty arises
because we do not know how many
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24463
small businesses or other small entities
will apply to participate in the Early
Retiree Reinsurance Program, nor do we
know how the increased access to
health insurance will affect small
businesses that provide health care
services and products to the participants
affected by the program. We believe,
however, that this interim final rule will
have a significant positive economic
effect on a substantial number of small
businesses. The HHS interpretation of
the Regulatory Flexibility Act has
historically been that it does not trigger
a regulatory flexibility analysis as a
result of positive economic impacts (the
statute requires that economic impacts
be minimized, which makes no sense
when applied to positive effects). The
Department nonetheless usually
prepares a voluntary regulatory
flexibility analysis in such
circumstances. In addition, because a
regulatory flexibility analysis is only
required for rules for which an NPRM
must be prepared, there is an additional
exemption that applies to this rule.
Accordingly, we conclude that a
regulatory flexibility analysis is not
required. Nonetheless, we believe that
this regulatory impact section, together
with the remainder of the preamble,
constitutes a voluntary analysis that
meets the requirements that would
otherwise be applicable.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. For purposes of section
1102(b) of the Act, we define a small
rural hospital as a hospital that is
located outside of a metropolitan
statistical area and has fewer than 100
beds. We do not believe this rule will
have a significant impact on the
operations of a substantial number of
small rural hospitals because the
increased access to health insurance,
while positively affecting small rural
hospitals’ ability to collect payment for
services rendered to plan participants
affected by the program, will be unlikely
to increase revenues in an economically
significant amount. Therefore, the
Secretary has determined that this
interim final rule will not have a
significant impact on the operations of
a substantial number of small rural
hospitals. In addition, such an analysis
is not required when an NPRM is not
required, as in this case.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
required spending in any 1 year of $100
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Federal Register / Vol. 75, No. 86 / Wednesday, May 5, 2010 / Rules and Regulations
million in 1995 dollars, updated
annually for inflation. In 2010, that
threshold is approximately $135
million. This rule does not mandate any
spending by State, local, or tribal
governments in the aggregate, or by the
private sector. In fact, participation in
the program is voluntary and for all
sponsors participating, we expect in the
aggregate that sponsors will receive $5
billion in reimbursement, less
administrative costs.
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
This rule will not have a substantial
direct effect on State or local
governments, preempt State laws, or
otherwise have a Federalism
implication.
B. Need for Regulatory Action
As previously discussed, the
Affordable Care Act, includes this
provision that establishes the temporary
Early Retiree Reinsurance Program.
Section 1102(a)(1) requires the Secretary
to establish the program within 90 days
of enactment of the law, which is June
21, 2010. This interim final rule is
necessary to implement this program by
the statutory deadline. The program is
designed to assist people in the early
retiree age group who often face
difficulties obtaining insurance in the
individual market because of advanced
age or chronic conditions that make
coverage unaffordable and inaccessible.
The Early Retiree Reinsurance Program
will provide financial help for
employer-based plans to continue to
provide coverage to plan participants,
and provides financial relief to plan
participants.
C. Anticipated Effects
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1. Effects on Plan Sponsors
This rule will positively affect
employers and employee organizations
that self-fund health benefits or pay
premiums to insure their early retirees’
health benefits. The amount of the
effects depends upon the sponsors’
determination of the use of the
reimbursement. Thus the positive effect
will range from negligible if they use the
reimbursement almost exclusively for
plan participants’ costs to just under $5
billion, minus the administrative costs
of this program if they maximize the
amount of reimbursement used to lower
plan costs.
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2. Effects on Plan Participants
We believe that this rule will have a
positive effect on plan participants. We
believe that the program will encourage
sponsors to maintain coverage that they
might not otherwise maintain, and will
lower health benefit costs for plan
participants and sponsors. With access
to insurance, we believe, that plan
participants will access health care as
needed, instead of delaying a health
care encounter until the condition
progresses to a point when an encounter
is unavoidable (and then more severe
and expensive). Furthermore, we
believe plan participants will not incur
as much debt due to health care costs.
The amount of the effects depends upon
the sponsors’ determination of the use
of the reimbursement. Thus, the positive
effect will range from moderate if
sponsors use almost all of the
reimbursement for sponsors’ costs (in
this case, the lower costs to the sponsor
encourages continued provision of
retiree coverage, which is of benefit to
the retiree) to nearly $5 billion, minus
administrative costs, if sponsors use the
reimbursement almost exclusively to
lower plan participants’ costs.
3. Effects on Other Providers
We expect this rule to have an
indirect positive effect on providers
because more individuals will have
access to health insurance, which will
cause these individuals to seek health
care when needed, as may not be the
case currently, and health care
providers will be able to receive
payment for services provided. It is a
two-fold benefit. Providers may have
more patients and more of the patients
will be able to pay for the services or
products provided, whether directly (for
example, co-insurance or co-payment)
or via their insurance.
4. Effects on the Medicare and Medicaid
Programs
This rule does not impose any
consequential costs on Medicare or
Medicaid. While sponsors may only
submit claims for reimbursement for
early retirees and early retirees’ spouses,
surviving spouses or dependents, the
reimbursements paid to a sponsor must
be used to lower costs for all plan
participants, which may include
enrollees who also have Medicare
coverage. Other than increased
utilization of health care services or
products for plan participants that are
covered by a certified plan, we do not
expect any notable impact on Medicare.
We expect the impact due to increased
utilization to be minimal.
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This rule may in fact lessen the
number of individuals on Medicaid, or
slow any growth in numbers of
individuals eligible for Medicaid,
because sponsors that are considering
dropping health insurance for early
retirees or plan participants may decide
otherwise, once the sponsor becomes
eligible for the program. Furthermore, it
is possible that employers may decide to
offer health insurance to early retirees
because of the program.
D. Alternatives Considered
With respect to implementing this
program, there is no alternative. The
Congress requires that the program be in
effect not later than 90 days after the
enactment of the bill. The statute was
enacted March 23, 2010. With respect to
the application process, we considered
numerous requirements as to what we
would need in order to protect the
integrity of the program, but ultimately
settled on the requirements in the
regulation. We had originally
considered requiring an attestation from
a qualified actuary, certifying that the
sponsor’s estimate of projected costs is
reasonable. We decided against this
requirement because the projection was
merely for the purpose of letting us
know if and when we should stop
taking applications. Weighing the
expense of requiring a sponsor to pay an
actuary to make the certification against
the benefit the certification would
provide, we decided not to require this
because we want this program to be as
inclusive as possible.
We also considered how best to
implement the provision relating to
participants with chronic and high-cost
conditions. We considered identifying
specific conditions in sub-regulatory
guidance but decided that such a policy
would ultimately work against the goals
of the program because we would not be
able to do a comprehensive analysis to
identify them in the time allotted to
implement this program. Furthermore,
because many sponsors’ plans were
initiated before the effective date of the
statute and any guidance we may have
developed, sponsors that covered what
they think are chronic and high-cost
conditions, but which we did not
identify as such, would have been
penalized. Because this is supposed to
be an inclusive program, we defined the
term ‘‘chronic and high-cost conditions’’
to be any condition for which the plan
is likely to incur health benefits costs of
at least $15,000 for any one plan
participant in a plan year. If a sponsor
has programs and procedures that have
generated or have the potential to
generate cost savings in place to address
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any such conditions, it will meet the
requirement.
Ultimately, the approach we took in
these regulations is intended to balance
the need to protect the integrity of the
program with the inclusive nature of the
program.
E. Accounting Statement and Table
Whenever a rule is considered an
economically significant rule under
Executive Order 12866, we are required
to develop an Accounting Statement.
We have prepared an accounting
statement below (Table 2) showing the
classification of the expenditures
associated with the provisions of this
interim final rule.
The terminology from this table may
be interpreted as follows:
1. Annualized—means to determine
cost/benefits on a yearly basis as
opposed to quarterly. This would
include both start-up and ongoing costs
amortized over the number of years
used in the RIA. Due to the uncertainty
in estimating these costs/benefits we
have estimated the amortization equally
over the 4 years 2010 through 2013.
2. Monetized—means to develop
quantitative estimates and convert them
to dollar amounts, if possible.
24465
3. Qualitative Benefits and Costs—
means to categorize or rank the
qualitative effects in terms of their
importance (for example, certainty,
likely magnitude, and reversibility).
4. Effects—means the effects on
Medicare/Medicaid program,
beneficiaries, and health care facilities,
taken from the impact analysis. (We
note that regulations with annual costs
that are less than one billion dollars are
likely to have a minimal effect on
economic growth.)
5. All quantitative estimates must be
presented as discounted flows using 3
percent and 7 percent factors.
TABLE 2—ACCOUNTING STATEMENT
Category
Primary estimate
Year dollars
Period
covered
Discount rate
Source citation (RIA,
preamble, etc.)
BENEFITS
Annualized monetized
benefits (in millions of
dollars per year).
Not estimated.
COSTS
Annualized monetized
costs (in millions of
dollars per year).
39.8 ..............................
2010 .............................
7% ................................
39.8 ..............................
2010 .............................
2010–2013
Paperwork Reduction
Act Burden in Preamble.
3% ................................
2010–2013
Statute.
TRANSFERS
Annualized monetized
transfers: ‘‘on budget’’
(in millions of dollars
per year).
From whom to whom? ..
$1,250 ..........................
2010 .............................
7% ................................
$1,250 ..........................
From the Federal Government to eligible
sponsors and for administration of the
program including to
contractors.
2010 .............................
From the Federal Government to eligible
sponsors and for administration of the
program including to
contractors.
3% ................................
From the Federal Government to eligible
sponsors and for administration of the
program including to
contractors.
Category
Effects on State, local,
and/or tribal governments.
Effects on small businesses.
Effects
Positive, but currently
unable to be determined.
Positive, but currently
unable to be determined.
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E. Conclusion
We used statistics from the RDS
Program as a model because it has
similar characteristics to the
characteristics of this new Early Retiree
Reinsurance Program, and, based on this
model, we expect that approximately
4,500 sponsors will apply to participate
in the Early Retiree Reinsurance
Program. Of those sponsors, we expect
approximately 3,000 will be private
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18:34 May 04, 2010
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*Source Citation
(RIA, preamble, etc.).
......................................
......................................
......................
RIA.
......................................
......................................
......................
RIA.
entities and 1,500 will be State and local
governments. Alternatively, the number
of applicants could be substantially
higher if small or other employers
participate in this program in higher
numbers than they did in the Retiree
Drug Subsidy Program. Regardless, total
spending cannot exceed the $5 billion
appropriated for this program over the
four-year period. While some of the
funds allotted for the program are
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required to be used to implement the
program, we anticipate an overall
positive transfer of $5 billion to eligible
sponsors (and indirectly a portion of
those funds will be transferred for the
benefit of plan participants), less
administrative costs. The analysis
above, together with the remainder of
this preamble, provides a regulatory
impact analysis and meets the
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Federal Register / Vol. 75, No. 86 / Wednesday, May 5, 2010 / Rules and Regulations
requirements for a Final Regulatory
Flexibility Analysis.
In accordance with the provisions of
Executive Order 12866 the Office of
Management and Budget reviewed this
regulation.
Subpart H—Change of Ownership
Requirements
149.700 Change of ownership requirements.
List of Subjects in 45 CFR Part 149
Subpart A—General Provisions
Administrative practice and
procedure, Health care, Health
insurance, Penalties, Reporting and
recordkeeping requirements.
§ 149.1
For the reasons set forth in the
preamble, the Department of Health and
Human Services amends 45 CFR subtitle
A, subchapter B, by adding a new part
149 to read as follows:
■
PART 149—REQUIREMENTS FOR THE
EARLY RETIREE REINSURANCE
PROGRAM
Subpart A—General Provisions
Sec.
149.1
149.2
Purpose and basis.
Definitions.
Subpart B—Requirements for Eligible
Employment-based Plans
149.30 General requirements.
149.35 Requirements to participate.
149.40 Application.
149.41 Consequences of Non-Compliance,
Fraud, or Similar Fault
149.45 Funding limitation.
Subpart C—Reinsurance Amounts
149.100
149.105
149.110
149.115
Amount of reimbursement.
Transition provision.
Negotiated price concessions.
Cost threshold and cost limit.
Subpart D—Use of Reimbursements
149.200
Use of reimbursements.
Subpart E—Reimbursement Methods
149.300 General reimbursement rules.
149.310 Timing.
149.315 Reimbursement conditioned upon
available funds.
149.320 Universe of claims that must be
submitted.
149.325 Requirements for eligibility of
claims.
149.330 Content of claims.
149.335 Documentation of costs of actual
claims involved.
149.340 Rule for insured plans.
149.345 Use of information provided.
149.350 Maintenance of records.
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Subpart F—Appeals
149.500
149.510
149.520
Appeals.
Content of request for appeal.
Review of appeals.
Subpart G—Disclosure of Inaccurate Data
149.600 Sponsor’s duty to report data
inaccuracies.
149.610 Secretary’s authority to reopen and
revise reimbursement determination
amounts.
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Authority: Section 1102 of the Patient
Protection and Affordable Care Act (Pub. L.
111–148).
Purpose and basis.
This part implements the Early
Retiree Reinsurance Program, as
required by section 1102 of the Patient
Protection and Affordable Care Act
(Pub. L. 111–148).
§ 149.2
Definitions.
For purposes of this part, the
following definitions apply:
Authorized representative means an
individual with legal authority to sign
and bind a sponsor to the terms of a
contract or agreement.
Benefit option means a particular
benefit design, category of benefits, or
cost-sharing arrangement offered within
an employment-based plan.
Certified means that the sponsor and
its employment-based plan or plans
meet the requirements of this part and
the sponsor’s application to participate
in the program has been approved by
the Secretary.
Chronic and high-cost condition
means a condition for which $15,000 or
more in health benefit claims are likely
to be incurred during a plan year by one
plan participant.
Claim or medical claim means
documentation, in a form and manner to
be specified by the Secretary, indicating
the health benefit provided, the
provider or supplier, the incurred date,
the individual for whom the health
benefit was provided, the date and
amount of payment net any known
negotiated price concessions, and the
employment-based plan and benefit
option under which the health benefit
was provided. The terms claim or
medical claim include medical,
surgical, hospital, prescription drug and
other such claims as determined by the
Secretary.
Early retiree means a plan participant
who is age 55 and older who is enrolled
for health benefits in a certified
employment-based plan, who is not
eligible for coverage under title XVIII of
the Act, and who is not an active
employee of an employer maintaining,
or currently contributing to, the
employment-based plan or of any
employer that has made substantial
contributions to fund such plan. In this
part, the term early retiree also includes
the enrolled spouse, surviving spouse,
and dependents of such individuals.
The determination of whether an
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individual is not an active employee is
made by the sponsor in accordance with
the rules of its plan. For purposes of this
subpart, however, an individual is
presumed to be an active employee if,
under the Medicare Secondary Payer
rules in 42 CFR 411.104 and related
guidance published by the Centers for
Medicare & Medicaid Services, the
person is considered to be receiving
coverage by reason of current
employment status. This presumption
applies whether or not the Medicare
Secondary Payer rules actually apply to
the sponsor. For this purpose, a sponsor
may also treat a person receiving
coverage under its employment-based
plan as a dependent in accordance with
the rules of its plan, regardless of
whether that individual is considered a
dependent for Federal or state tax
purposes. For purposes of this
definition of early retiree, an employer
maintaining, or currently contributing
to, the employment-based plan or any
employer that has made substantial
contributions to fund such plan, means
a plan sponsor (as defined in this
section).
Employment-based plan means a
group health plan as defined in this
section of the regulation.
Good cause means:
(1) New and material evidence exists
that was not readily available at the time
the reimbursement determination was
made;
(2) A clerical error in the computation
of the reimbursement determination was
made by the Secretary; or
(3) The evidence that was considered
in making the reimbursement
determination clearly shows on its face
that an error was made.
Group health plan means group
health plan as defined in 42 CFR
423.882 that provides health benefits to
early retirees, but excludes Federal
governmental plans.
Health benefits means medical,
surgical, hospital, prescription drug,
and other benefits that may be specified
by the Secretary, whether self-funded or
delivered through the purchase of
health insurance or otherwise. Such
benefits include benefits for the
diagnosis, cure, mitigation, or
prevention of physical or mental disease
or condition with respect to any
structure or function of the body. Health
benefits do not include benefits
specified at 45 CFR 146.145(c)(2)
through (4).
Incurred means the point in time
when the sponsor, health insurance
issuer (as defined in 45 CFR 160.103),
employment-based plan, plan
participant, or a combination of these or
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similar stakeholders, become
responsible for payment of the claim.
Negotiated price concession means
any direct or indirect remuneration
(including discounts, direct or indirect
subsidies, charge backs or rebates, cash
discounts, free goods contingent on a
purchase agreement, up-front payments,
coupons, goods in kind, free or reducedprice services, grants, or other price
concessions or similar benefits) offered
to some or all purchasers, which may
include a sponsor, a health insurance
issuer, or an employment-based plan)
that would serve to decrease the costs
incurred under the employment-based
plan.
Plan participant means anyone
enrolled in an applicable plan including
an early retiree, as defined in this
section, a retiree, a retiree’s spouse and
dependent, an active employee and an
active employee’s spouse and
dependent.
Plan year means the year that is
designated as the plan year in the plan
document of an employment-based
plan, except that if the plan document
does not designate a plan year, if the
plan year is not a 12-month plan year,
or if there is no plan document, the plan
year is:
(1) The deductible or limit year used
under the plan;
(2) The policy year, if the plan does
not impose deductibles or limits on a
12-month basis;
(3) The sponsor’s taxable year, If the
plan does not impose deductibles or
limits on a 12-month basis, and either
the plan is not insured or the insurance
policy is not renewed on a 12-month
basis, or;
(4) The calendar year, in any other
case.
Post point-of-sale negotiated price
concession means any negotiated price
concession that an employment-based
plan or insurer receives with respect to
a given health benefit, after making
payment for that health benefit.
Program means the Early Retiree
Reinsurance Program established in
section 1102 of the Patient Protection
and Affordable Care Act.
Secretary means the Secretary of the
United States Department of Health &
Human Services or the Secretary’s
designee.
Sponsor means a plan sponsor as
defined in section 3(16)(B) of the
Employee Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C.
1002(16)(B), except that in the case of a
plan maintained jointly by one
employer and an employee organization
and for which the employer is the
primary source of financing, the term
means the employer.
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14:33 May 04, 2010
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Sponsor agreement means an
agreement between the sponsor and the
United States Department of Health &
Human Services, or its designee, which
is made to comply with the provisions
of this part.
Subpart B—Requirements for Eligible
Employment-Based Plans
§ 149.30
General requirements.
A sponsor is eligible to participate in
the program if it meets the requirements
of section 1102 of the Patient Protection
and Affordable Care Act, this part, and
guidance developed by the Secretary.
§ 149.35
Requirements to participate.
(a) A sponsor’s employment-based
plan must—
(1) Be certified by the Secretary.
(2) Include programs and procedures
that have generated or have the
potential to generate cost-savings with
respect to plan participants with
chronic and high-cost conditions.
(b) A sponsor must—
(1) Make available information, data,
documents, and records as specified in
§ 149.350.
(2) Have a written agreement with its
health insurance issuer (as defined in 45
CFR 160.103) or employment-based
plan (as applicable) regarding disclosure
of information, data, documents, and
records, to the Secretary, and the health
insurance issuer or employment-based
plan must disclose to the Secretary, on
behalf of the sponsor, at a time and in
a manner specified by the Secretary in
guidance, the information, data,
documents and records necessary for
the sponsor to comply with the
program, this part, and program
guidance.
(3) Ensure that policies and
procedures to protect against fraud,
waste and abuse under this program are
in place, and must comply timely with
requests from the Secretary to produce
the policies and procedures and any
documents or data to substantiate the
implementation of the policies and
procedures and their effectiveness.
(4) Submit an application to the
Secretary in the manner, and at the
time, required by the Secretary as
specified in § 149.40.
§ 149.40
Application.
(a) The applicant must submit an
application to participate in this
program to the Secretary, which is
signed by an authorized representative
of the applicant who certifies that the
information contained in the
application is true and accurate to the
best of the authorized representative’s
knowledge and belief.
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24467
(b) Applications will be processed in
the order in which they are received.
(c) An application that fails to meet
all the requirements of this part will be
denied and the applicant must submit
another application if it wishes to
participate in the program. The new
application will be processed based on
when the new submission is received.
(d) An applicant need not submit a
separate application for each plan year
but must identify in its application the
plan year start and end date cycle
(starting month and day, and ending
month and day) for which it is applying.
(e) An applicant must submit an
application for each plan for which it
will submit a reimbursement request.
(f) In connection with each
application the applicant must submit
the following:
(1) Applicant’s Tax Identification
Number.
(2) Applicant’s name and address.
(3) Contact name, telephone number
and email address.
(4) Plan sponsor agreement signed by
an authorized representative, which
includes—
(i) An assurance that the sponsor has
a written agreement with its health
insurance issuer (as defined in 45 CFR
160.103) or employment-based plan, as
applicable, regarding disclosure of
information to the Secretary, and the
health insurance issuer or employmentbased plan must disclose to the
Secretary, on behalf of the sponsor, at a
time and in a manner specified by the
Secretary in guidance, information,
data, documents, and records necessary
for the sponsor to comply with the
requirements of the program.
(ii) An acknowledgment that the
information in the application is being
provided to obtain Federal funds, and
that all subcontractors acknowledge that
information provided in connection
with a subcontract is used for purposes
of obtaining Federal funds.
(iii) An attestation that policies and
procedures are in place to detect and
reduce fraud, waste, and abuse, and that
the sponsor will produce the policies
and procedures, and necessary
information, records and data, upon
request by the Secretary, to substantiate
existence of the policies and procedures
and their effectiveness.
(iv) Other terms and conditions
required by the Secretary.
(5) A summary indicating how the
applicant will use any reimbursement
received under the program to meet the
requirements of the program, including:
(i) How the reimbursement will be
used to reduce premium contributions,
co-payments, deductibles, coinsurance,
or other out-of-pocket costs for plan
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participants, to reduce health benefit or
health benefit premium costs for the
sponsor, or to reduce any combination
of these costs;
(ii) What procedures or programs the
sponsor has in place that have generated
or have the potential to generate cost
savings with respect to plan participants
with chronic and high-cost conditions;
and
(iii) How the sponsor will use the
reimbursement to maintain its level of
contribution to the applicable plan.
(6) Projected amount of
reimbursement to be received under the
program for the first two plan year
cycles with specific amounts for each of
the two cycles.
(7) A list of all benefit options under
the employment-based plan that any
early retiree for whom the sponsor
receives program reimbursement may be
claimed.
(8) Any other information the
Secretary requires.
(g) An application must be approved,
and the plan and the sponsor certified,
by the Secretary before a sponsor may
request reimbursement under the
program.
(h) The Secretary may reopen a
determination under which an
application had been approved or
denied:
(1) Within 1 year of the determination
for any reason;
(2) Within 4 years of the
determination if the evidence that was
considered in making the determination
shows on its face that an error was
made; or
(3) At any time in instances of fraud
or similar fault.
§ 149.41 Consequences of NonCompliance, Fraud, or Similar Fault.
Upon failure to comply with the
requirements of this part, or if fraud,
waste, and abuse, or similar fault are
found, the Secretary may recoup or
withhold funds, terminate or deny a
sponsor’s application, or take a
combination of these actions.
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§ 149.45
Funding limitation.
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§ 149.100
Amount of reimbursement.
(a) For each early retiree enrolled in
a certified plan in a plan year, the
sponsor receives reimbursement in the
amount of 80 percent of the costs for
health benefits (net of negotiated price
concessions for health benefits) for
claims incurred during the plan year
that are attributed to health benefits
costs between the cost threshold and
cost limit, and that are paid by the
employment-based plan or by the
insurer (if an insured plan), and by the
early retiree.
(b) Costs are considered paid by an
early retiree, if paid by that individual
or another person on behalf of the early
retiree, and the early retiree (or person
paying on behalf of the early retiree) is
not reimbursed through insurance or
otherwise, or other third party payment
arrangement.
(c) Reimbursement is calculated by
first determining the costs for health
benefits net of negotiated price
concessions, within the applicable plan
year for each early retiree, and then
subtracting amounts below the cost
threshold and above the cost limit
within the applicable plan year for each
such individual.
(d) For purposes of determining
amounts below the cost threshold and
above the cost limit for any given early
retiree, all costs for health benefits paid
by the employment-based plan (or by
the insurer, if applicable), or by or on
behalf of, an early retiree, for all benefit
options the early retiree is enrolled in
with respect to a given certified
employment-based plan for a given plan
year, will be combined. For each early
retiree enrolled in an employment-based
plan, there is only one cost threshold
and one cost limit per plan year
regardless of the number of benefit
options the early retiree is enrolled in
during that plan year.
§ 149.105
(a) Based on the projected or actual
availability of program funding, the
Secretary may deny applications that
otherwise meet the requirements of this
part, and if an application is approved,
may deny all or part of a sponsor’s
reimbursement request.
(b) The Secretary’s decision to stop
accepting applications or satisfying
reimbursement requests based on the
availability of funding is final and
binding, and is not appealable.
VerDate Mar<15>2010
Subpart C—Reinsurance Amounts
Transition provision.
For a certified plan that has a plan
year that begins before June 1, 2010 and
ends on any date thereafter, the
reinsurance amount for the plan year
must be determined as follows:
(a) With respect to claims incurred
before June 1, 2010, the amount of such
claims up to $15,000 count toward the
cost threshold and the cost limit. The
amount of claims incurred before June
1, 2010 that exceed $15,000 are not
eligible for reimbursement and do not
count toward the cost limit.
(b) The reinsurance amount to be paid
is based only on claims incurred on and
after June 1, 2010, that fall between the
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cost threshold and cost limit for the
plan year.
§ 149.110
Negotiated price concessions.
(a) The amount of negotiated price
concessions that will be taken into
account in determining the reinsurance
amount will reflect negotiated price
concessions that have already been
subtracted from the amount the
employment-based plan or insurer paid
for the cost of health benefits and the
amount of post-point-of-sale negotiated
price concessions received.
(b) At a time specified by the
Secretary, sponsors are required to
disclose the amount of post-point-ofsale price concessions that were
received but not accounted for in their
submitted claims.
§ 149.115
Cost threshold and cost limit.
The following cost threshold and cost
limits apply individually, to each early
retiree as defined in § 149.2:
(a) The cost threshold is equal to
$15,000 for plan years that start on any
date before October 1, 2011.
(b) The cost limit is equal to $90,000
for plan years that start on any date
before October 1, 2011.
(c) The cost threshold and cost limit
specified in paragraphs (a) and (b) of
this section, for plan years that start on
or after October 1, 2011, will be adjusted
each fiscal year based on the percentage
increase in the Medical Care Component
of the Consumer Price Index for all
urban consumers (rounded to the
nearest multiple of $1,000) for the year
involved.
Subpart D—Use of Reimbursements
§ 149.200
Use of reimbursements.
(a) A sponsor must use the proceeds
under this program:
(1) To reduce the sponsor’s health
benefit premiums or health benefit
costs,
(2) To reduce health benefit premium
contributions, copayments, deductibles,
coinsurance, or other out-of-pocket
costs, or any combination of these costs,
for plan participants, or
(3) To reduce any combination of the
costs in (a)(1) and (a)(2) of this section.
(b) Proceeds under this program must
not be used as general revenue for the
sponsor.
Subpart E—Reimbursement Methods
§ 149.300
General reimbursement rules.
Reimbursement under this program is
conditioned on provision of accurate
information by the sponsor or its
designee. The information must be
submitted, in a form and manner and at
the times provided in this subpart and
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other guidance specified by the
Secretary. A sponsor must provide the
information specified in section
§ 149.335.
§ 149.310
Timing.
(a) An employment-based plan and a
sponsor must be certified by the
Secretary before claims can be
submitted and a reimbursement request
may be made. Reimbursement will be
made with respect to submitted claims
for health benefits at a time and in a
manner to be specified by the Secretary,
after the sponsor or its designee submits
the claims to the Secretary. Claims must
satisfy the requirements of this subpart
in order to be eligible for
reimbursement.
(b) Claims for health benefits may be
submitted for a given plan year only
upon the approval of an application that
references that plan year cycle. Claims
for an early retiree for a plan year
cannot be submitted until the total paid
costs for health benefits for that early
retiree incurred for that plan year
exceed the applicable cost threshold.
(c) For employment-based plans for
which a provider in the normal course
of business does not produce a claim,
such as a staff-model health
maintenance organization, the
information required in a claim must be
produced and provided to the Secretary,
as set out in this regulation and
applicable guidance.
§ 149.315 Reimbursement conditioned
upon available funds.
Notwithstanding a sponsor’s
compliance with this part,
reimbursement is conditioned upon the
availability of program funds.
§ 149.320 Universe of claims that must be
submitted.
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(a) Claims submitted for an early
retiree, as defined in § 149.2, must
include claims below the applicable
cost threshold for the plan year.
(b) Claims must not be submitted
until claims are submitted for amounts
that exceed the applicable cost
threshold for the plan year for the early
retiree.
(c) Sponsors must not submit claims
for health benefits for an early retiree to
the extent the sponsor has already
submitted claims for the early retiree
that total more than the applicable cost
limit for the applicable plan year.
§ 149.325
claims.
Requirements for eligibility of
A claim may be submitted only if it
represents costs for health benefits for
an early retiree, as defined in § 149.2,
has been incurred during the applicable
plan year, and has been paid.
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14:33 May 04, 2010
Jkt 220001
§ 149.330
Content of claims.
Each claim on its face must include
the information specified in, and meet,
the definition of claim or medical claim
found at § 149.2.
§ 149.335 Documentation of costs of
actual claims involved.
(a) A submission of claims consists of
a list of early retirees for whom claims
are being submitted, and documentation
of the actual costs of the items and
services for claims being submitted, in
a form and manner specified by the
Secretary.
(b) In order for a sponsor to receive
reimbursement for the portion of a claim
that an early retiree paid, the sponsor
must submit prima facie evidence that
the early enrollee paid his or her portion
of the claim.
§ 149.340
Rule for insured plans.
With respect to insured plans, the
claims and data specified in the subpart
may be submitted directly to the
Secretary by the insurer.
§ 149.345
Use of information provided.
The Secretary may use data and
information collected under this section
only for the purpose of, and to the
extent necessary in, carrying out this
part including, but not limited to,
determining reimbursement and
reimbursement-related oversight and
program integrity activities, or as
otherwise allowed by law. Nothing in
this section limits the Office of the
Inspector General’s authority to fulfill
the Inspector General’s responsibilities
in accordance with applicable Federal
law.
§ 149.350
Maintenance of records.
(a) The sponsor of the certified plan
(or a subcontractor, as applicable) must
maintain and furnish to the Secretary,
upon request the records enumerated in
paragraph (b) of this section. The
records must be maintained for 6 years
after the expiration of the plan year in
which the costs were incurred, or longer
if otherwise required by law.
(b) The records that must be retained
are as follows—
(1) All documentation, data, and other
information related to this part.
(2) Any other records specified by the
Secretary.
(c) The Secretary may issue additional
guidance addressing recordkeeping
requirements, including (but not limited
to) the use of electronic media.
(d) The sponsor must require its
health insurance issuer or employmentbased plan, as applicable, to maintain
and produce upon request records to
satisfy subparagraph (a) of this
regulation.
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24469
(e) The sponsor is responsible for
ensuring that the records are maintained
and provided according to this subpart.
Subpart F—Appeals
§ 149.500
Appeals.
(a) An adverse reimbursement
determination is final and binding
unless appealed pursuant to paragraph
(e) of this section.
(b) Except as provided in paragraph
(c) of this section, a sponsor may request
an appeal of an adverse reimbursement
determination.
(c) A sponsor may not appeal an
adverse reimbursement determination if
the denial is based on the unavailability
of funds.
(d) An adverse reimbursement
determination is a determination
constituting a complete or partial denial
of a reimbursement request.
(e) If a sponsor appeals an adverse
reimbursement determination, the
sponsor must submit the appeal in
writing to the Secretary within 15
calendar days of receipt of the
determination pursuant to guidance
issued by the Secretary.
§ 149.510
Content of request for appeal.
The request for appeal must specify
the findings or issues with which the
sponsor disagrees and the reasons for
the disagreements. The request for
appeal may include supporting
documentary evidence the sponsor
wishes the Secretary to consider.
§ 149.520
Review of appeals.
(a) In conducting review of the
appeal, the Secretary reviews the
appeal, the evidence and findings upon
which the adverse reimbursement
determination was made, and any other
written evidence submitted by the
sponsor or the Secretary’s designee and
will provide a ruling on the appeal
request.
(b) In conducting the review, the
Secretary reviews the determination at
issue, the evidence and findings upon
which it was based, any written
documents submitted to the Secretary
by the sponsor and the Secretary’s
designee, and determines whether to
uphold, reverse or modify the
Secretary’s initial reimbursement
determination.
(c) A decision by the Secretary under
this provision is final and binding.
(d) Regardless of the Secretary’s
decision, additional reimbursement is
contingent upon the availability of
funds at the time of the Secretary’s
determination.
(e) The Secretary informs the sponsor
and the applicable Secretary’s designee
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of the decision. The Secretary sends a
written decision to the sponsor or the
applicable Secretary’s designee upon
request.
Subpart G—Disclosure of Data
Inaccuracies
§ 149.600 Sponsor’s duty to report data
inaccuracies.
A sponsor is required to disclose any
data inaccuracies upon which a
reimbursement determination is made,
including inaccurate claims data and
negotiated price concessions, in a
manner and at a time specified by the
Secretary in guidance.
§ 149.610 Secretary’s authority to reopen
and revise a reimbursement determination.
(a) The Secretary may reopen and
revise a reimbursement determination
upon the Secretary’s own motion or
upon the request of a sponsor:
(1) Within 1 year of the
reimbursement determination for any
reason.
(2) Within 4 years of a reimbursement
determination for good cause.
(3) At any time, in instances of fraud
or similar fault.
(b) For purposes of this section, the
Secretary does not find good cause if the
only reason for the revision is a change
of legal interpretation or administrative
ruling upon which the determination to
reimburse was made.
(c) A decision by the Secretary not to
revise a reimbursement determination is
final and binding (unless fraud or
similar fault is found) and cannot be
appealed.
Subpart H—Change of Ownership
Requirements
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[FR Doc. 2010–10658 Filed 5–4–10; 8:45 am]
BILLING CODE 4150–03–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of the Secretary
45 CFR Part 159
Health Care Reform Insurance Web
Portal Requirements
(a) Change of ownership consists of:
(1) Partnership. The removal, addition,
or substitution of a partner, unless the
partners expressly agree otherwise as
permitted by applicable state law.
(2) Asset sale. Transfer of all or
substantially all of the assets of the
sponsor to another party.
(3) Corporation. The merger of the
sponsor’s corporation into another
corporation or the consolidation of the
sponsor’s organization with one or more
other corporations, resulting in a new
corporate body.
(b) Change of ownership; exception.
Transfer of corporate stock or the merger
of another corporation into the
sponsor’s corporation, with the sponsor
surviving, does not ordinarily constitute
change of ownership.
(c) Advance notice requirement. A
sponsor that has a sponsor agreement in
14:33 May 04, 2010
Dated: April 29, 2010.
Jay Angoff,
Director, Office of Consumer Information and
Insurance Oversight.
Dated: April 29, 2010
Kathleen Sebelius,
Secretary.
RIN 0991–AB63
§ 149.700 Change of ownership
requirements.
VerDate Mar<15>2010
effect under this part and is considering
or negotiating a change in ownership
must notify the Secretary at least 60
days before the anticipated effective
date of the change.
(d) Assignment of agreement. When
there is a change of ownership as
specified in paragraph (a) of this
section, and this results in a transfer of
the liability for health benefits, the
existing sponsor agreement is
automatically assigned to the new
owner.
(e) Conditions that apply to assigned
agreements. The new owner to whom a
sponsor agreement is assigned is subject
to all applicable statutes and regulations
and to the terms and conditions of the
sponsor agreement.
(f) Failure to notify the Secretary at
least 60 days before the anticipated
effective date of the change may result
in the Secretary recovering funds paid
under this program.
Office of the Secretary, HHS.
Interim final rule with comment
AGENCY:
ACTION:
period.
SUMMARY: The Patient Protection and
Affordable Care Act (the Affordable Care
Act) was enacted on March 23, 2010. It
requires the establishment of an internet
Web site (hereinafter referred to as a
Web portal) through which individuals
and small businesses can obtain
information about the insurance
coverage options that may be available
to them in their State. The Department
of Health and Human Services (HHS) is
issuing this interim final rule in order
to implement this mandate. This interim
final rule adopts the categories of
information that will be collected and
displayed as Web portal content, and
the data we will require from issuers
and request from States, associations,
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and high risk pools in order to create
this content.
DATES: Effective Date: These regulations
are effective on May 10, 2010.
Comment Date: To be assured
consideration, comments must be
received at the address provided below,
no later than 5 p.m. on June 4, 2010.
ADDRESSES: In commenting, please refer
to file code DHHS–9997–IFC. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
• Electronically. You may submit
electronic comments on this regulation
to https://www.regulations.gov. Follow
the instructions on the home page.
• By regular mail. You may mail
written comments to the following
address ONLY: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
DHHS–9997–IFC, P.O. Box 8014,
Baltimore, MD 21244–8014.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
• By express or overnight mail. You
may send written comments to the
following address ONLY: Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, Attention: DHHS–9997–IFC,
Mail Stop C4–26–05, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
• By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments before the close
of the comment period to either of the
following addresses:
a. For delivery in Washington, DC—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Room 445–G, Hubert
H. Humphrey Building, 200
Independence Avenue, SW.,
Washington, DC 20201
(Because access to the interior of the
Hubert H. Humphrey Building is not
readily available to persons without
Federal government identification,
commenters are encouraged to leave
their comments in the CMS drop slots
located in the main lobby of the
building. A stamp-in clock is available
for persons wishing to retain a proof of
filing by stamping in and retaining an
extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
E:\FR\FM\05MYR1.SGM
05MYR1
Agencies
[Federal Register Volume 75, Number 86 (Wednesday, May 5, 2010)]
[Rules and Regulations]
[Pages 24450-24470]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-10658]
[[Page 24450]]
=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Part 149
RIN 0991-AB64
Early Retiree Reinsurance Program
AGENCY: Office of the Secretary, HHS.
ACTION: Interim final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: This interim final rule with comment period (IFC) implements
the Early Retiree Reinsurance Program, which was established by section
1102 of the Patient Protection and Affordable Care Act (the Affordable
Care Act). The Congress appropriated funding of $5 billion for the
temporary program. Section 1102(a)(1) requires the Secretary to
establish this temporary program not later than 90 days after enactment
of the statute, which is June 21, 2010. The program ends no later than
January 1, 2014. The program provides reimbursement to participating
employment-based plans for a portion of the cost of health benefits for
early retirees and their spouses, surviving spouses and dependents. The
Secretary will reimburse plans for certain claims between $15,000 and
$90,000 (with those amounts being indexed for plan years starting on or
after October 1, 2011). The purpose of the reimbursement is to make
health benefits more affordable for plan participants and sponsors so
that health benefits are accessible to more Americans than they would
otherwise be without this program.
DATES: Effective Date: These regulations are effective on June 1, 2010.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
EST on June 4, 2010.
ADDRESSES: In commenting, please refer to file code DHHS-9996-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed).
Electronically. You may submit electronic comments on this
regulation to https://www.regulations.gov. Follow the instructions on
the home page.
By regular mail. You may mail written comments to the
following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: DHHS-9996-IFC, P.O.
Box 8014, Baltimore, MD 21244-8014.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
By express or overnight mail. You may send written
comments to the following address only: Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Attention: DHHS-
9996-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD
21244-1850.
By hand or courier. If you prefer, you may deliver (by
hand or courier) your written comments before the close of the comment
period to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: James Slade, (410) 786-1073, for
information regarding the Purpose and Basis, Requirements for Eligible
Employment-Based Plans, Use of Reimbursement Amounts, Appeals, and
Disclosure of Data Inaccuracies.
David Mlawsky, (410) 786-6851, for information regarding the
Definitions, Reinsurance Amounts, Reimbursement Methods, Including
Provision of Necessary Information, and Change of Ownership
Requirements.
SUPPLEMENTARY INFORMATION: Inspection of Public Comments. All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all electronic comments received before the close of the comment
period on the following public Web site as soon as possible after they
have been received: https://www.regulations.gov. Follow the search
instructions on that Web site to view public comments.
Comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of a document, at Room 445-G, Department of Health and
Human Services, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments, call
1-800-743-3951.
I. Background
A. Overview of the Early Retiree Reinsurance Program Enacted as Part of
the Patient Protection and Affordable Care Act
On March 21, 2010, the Congress passed the Patient Protection and
Affordable Care Act (the Affordable Care Act) (Pub. L. 111-148), which
was signed into law on March 23, 2010. Included in this health
insurance reform law is a provision that establishes the temporary
Early Retiree Reinsurance Program. This provision addresses the recent
erosion in the number of employers providing health coverage to early
retirees. People in the early retiree age group often face difficulties
obtaining insurance in the individual market because of advanced age or
chronic conditions that make coverage unaffordable and inaccessible.
The Early Retiree Reinsurance Program provides needed financial help
for employer-based plans to continue to provide valuable coverage to
plan participants, and provides financial relief to plan participants.
The Early Retiree Reinsurance Program provides reimbursement to
participating sponsors for a portion of the costs of providing health
coverage to early retirees (and eligible spouses, surviving spouses,
and dependents of such retirees). Section 1102(a)(2)(B) of
[[Page 24451]]
the Affordable Care Act defines ``employment-based plan'' to include a
group benefits plan providing health benefits that is maintained by
private employers, State or local governments, employee organizations,
voluntary employees' beneficiary association, a committee or board of
individuals appointed to administer such plan, or a multiemployer plan
(as defined by Employee Retirement Income Security Act or ERISA).
Section 1102 does not differentiate between health benefits provided by
self-funded plans or through the purchase of insurance.
Section 1102(a)(1) requires the Secretary of HHS (the Secretary) to
establish the program within 90 days of enactment of the law, which is
June 21, 2010. We expect this program to be established by June 1,
2010. By law, the program will expire on January 1, 2014. Funding for
the program is limited to $5 billion.
II. Provisions of the Interim Final Rule
This regulation establishes 45 CFR part 149, ``Requirements for the
Early Retiree Reinsurance Program.'' This part implements section 1102
of the Affordable Care Act, which requires the Secretary to provide
reimbursement to sponsors with certified plans for a portion of the
cost of health benefits for early retirees and their spouses, surviving
spouses and dependents, provided funds remain available. In part 149,
we established new subparts A through H. These new subparts set forth
the framework for implementing the Early Retiree Reinsurance Program
effective June 1, 2010 through January 1, 2014. We are implementing the
statutory requirements of the program as follows:
A. General Provisions (Subpart A)
1. Purpose and Basis (Sec. 149.1)
In this section, we provide the statutory authority for
promulgating the regulation.
2. Definitions (Sec. 149.2)
Section 1102(a) of the Affordable Care Act (also referred to as the
``statute'') provides definitions for three specific terms. One of
these terms is the term ``employment-based plan'', which the statute
defines as a ``group benefits plan providing health benefits'' that
satisfies certain conditions. The statute at section 1102(a)(1) also
specifies that under the program, the Secretary shall provide
reimbursement to participating employment-based plans. However, a plan
typically constitutes merely an arrangement to provide benefits, as
opposed to a discrete entity to which payments can be directly made or
sent. Thus, the regulation interprets this provision to require
reimbursement under the program to a ``sponsor,'' and defines sponsor
as that term is defined in regulations promulgated for the Retiree Drug
Subsidy (RDS) Program at 42 CFR 423.882. That definition defines
sponsor as a plan sponsor as defined in section 3(16)(B) of ERISA, 29
U.S.C. 1002(16)(B), except that, in the case of a plan maintained
jointly by one employer and an employee organization and for which the
employer is the primary source of financing, the term means the
employer. By defining the term sponsor in the regulation, and by
specifying that sponsors are the entities that apply for and get
reimbursed under the program, we believe we are achieving two important
objectives: (1) We are ensuring that program reimbursements can be made
to actual existing entities, and (2) We are promoting consistency with
the RDS Program. This second objective is critical, as we believe that
many of the entities that will apply for the Early Retiree Reinsurance
Program are entities that participate in the RDS Program, as these two
programs have many similarities. Thus, the common use of terms across
the two programs will minimize confusion, and we believe will help to
maximize program participation.
Although we drafted the regulation to specify that a sponsor is the
entity that would be directly paid under the program, there is still a
need to use the term ``employment-based plan'' in the regulation. This
is because the statute envisions that the entity receiving
reimbursement have a benefits arrangement (that is, a plan) in place
that satisfies certain criteria (for example, implements programs and
procedures to generate cost-savings with respect to participants with
chronic and high-cost conditions.) The statute provides a definition of
``employment-based plan'' as constituting a ``group benefits plan''
that has certain characteristics. Those characteristics (for example,
must be maintained by one or more employers, can include a
multiemployer plan as defined in section 3(37) of ERISA) borrow
components of the ERISA definition of a ``group health plan''. For that
reason, we define ``employment-based plan'' as meaning a ``group health
plan'' as defined in the RDS regulations at 42 CFR 423.882 that
provides health benefits to early retirees, but excludes Federal
governmental plans. (Unlike the RDS statutory provisions, the Early
Retiree Reinsurance Program's statutory provisions do not expressly
include Federal plans). The RDS regulatory definition of ``group health
plan'' largely tracks the ERISA definition. For reasons previously
stated, we believe it is beneficial to use the same or similar
terminology, and have the same or similar requirements for the RDS
Program and the Early Retiree Reinsurance Program, when appropriate.
Because the RDS program requires a sponsor to have a benefits
arrangement that constitutes a group health plan, we believe the
benefits arrangement must be in place for purposes of the Early Retiree
Reinsurance Program (that is, an employment-based plan), should also be
a group health plan (that is, an employment-based plan, defined
generally as group health plan). Generally, the regulation uses the
term ``sponsor'' when referring to the entity that applies for and
receives reimbursement under the program, and uses the term
``employment-based plan'' when discussing the health benefits
arrangement the sponsor must offer.
In addition to introducing the definition of ``sponsor'', the
regulation also defines other terms that are not defined in the
statute, including the term ``authorized representative.'' We define
this term to mean an individual with legal authority to sign and bind a
sponsor to the terms of a contract or agreement. This term is important
in the regulatory provision relating to the program application and the
plan sponsor agreement. The regulation requires an authorized
representative to sign a plan sponsor agreement as part of the program
application.
We use the term ``benefit option'' in the regulation when
discussing the fact that there is only one cost threshold and cost
limit per early retiree per plan, regardless of how many benefit
options within that plan the early retiree is enrolled in, in a given
plan year. We define ``benefit option'' as a particular benefit design,
category of benefits, or cost-sharing arrangement offered within an
employment-based plan.
The statute at section 1102(b) requires that an employment-based
plan be certified by the Secretary, and submit an application for the
program, before the plan can participate in the program. As stated
above, under this regulation, the entity that participates in (that is,
applies for) the program, is the plan sponsor. We will not approve an
application unless the sponsor, and the employment-based plan, meet
their respective requirements under the statute and the regulation.
Therefore, we define the term ``certified'' as meaning that the sponsor
and its employment-
[[Page 24452]]
based plan or plans meet the requirements of this part and the
sponsor's application to participate in the program has been approved
by the Secretary. All elements of this requirement must be satisfied
before a sponsor can participate in the program.
The statute at section 1102(b)(2) requires employment-based plans
to have programs and procedures in place to generate cost savings for
participants with chronic and high-cost conditions. We define the term
``chronic and high-cost condition'' to mean a condition for which
$15,000 or more in health benefit claims are likely to be incurred
during a plan year by any one participant. Sponsors participating in
this program are likely to be sponsors that have offered the applicable
plan in previous years. Sponsors, therefore, will recognize which
conditions are likely to result in $15,000 in claims in a plan year for
one participant. While we expect that the employment-based plans will
have programs and procedures in place that have generated or have the
potential to generate savings for participants with these conditions,
which may vary across plans, geographic regions and due to other
factors, we do not expect plans to have programs and procedures in
place for all conditions for which claims are likely to exceed $15,000
in a plan year for a plan participant. To require that plans have
programs and procedures in place to address all chronic and high-cost
conditions could exclude many sponsors from participating in the
program and could be overly restrictive. We expect sponsors to take a
reasonable approach when identifying such conditions and selecting
programs and procedures to lower the cost of care, as well as improve
the quality of care, for such conditions.
We define ``claim'' or ``medical claim'' in order to lay out in
more detail what is required on the claim to be reimbursed under this
program, and to note that the terms ``claim'' or ``medical claim''
include medical, surgical, hospital, prescription drug and other types
of claims as determined by the Secretary. The statute at section
1102(a)(2)(A) defines ``health benefits'' as medical, surgical,
hospital, prescription drug, and such other benefits as shall be
determined by the Secretary whether self-funded, or delivered through
the purchase of insurance or otherwise. The regulatory definition of
``health benefit'' clarifies that such benefits include benefits for
the diagnosis, cure, mitigation, or prevention of physical or mental
disease or condition with respect to any structure or function of the
body. (As discussed below, health benefits do not include benefits
specified at 45 CFR 146.145(c)(2) through (4)). Therefore, per the
Secretary's authority to determine benefits for which claims may be
submitted, the terms ``claim'' or ``medical claim'' include claims for
the benefits set out in the definition of ``health benefit.'' This list
of benefits, for which the Secretary has the authority to determine are
appropriate under the program, is not exhaustive.
The statute at section 1102(a)(2)(C) defines ``early retirees'' as
individuals who are age 55 and older but are not eligible for coverage
under Medicare, and who are not active employees of an employer
maintaining, or currently contributing to, the employment-based plan or
of any employer that has made substantial contributions to fund such
plan. We have incorporated this definition into the regulation, and we
clarified that spouses, surviving spouses, and dependents are also
included in the definition of early retiree. This definition
accommodates the language in section 1102(a)(1) of the statute, which
states that reimbursement under the program is made to cover a portion
of the costs of providing health coverage to early retirees and to the
eligible spouses, surviving spouses, and dependents of such retirees.
This definition accommodates the language in section 1102(a)(1) in such
a way that reimbursement can be made under the program for the health
benefit costs of eligible spouses, surviving spouses, and dependents of
such retirees, even if they are under the age of 55, and/or are
eligible for Medicare. We believe the statute can reasonably be
interpreted to provide reimbursement for the health benefit costs of
such individuals. This interpretation will provide additional
assistance to sponsors, which will encourage them to continue to offer
coverage to the spouses, surviving spouses, and dependents of early
retirees.
The regulatory definition of early retiree also clarifies that the
determination of whether an individual is not an active employee is
made by the sponsor in accordance with the rules of its plan. However,
an individual is presumed to be an active employee if, under the
Medicare Secondary Payer (MSP) rules in 42 CFR 411.104 and related
Centers for Medicare & Medicaid Services' (CMS) guidance, the person is
considered to be receiving coverage by reason of current employment
status. The presumption would apply whether or not the MSP rules
actually apply to the sponsor. We also clarify that a sponsor may treat
a person receiving coverage under its employment-based plan as a
dependent in accordance with the rules of its plan, regardless of
whether that person constitutes a dependent for Federal or state tax
purposes. These two clarifications are also found in the RDS regulation
in the definition of ``qualifying covered retiree,'' under which, as
that term implies, an individual must be a retiree. As previously
stated, we believe that regulatory terminology and concepts should be
the same or similar between the RDS Program and the Early Retiree
Reinsurance Program when appropriate, and we believe it is appropriate
when determining whether an individual is a retiree under each program.
Finally, in the regulatory definition of ``early retiree,'' we also
clarify that for purposes of this definition, the phrase ``an employer
maintaining or currently contributing to the employment-based plan or
any employer that has made substantial contributions to fund such
plan,'' which is also found in the statutory definition of ``early
retiree,'' means a plan sponsor. Under ERISA (and the RDS Program
regulation), a plan sponsor is an entity (such as an employer) that
establishes or maintains a group health plan. Thus, because this part
of the statutory definition of early retiree in the Affordable Care Act
speaks to the relationship between the sponsor (for example, the
employer) and the employment-based plan, we believe this clarification
is appropriate.
Section 149.610 of this regulation permits the Secretary to reopen
and revise a reimbursement determination upon the Secretary's own
motion or upon the request of a sponsor within 1 year of the
reimbursement determination for any reason, within 4 years of the
reimbursement determination for good cause, or at any time in instances
of fraud or similar fault. These three standards are the same
regulatory standards that apply with respect to CMS' ability to reopen
or revise an initial or reconsidered determination under the RDS
Program, at 42 CFR 423.890(d). The RDS regulatory provision provides
examples of what constitutes ``good cause,'' and again, because of the
similarity between that program and the Early Retiree Reinsurance
Program, we believe those examples would be appropriate for the latter.
Therefore, similar to the RDS regulation, this regulation provides the
following examples of good cause: (1) New and material evidence exists
that was not readily available at the time the reimbursement
determination was made, (2) A clerical error in the computation of the
reimbursement determination was made, or (3) The
[[Page 24453]]
evidence that was considered in making the reimbursement determination
clearly shows on its face that an error was made. For example, if a
sponsor receives a post-point-of-sale price concession that was not
known at the time a reimbursement determination was made, good cause
may be found and the reimbursement determination may be reopened and
revised.
The statute at section 1102(a)(2)(A) defines ``health benefits'' as
medical, surgical, hospital, prescription drug, and such other benefits
as shall be determined by the Secretary, whether self-funded, or
delivered through the purchase of insurance or otherwise. We clarify in
the regulatory definition that such benefits include benefits for the
diagnosis, cure, mitigation, or prevention of physical or mental
disease or condition with respect to any structure or function of the
body. This is not an exhaustive list. We also specify that health
benefits do not include certain benefits designated as excepted
benefits under the regulations implementing the health insurance
portability provisions of the Health Insurance Portability and
Accountability Act (HIPAA). Those provisions impose certain
requirements on group health plans and group health insurance issuers,
but do not apply those requirements to certain arrangements that
typically are not part of a major medical plan (that is, excepted
benefits). For example, long-term care benefits are excepted benefits.
In the context of the Early Retiree Reinsurance Program, we do not
believe it would be appropriate to consider health benefits as
including benefits provided under such arrangements, as we believe the
best read of the statutory phrase ``medical, surgical, hospital, [and]
prescription drug'' means such major medical benefits.
In order to aid stakeholders in understanding when the Secretary
will make reimbursement to a sponsor, we define the term ``incurred''
to mean the point in time when the sponsor, health insurance issuer,
group health plan or plan participant, or a combination of these or
similar stakeholders, become responsible for payment of the claim. In
short, the Secretary will not pay a sponsor until a claim has been
incurred and paid, as the statute at section 1102(c)(1)(B) specifies
that claims ``shall be based on the actual amount expended.''
We define a ``negotiated price concession'' as any direct or
indirect remuneration that would serve to decrease the costs incurred
under the employment-based plan. We set out examples of what negotiated
price concessions are, which include discounts, rebates, coupons, and
goods in kind. The list at Sec. 149.2, ``Definitions,'' describing
what may constitute a negotiated price concession is not an exhaustive
list.
Because the statute does not use the terms ``early retiree'' and
``plan participant'' interchangeably, we define the term ``plan
participant'' to include all enrollees in a plan, including an early
and other retiree, an early and other retiree's spouse, surviving
spouse, and dependent, and an active employee and an active employee's
spouse and dependent.
The statute at section 1102(c)(1)(B) specifies that claims
submitted under the program ``shall be based on the actual amount
expended by the participating employment-based plan involved within the
plan year'' for the health benefits provided to early retirees and
eligible spouses, surviving spouses, and dependents. This regulation
includes a definition of plan year, and defines plan year as the year
that is designated as the plan year in the plan document of an
employment-based plan, except that if the plan document does not
designate a plan year, if the plan year is not a 12-month plan year, or
if there is no plan document, the plan year is: (1) The deductible or
limit year used under the plan, (2) the policy year, if the plan does
not impose deductibles or limits on a 12-month basis: (3) the sponsor's
taxable year, if the plan does not impose deductibles or limits on a
12-month basis, and either the plan is not insured or the insurance
policy is not renewed on a 12-month basis, or (4) the calendar year, in
any other case. We define this term in such a way to give deference to
the plan year the sponsor has already established for other purposes.
However, we balance that deference with our belief that the intent of
the statute is to calculate reimbursement amounts, and to apply the
cost threshold and cost limit, to periods of time that are 12 months in
duration. We believe most sponsors' plan years are in fact 12 months in
duration.
The term ``post point-of-sale negotiated price concession'' is
defined because not all negotiated price concessions occur at or before
the point of sale. The statute requires negotiated price concessions to
be excluded from the calculation of reimbursement, which causes
reimbursement to be based on the actual amounts paid, not an inflated
amount that may not reflect a price concession. When post point-of-sale
negotiated price concessions occur they may cause data submitted for
reimbursement to become inaccurate, resulting in ultimately, an
inaccurate reimbursement. Once these price concessions are accounted
for, a sponsor's reimbursement determination may be reopened and
revised.
For purposes of brevity, we defined the term ``program'' to mean
the Early Retiree Reinsurance Program.
We define the term ``Secretary'' to mean the Secretary of the
Department of Health & Human Services or the Secretary's designee. We
include the Secretary's designee in the definition because the
Secretary will not actually be performing the tasks set out in this
regulation, but will designate an individual or entity to act on the
Secretary's behalf.
The term ``sponsor agreement'' is based on the definition of the
term in the RDS regulation. The sponsor agreement is basically used to
ensure that the sponsor and Department are bound to comply with the
details of the program that appear in the regulation and in other
guidance, and to address any other points that must be addressed in
order to implement this program.
B. Requirements for Eligible Employment-Based Plans (Subpart B)
1. General Requirement (Sec. 149.30)
In this section, we provide the requirements that allow a sponsor
to be eligible to participate in the Early Retiree Reinsurance Program.
2. Requirements to Participate (Sec. 149.35)
Section 1102(b)(2)(A) of the Affordable Care Act requires that an
employment-based plan implement programs and procedures to generate
cost-savings with respect to participants with chronic and high-cost
conditions. We interpret this to mean that a plan must have in place
programs and procedures that have generated or have the potential to
generate cost-savings for these participants in order to participate in
the Early Retiree Reinsurance Program, not necessarily that the sponsor
has to ensure that new programs and procedures are put in place just to
participate in this program.
Proper management and treatment of chronic and high-cost conditions
may be promoted by generating cost-savings for plan participants with
these conditions because plan participants may be more apt to seek out
proper and timely treatment and management before a condition becomes
critical if treatment and management are financially manageable. As an
example of a program and procedure to generate cost savings for a
participant with a chronic condition, a sponsor may determine that
diabetes, if not managed
[[Page 24454]]
properly, is likely to lead to claims in excess of $15,000 for a plan
year for one plan participant. The sponsor may ensure implementation of
a diabetes management program that includes aggressive monitoring and
behavioral counseling to prevent complications and unnecessary
hospitalization. With respect to generating cost savings for a high-
cost condition, a sponsor may determine that cancer is a high-cost
condition for which it should generate cost savings. The sponsor may
ensure that its plan covers all or a large portion of the participant's
coinsurances or copayments, and/or it could eliminate or reduce the
plan's deductible for treatment and visits related to the condition.
Sponsors may choose other chronic and high-cost conditions to address,
but upon audit the sponsor must be able to demonstrate that its
programs and procedures have generated or had the potential to generate
cost savings, consistent with the representations the sponsor made in
its program application.
We considered various options of how best to implement this
provision and developed several options. The first option was to
further identify which specific conditions meet the chronic condition
definition and which specific conditions meet the high-cost condition
definition and identify these specific conditions in sub-regulatory
guidance to be issued at the time of, or immediately after, the
issuance of this regulation. Issues that arose with this option
consisted of:
(1) How best to define the terms ``chronic and high-cost
conditions'', which would likely involve a significant amount of data
analysis. Chronic and high-cost conditions can vary significantly
across geographic regions, age ranges, and due to other factors. We do
not think that specifying the chronic and high-cost conditions to be
addressed could effectively occur within the 90 days allowed for
establishment of this program; and
(2) Our belief that the Congress intends this to be an inclusive
program, not a program that excludes potential sponsors merely because
they did not develop programs to address the specific conditions we
might identify in our guidance. Had the Congress narrowly defined the
types of plans for which sponsors might be reimbursed, we might have
thought that this program is not an inclusive program. Instead Congress
defined the term ``employment-based plan'' broadly in the statute at
section 1102 (a)(2)(B). It defines the term as a ``group benefits plan
providing health benefits'' as a plan that ``is * * * maintained by one
or more current or former employers (including without limitation any
State or local government or political subdivision thereof), employee
organization, a voluntary employees' beneficiary association, or a
committee or board of individuals appointed to administer such plan; or
* * * a multiemployer plan * * * '' Therefore the scope of sponsors
eligible to receive this reimbursement is extremely broad, which shows
intent on behalf of Congress to be inclusive.
The inclusive nature of the program is particularly important
because this program will involve plans with plan years that began
before the effective date of the program, as will be discussed below.
This means that a plan may not have a program in place to address
certain chronic and high-cost conditions that we may have identified
after the plan year has started, which would then exclude the sponsor
from participation in the program. In such cases, sponsors would, in
effect, be penalized if we identified specific conditions. As stated
above, chronic and high-cost conditions can vary significantly across
geographic regions, age ranges, and due to other factors, so we expect
that sponsors might focus cost-saving programs and procedures on
conditions that effect enrollees in their plan or plans. Our intent is
that the regulation takes into account these differences.
The approach we decided to take was to define the term ``chronic
and high-cost condition'' as specified in Sec. 149.2--Definitions.
``Chronic and high-cost condition'' means a condition for which $15,000
or more in applicable claims are likely to be incurred during a plan
year by one participant. Therefore, a sponsor must have programs and
procedures in place that generate or have the potential to generate
cost savings for plan participants with conditions that are likely to
generate $15,000 in claims for a plan year, in order to participate in
this program. We do not require that a sponsor have programs and
procedures in place to address all conditions that may result in claims
exceeding $15,000 for one participant in a plan year. The sponsor must
take a reasonable approach to identifying which conditions it must
address. We believe this is a reasonable interpretation of the statute
because it will promote cost savings for participants with chronic and
high-cost conditions, but due to the approaches' flexibility (that is,
the fact that sponsors may choose programs and procedures that meet
this requirement that are applicable to their enrollees) will serve to
allow as many of the types of sponsors referenced in the definition of
``employment-based plan'' as possible to become certified to
participate in the program. Of course, this requirement does not
supersede requirements in other Federal laws that may apply to programs
and procedures for chronic and high-cost conditions, such as the
Americans with Disabilities Act.
In order to administer this program and to audit the program as
required by section 1102(d), we are requiring the sponsor to make
records available for these purposes. For example, when a sponsor is
audited, the auditors may request a copy of the sponsor's (or the
sponsor's health insurance issuer or group health plan's, as
applicable) policies and procedures to detect fraud, waste and abuse,
and data to substantiate the effectiveness of the policies and
procedures. Under this provision, the sponsor is required to ensure
that the applicable policies and procedures are produced.
We also require that the sponsor have a written agreement with its
health insurance issuer (as defined in 45 CFR 160.103) or employment-
based plan (as defined in 45 CFR 149.2), as applicable, requiring the
health insurance issuer or employment-based plan to disclose
information on behalf of the sponsor to the Secretary. This requirement
in part exists to accommodate the HIPAA Privacy Rule at 45 CFR part 160
and subparts A and E of part 164 (``Privacy Rule''). This rule applies
to ``covered entities,'' which include group health plans (that is,
employment-based plans) and health insurance issuers, as defined in 45
CFR 160.103. Third party administrators would be business associates,
as defined in 45 CFR 160.103, of group health plans. Sponsors would not
become covered entities by sponsoring a plan. Sponsors typically do not
perform administrative activities for their group health plans and
therefore do not have access to the claims information or similar
protected health information (PHI) we require in this regulation to
support program reimbursement. Much of the data that we would need to
support program reimbursements, as outlined above, would be PHI held by
group health plans, health insurance issuers, or third party
administrators on behalf of group health plans. The requirement for
health insurance issuers and employment-based plans to disclose
information to the Secretary encompasses information created or held by
Business Associates on behalf of the health insurance issuer or group
health plan.
We believe that we have the authority to require the disclosure of
the PHI in accordance with section 1102(c)(1)(A), which states that a
participating plan ``shall submit claims for reimbursement
[[Page 24455]]
to the Secretary which shall contain documentation of the actual costs
of the items and services for which each claim is being submitted.''
Additionally, section 1102(d) requires the Secretary to conduct audits
of claims data submitted by, or on behalf of, sponsors participating in
the program, to ensure that such plans are in compliance with the
statute, and this simply cannot be done without mandating disclosure of
PHI. Thus, covered entities can comply with the mandate (without first
obtaining specific authorization from individuals) pursuant to ``the
required by law'' provisions of the Privacy Rule (45 CFR 164.512(a)).
As noted above, typically group health plans and health insurance
issuers or third party administrators acting on behalf of group health
plans, have PHI that the Secretary requires for the submission of
claims data for reimbursement under the program pursuant to the
regulations. In these situations, it may be unlawful, under the Privacy
Rule, for PHI to be shared with the sponsors. This regulation does not
authorize disclosure of PHI to sponsors. Therefore, for purposes of
this subpart, the sponsor must have a written agreement with the group
health plan (that is, the employment-based plan) or health insurance
issuer, as applicable, regarding disclosure of records, and the plan or
issuer must disclose to us, on the sponsor's behalf, the information,
data, documents, and records necessary for the sponsor to comply with
this program, part, and guidance, at a time and in a manner specified
by the Secretary. Sponsors of self-funded plans with legal access to
such data will be able to either provide this data to us themselves or
have a group health plan or insurer provide the data to us on their
behalf.
Section 1102 (c)(6) of the Affordable Care Act requires the
Secretary to establish procedures to protect against fraud, waste and
abuse. In order to implement this provision, the Secretary will, for
example, check the exclusions lists developed by the HHS' Office of the
Inspector General and the U.S. General Services Administration before
allowing an entity to participate, or play a role, in the program, and
will take other steps such as verifying the identities of the early
retirees for whom claims are being submitted. The Secretary may also
verify the identities of the individuals associated with the sponsor
and health insurance issuer, or group health plan, as applicable, and
will examine claims before reimbursement is made, to ensure, among
other things, that instances of fraud, waste and abuse are minimized.
Furthermore, the Secretary will perform audits per section 1102(d) of
the Affordable Care Act. To aid the Secretary in detecting and reducing
fraud, waste and abuse, we are requiring that sponsors ensure that
there are policies and procedures in place to detect and reduce fraud,
waste and abuse. While the policies and procedures may be maintained by
the sponsor's health insurance issuer or group health plan, the sponsor
will have to attest that these policies and procedures are in place in
the application. The sponsor must comply with requests from the
Secretary to produce the policies and procedures and any documents or
data to substantiate the implementation, and the effectiveness, of the
procedures. We believe we meet the requirements of the statute by
taking actions to detect and reduce fraud, waste, and abuse, by
requiring sponsors to have such policies and procedures in place, and
by requiring a sponsor to produce the policies and procedures upon
request (such as for the purposes of an audit). If it is found that a
sponsor committed fraud, waste or abuse, or allowed fraud, waste, and
abuse to occur under its plan or plans, the Secretary may recoup from
the sponsor some or all of the reimbursements paid under the program,
and/or may revoke a sponsor's certification to participate in the
program. Of course, there are other laws relating to fraud, waste, and
abuse, with which sponsors and their health insurance issuers or group
health plans must comply.
3. Application (Sec. 149.40)
Section 1102(b)(1)(B) requires the sponsor to submit ``an
application for participation in the program, at such time, in such
manner, and containing such information as the Secretary shall
require.'' In order to implement this provision, a sponsor must submit
one application per plan, and identify the plan year cycle for which
the sponsor is applying (that is, starting month and day, and ending
month and day; no year is required). One application must be filed for
each plan. Filing a different application for each plan will aid in
tracking the plan as this program progresses to ensure proper
reimbursement and compliance with program requirements.
In order to verify the accuracy of the information contained in the
application, the application will have to be signed by an authorized
representative of the applicant and the authorized representative will
have to certify that the information contained in the application is
true and accurate to the best of the authorized representative's
knowledge and belief, among other certifications. We use the term
applicant in this section to refer to any sponsor that has filed an
application that has not yet been certified under the program. The term
applicant is used to clarify that the applicant is not entitled to the
privileges of a certified sponsor, such as the ability to submit a
reimbursement request or appeal a reimbursement determination. Before a
sponsor may submit claims and make a reimbursement request, the
sponsor's application must be approved by the Secretary. Applications
will be processed in the order in which they are received. Because
funding for this program is limited, we expect more requests for
reimbursement than there are funds to pay the requests. Therefore we
expect an applicant to perform its due diligence when applying, which
should result in the submission of a complete application upon the
first submission. Because it is important that applicants submit
complete applications the first time, we will be providing assistance.
If an application is incomplete, it will be denied and the applicant
will have to submit a new application, which will be processed based on
when the new application is received. If we were to allow an applicant
to cure defects in the application, it would likely result in an
extended application process, which would hinder the efficient
implementation of this program. We must be prepared to exercise our
authority under section 1102(f) to stop accepting applications based on
the availability of the $5 billion appropriated for the program. It is
therefore of paramount importance to applicants that they submit
complete applications upon their first submission, otherwise there may
not be an opportunity to submit a new and complete application.
An application for a given plan does not have to be submitted each
year. To require a separate application for a plan each year would only
complicate the process and would place unneeded burden on applicants
and the Secretary. The application will request the plan year cycles
(that is, the start month and day and the end month and day; no year
required), which for our purposes will provide the information we need
to calculate reimbursement based on reimbursement requests. We do not
think that an annual application approval is required. Once a plan is
certified, the application approved, and the sponsor continues to meet
the requirements of the statute, this part,
[[Page 24456]]
and applicable guidance, the plan and sponsor will continue to be
certified and the application approved.
We set out in Sec. 149.40 what we believe we will need in order to
approve an application. The application must include the applicant's
Tax Identification Number, the applicant's name and address, and
contact information for the applicant. To ensure compliance with the
requirements of the statute, an applicant must provide a summary in its
application of how it will use the reimbursement to meet the
requirements of the program, including how it will use the
reimbursement to reduce plan participant or sponsor costs, or any
combination of these costs, and its plans to implement programs and
procedures to generate savings for plan participants with chronic and
high-cost conditions. Because the statute requires that the funds
dispersed under this program not be used as general revenue, we are
requiring sponsors to maintain the level of effort in contributing to
support their applicable plan or plans. Otherwise, sponsors might
circumvent the prohibition on using the program funds as general
revenue by using, dollar for dollar, sponsors' funds not otherwise used
for health benefits due to the program reimbursement, as general
revenue. We expect that sponsors will use the reimbursement to pay for
increases in, for example, the sponsor's premium, or increases in other
health benefit costs (or to reduce plan participants' costs). Therefore
the sponsor's summary of how it will use the program's reimbursement
must also explain how the reimbursement will be applied to maintain the
sponsor's level of effort in contributing to support the applicable
plan. We do not expect a sponsor to explain every detail of their
programs and procedures and use of program funds but to give us an idea
of how it will meet these requirements. We understand that these
submissions may vary because applicants' situations with respect to
their plans may vary widely. For example, reimbursements received in
the first year that a sponsor participates may be applied the second
year of participation because many plans will have already been
negotiated, agreed to, and implemented upon the effective date of this
regulation. Other sponsors may have more flexibility to use these
reimbursements immediately to lower costs.
We will also require applicants to project their reimbursement
amounts for the first two plan-year cycles in the application so that
we can project total reimbursement amounts. To help us with our funding
projections, we will need sponsors to identify specific projected
reimbursement amounts for each of the two plan-year cycles. This
assessment will help us determine if and when we should stop accepting
applications due to funding limitations. We will also require
applicants to identify all benefit options under the employment-based
plan that any early retiree, for whom the applicant may receive program
reimbursement, may be claimed. This is necessary for us to track where
funds are being spent and to otherwise manage the program. We will also
require sponsors to attest that there are fraud, waste and abuse
policies and procedures in place.
As is required in the RDS program, as a condition of participation,
the sponsor will be required to sign a plan sponsor agreement, which
will include certain assurances made by the sponsor. Included in this
agreement will be a provision stating that reimbursement is based on
information and data submitted by the sponsor and if the information
and data are found to be inaccurate, incomplete or otherwise incorrect,
the Secretary may reopen and revise a reimbursement determination,
including recouping reimbursement from the sponsor. The sponsor will be
required to specifically agree to comply with the terms and conditions
for participation in the program, and acknowledge that information in
the application is being provided for the purpose of obtaining federal
funds. This list of application requirements is not exhaustive. Due to
the compressed timeline for implementing this program, we may need to
request additional information in the application.
Finally, we allow the Secretary to reopen a determination under
which an application had been approved or denied so that if it is later
determined that a sponsor committed fraud or otherwise was untruthful
in the application, the Secretary can revisit the determination.
4. Consequences of Non-Compliance, Fraud or Similar Fault (Sec.
149.41)
To clarify the actions the Secretary may take in instances when
non-compliance, fraud, waste, and abuse, or similar fault are found, we
include a regulation that states that failure to comply with the
requirements of this part, or if fraud, waste, and abuse, or similar
fault are found, the Secretary may recoup or withhold funds, terminate
or deny an application, or take any combination of these actions. We
include termination of an application because, depending upon the
specific situation involved, if it is found that a sponsor committed
fraud or otherwise was untruthful in the application, the determination
to approve an application can be revised under Sec. 149.40. We believe
it is important to set out what actions the Secretary may take so that
sponsors are aware of the ramifications of non-compliance, fraud, waste
and abuse, or similar fault. This regulation does not, of course,
supersede other Federal laws or consequences of non-compliance fraud,
waste and abuse, or similar fault.
5. Funding Limitation (Sec. 149.45)
Section 1102(f) authorizes the Secretary to stop accepting
applications based on the availability of funds. We clarify that a
reimbursement request made on behalf of a certified plan may also be
denied, in whole or in part, due to limitation of funds. Determinations
based on funding limitations are final, binding and cannot be appealed,
because any appeal, even if a sponsor is successful, would not result
in reimbursement to a sponsor. Once the program funds are exhausted
there will be no funds to reimburse a sponsor that may have been
successful upon appeal.
C. Reinsurance Amounts (Subpart C)
1. Amount of Reimbursement (Sec. 149.100)
The statute at section 1102(c) requires the Secretary, upon receipt
of a valid claim for health benefits, to make reimbursement in an
amount of 80 percent of the portion of the health benefit costs (net of
negotiated price concessions) attributable to the claims that exceed
$15,000, but are below $90,000. We interpret the statute to mean that
cumulative health benefits incurred in a given plan year and paid for a
given early retiree, as defined in Sec. 149.2, that fall between those
amounts will receive reimbursement, rather than reimbursement being
made only for discrete health benefit items or services whose
reimbursement total falls between those amounts. This interpretation
will get much needed program funds to plan sponsors more quickly. The
statute also specifies that in determining the amount of claims, the
costs paid by the early retiree (or his or her spouse, surviving
spouse, or dependent) in the form of deductibles, copayments, or
coinsurance shall be included in the amounts paid by the participating
employment-based plan. As an initial matter, we clarify in the
regulation that reimbursement will be made under the program only for
claims that are incurred during the applicable plan year, and paid.
The regulation refers to the $15,000 lower limit and the $90,000
ceiling as
[[Page 24457]]
the ``cost threshold'' and ``cost limit'', respectively, and indicates
that reimbursement under the program is calculated by first determining
the costs for health benefits net of negotiated price concessions,
within the applicable plan year for each early retiree, and then
subtracting amounts below the cost threshold and above the cost limit
within the applicable plan year for each early retiree. We also clarify
that for purposes of determining the amounts below the cost threshold
and above the cost limit for any given early retiree, all costs for
health benefits paid by the plan or by the early retiree for all
benefit options the early retiree is enrolled in with respect to a
given certified employment-based plan for a given plan year, will be
combined. We make this clarification because the statute, at section
1102(c)(3), specifies that ``a claim submitted by a participating
employment-based plan shall not be less than $15,000 nor greater than
$90,000'' (emphasis added). For example, an early retiree is
simultaneously enrolled in two different benefit options within one
group health plan--Option 1 as a retiree, and Option 2 as a spouse of a
retiree. For purposes of determining when the early retiree satisfies
the cost threshold, all claims incurred and paid for that early retiree
by both benefit options within the applicable plan year, will be
counted. The claims for that early retiree under each benefit option
will not be separately counted. For purposes of determining if and when
the early enrollee has satisfied the cost limit, the same principle
applies. In other words, within one employment-based plan for a given
plan year, there is one threshold limit, and one cost limit, per early
retiree.
We also indicate that the reimbursement formula specified in the
regulation applies to insured plans as well as self-funded plans, and
that with respect to insured plans, costs for health benefits means
costs the insurer and the early retiree pay for health benefits net of
negotiated price concessions the insurer receives for health benefits.
Thus, for insured plans, the amount of premium the sponsor pays (and
the amount of premium contribution the early retiree pays) is
irrelevant for purposes of calculating reimbursement under the program.
We believe this is the correct interpretation because section
1102(c)(1)(A) states that claims for reimbursement must ``contain
documentation of actual costs of items and services * * *.'' Premiums
are not costs for items and services.
2. Transition (Sec. 149.105)
The program becomes effective June 1, 2010. We carefully considered
whether to allow sponsors to participate in the program for plan years
that ended before the program's effective date, but decided that such
an approach would seem inconsistent with the program's effective date.
We also considered whether to permit sponsors to participate only for
plan years that start on or after the program's effective date, but
decided that such an approach would arbitrarily favor sponsors with
plan years that start soon after June 1, 2010. Therefore, we decided to
allow sponsors to apply for plan years that start before June 1, 2010,
provided they end after that date (for example, calendar year 2010
plans).\1\ This raised the question of how claims incurred during such
a plan year, but before June 1, 2010, would be dealt with under the
program. Under one approach considered, any such claims would count
toward the cost threshold, and any such claims exceeding the threshold,
but below the cost limit, would be eligible for program reimbursement.
We did not adopt that approach, as it arguably would unfairly favor
sponsors with plan years that started significantly before the
program's effective date, especially in light of the program's limited
funding.
---------------------------------------------------------------------------
\1\ Sponsors can also apply for plan years that start after June
1, 2010.
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We decided upon the following approach. For claims incurred before
June 1, 2010, the amount of such claims up to $15,000 count toward the
cost threshold and the cost limit. The amount of claims incurred before
June 1, 2010 that exceed $15,000 are not eligible for reimbursement and
do not count toward the cost limit. The reinsurance amount to be paid
is based solely on claims incurred on and after June 1, 2010, and that
fall between the cost threshold and cost limit for the plan year. As an
example, for a plan with a plan year that began July 1, 2009, with an
end date of June 30, 2010, with an early retiree for which it has spent
$120,000 in health benefit claims before June 1, 2010, and it then
spends another $30,000 in health benefit claims on the early retiree
between June 1, 2010 and June 30, 2010, the sponsor would receive
credit for $15,000 in claims incurred before June 1 and receive
reimbursement of 80 percent of the $30,000 (for the claims incurred
after June 1, 2010), or $24,000. We believe this is a reasonable
approach because it provides as much relief as possible as soon as
possible to sponsors, while giving meaning to the effective date of the
program. A sponsor should therefore not submit claims above the $15,000
cost threshold that were incurred before June 1, 2010, for
reimbursement, as submission of such claims is outside the scope of the
regulation. Also, to submit these claims for reimbursement will make
the reimbursement process more complex than it needs to be.
3. Negotiated Price Concessions (Sec. 149.110) and Cost Threshold and
Cost Limit (Sec. 149.115)
Section 1102(c)(1)(B) states that any negotiated price concessions
obtained by an employment-based plan with respect to a health benefit
must be reflected in claims submitted for program reimbursement. We
recognize that sponsors and insurers sometimes do not receive certain
negotiated price concessions until after payment is made, and in many
cases, after the plan year during which the claim is incurred and paid,
has ended. For example, this is typically the case with prescription
drug rebates. Thus, we specify in the regulation that sponsors must
disclose such ``post-point-of-sale'' negotiated price concessions, in a
form and manner to be specified by the Secretary. We expect to specify
the form and manner of such disclosures in future guidance. This will
ensure that sponsors ultimately submit accurate claims data, and thus
ultimately receive accurate reimbursement.
Finally, the statute indicates that the $15,000 and $90,000 figures
shall be adjusted each fiscal year based on the percentage increase in
the Medical Care Component of the Consumer Price Index for all urban
consumers (rounded to the nearest multiple of $1,000) for the year
involved. We specify in the regulations that for plan years starting on
or after October 1, 2011, the figures will be so adjusted.
D. Use of Reimbursements (Subpart D)
Use of Reimbursements (Sec. 149.200)
Section 1102(c)(4) requires that the reimbursement ``shall be used
to lower costs for the plan. Such payments may be used to reduce
premium costs for an entity'' receiving a reimbursement or to reduce
premium contributions, co-payments, deductibles, co-insurance, or other
out-of-pocket costs for plan participants. We encourage sponsors to use
their reimbursement under the program for both of the following
purposes: (1) To reduce the sponsor's health benefit premiums or health
benefit costs, and (2) To reduce health benefit premium contributions,
co-payments, deductibles, coinsurance, or
[[Page 24458]]
other out-of-pocket costs, or any combination of these costs, for plan
participants. We expect that sponsors will continue to provide at least
the same level of contribution to support the applicable plan, as it
did before this program. For example, for a sponsor that pays a premium
to an insurer, if the premium increases, program funds may be used to
pay the sponsor's share of the premium increase from year to year,
which reduces the sponsor's premium costs. Section 1102(c)(4) sets
forth the requirements for use of reimbursements under this section and
envisions a role for the Secretary in developing a mechanism to monitor
the appropriate use of such reimbursements. Additional information
about this mechanism will be disseminated as it is developed.
The statute does not appear to use the terms ``early retiree'' and
``plan participants'' interchangeably. Therefore, we interpret this
provision to mean that a sponsor may only receive program funds for
claims of early retirees or their spouses, surviving spouses or
dependents, but the funds may be used to lower health benefit costs for
all participants in the plan, including retirees, and their spouses and
dependents, and active employees and their spouses and dependents. At
Sec. 149.200 (b), we clarify the statutory prohibition on using the
funds as general revenue of the sponsor.
E. Reimbursement Methods (Subpart E)
1. General Reimbursement Rules (Sec. 149.300), Timing (Sec. 149.310),
Reimbursement Conditioned Upon Available Funds (Sec. 149.315),
Universe of Claims That Must Be Submitted (Sec. 149.320), Requirements
for Eligibility of Claims (Sec. 149.325), and Content of Claims (Sec.
149.330)
Section 1102(c)(1) of the Affordable Care Act states that a
participating employment-based plan shall submit claims for
reimbursement to the Secretary which shall contain documentation of the
actual costs of the items and services for which each claim is being
submitted. As noted above, we define ``claim'' as documentation
specifying the health benefit provided, the provider or supplier, the
incurred date, the individual for whom the health benefit was provided,
the date and amount of payment net any known negotiated price
concessions, and the employment-based plan and benefit option under
which the health benefit was provided. The terms ``claim'' or ``medical
claim'' include medical, surgical, hospital, prescription drug and
other such claims as determined by the Secretary. We clarify in the
regulation that claims for benefits for the diagnosis, cure,
mitigation, or prevention of physical or mental disease or condition
with respect to any structure or function of the body, may be filed.
This clarification is not an exhaustive list of claims that the
Secretary may determine are appropriate.
The regulation also specifies that claims cannot be submitted for a
given plan year until the application that is associated with the claim
and that references the applicable plan year cycle has been approved.
With respect to a given early retiree, claims cannot be submitted until
the early retiree's total paid costs for health benefits incurred for
the plan year exceed the applicable cost threshold. Once that threshold
has been reached, claims can be submitted, but they must include all
claims below the applicable cost threshold for the plan year in order
to verify that the cost threshold has been met. Claims must be
submitted based on the amounts actually paid, which may include the
amounts paid by the early retiree. Once the cumulative claims of an
early retiree, as defined in Sec. 149.2, exceed $90,000 for a plan
year, a sponsor should not submit claims above this claims limit for
that early retiree because no reimbursement will be paid on these
claims.
2. Documentation of the Actual Cost of Medical Claims Involved (Sec.
149.335), Rule for Insured Plans (Sec. 149.340), and Use of
Information Provided (Sec. 149.345)
All claims submissions mus