Pre-Existing Condition Insurance Plan Program, 45014-45033 [2010-18691]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 75, Number 146 (Friday, July 30, 2010)]
[Rules and Regulations]
[Pages 45014-45033]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-18691]



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Part II





Department of Health and Human Services





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45 CFR Part 152



Pre-Existing Condition Insurance Plan Program; Interim Final Rule

Federal Register / Vol. 75 , No. 146 / Friday, July 30, 2010 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 152

[OCIIO-9995-IFC]
RIN 0991-AB71


Pre-Existing Condition Insurance Plan Program

AGENCY: Office of Consumer Information and Insurance Oversight, OCIIO, 
Department of Health and Human Services, HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: Section 1101 of Title I of the Patient Protection and 
Affordable Care Act of 2010 (Affordable Care Act) requires that the 
Secretary establish, either directly or through contracts with States 
or nonprofit private entities, a temporary high risk health insurance 
pool program to provide affordable health insurance coverage to 
uninsured individuals with pre-existing conditions. This program will 
continue until January 1, 2014, when Exchanges established under 
sections 1311 and 1321 of the Affordable Care Act will be available for 
individuals to obtain health insurance coverage. This interim final 
rule implements requirements in section 1101 of the Affordable Care 
Act. Key issues addressed in this interim final rule include 
administration of the program, eligibility and enrollment, benefits, 
premiums, funding, and appeals and oversight rules.

DATES: Effective date: This regulation is effective on July 30, 2010.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on September 28, 2010.

ADDRESSES: In commenting, please refer to file code OCIIO-9995-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)
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. 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: CMS-OCIIO-IFC, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. 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: OCIIO-9995-IFC, 
Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. 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) 786-7195 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: Ariel Novick, (301) 492-4290.

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 comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: https://regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. General

    Historically, public policy has addressed the challenges of people 
with pre-existing conditions through either high risk pools or 
insurance reform. In general, high risk pools provide coverage of last 
resort for people who, because of their health, are denied coverage by 
private insurers or are unable to purchase coverage in the individual 
market except at substantially surcharged premiums due to their health 
status, and are ineligible for public coverage (such as Medicare or 
Medicaid). Most States that permit insurers to decline coverage for 
health reasons have established high risk pools as an alternative 
coverage option in their individual market. These current pools provide 
safety net coverage for people who have difficulty obtaining individual 
health insurance because of their pre-existing conditions. First 
established in 1976, 35 State high risk pools currently provide 
coverage to approximately 200,000 individuals, or about one percent of 
the individual market nationwide, and vary in terms of the populations 
they cover and the benefits they provide.
    States and the Congress through the Affordable Care Act have also 
elected to use insurance reforms to address the accessibility and 
availability of health insurance coverage for high risk populations. 
Seven States have adopted guaranteed issue to ensure access to 
coverage, and two States prohibit health status from being a factor in 
setting premiums.\1\ The Patient Protection and Affordable Care Act of 
2010, (the Affordable Care Act or ``the Act''), Public Law 111-148 
applies a ban on pre-existing condition exclusions and ``rate-ups'' 
based on health status starting in

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2014 and prohibits the use of pre-existing condition exclusions for 
children starting in plan or policy years that begin on or after 
September 23, 2010.\2\ This temporary Federal program provides coverage 
to uninsured Americans with pre-existing conditions until the 
Affordable Care Act is fully implemented in 2014.
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    \1\ Kaiser Family Foundation. State Health Facts. https://www.statehealthfacts.org/.
    \2\ These provisions do not apply to ``grandfathered'' plans. 
For a description of these provisions, see the interim final 
regulations implementing 2719A (regarding patient protections), 
published in the Federal Register on June 28, 2010 (75 FR 37188).
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B. Overview: Section 1101 of the Patient Protection and Affordable Care 
Act

    The Affordable Care Act, was enacted on March 23, 2010. The Health 
Care and Education Reconciliation Act (the Reconciliation Act), Public 
Law 111-152, was enacted on March 30, 2010. Section 1101 of the 
Affordable Care Act requires that the Secretary of the Department of 
Health and Human Services (HHS) establish, either directly or through 
contracts with States or nonprofit private entities, a temporary high 
risk health insurance program to provide access to coverage for 
uninsured Americans with pre-existing conditions. (Hereafter, we 
generally refer to this program as the Pre-Existing Condition Insurance 
Plan program, or PCIP program, to avoid confusion with the existing 
State high risk pool programs, which will continue to operate 
separately.)
    The PCIP program is intended to remain in place from the time of 
its establishment until the Exchanges established under sections 1311 
or 1321 of the Act go into effect on January 1, 2014. This interim 
final regulation sets policy only for this unique, temporary Federal 
program with fixed Federal funding. Presented below is a general 
overview of the statutory requirements for the new program. More 
detailed descriptions of the specific requirements are included below 
as part of the discussion of the associated regulatory provisions set 
forth in this interim final rule.

II. Provisions of the Interim Final Rule

A. General Provisions (Subpart A, Sec.  152.1 Through Sec.  152.2)

    Section 152.1 of this interim final rule specifies the general 
statutory authority for the ensuing regulations and the scope of the 
program, consistent with section 1101 of the Act. Section 152.2 
provides definitions for terms that appear throughout these 
regulations. Generally, the definitions are self-explanatory or taken 
directly from section 1101 of the statute. The definitions set forth in 
subpart A apply to all of part 152 unless otherwise indicated and are 
applicable only for purposes of part 152.
    The definition of ``pre-existing condition exclusion'' warrants a 
brief discussion. First, it is important to note that this definition 
applies only for purposes of the prohibition in section 1101(c)(2)(A) 
on a PCIP ``impos[ing] any preexisting condition exclusion'' under the 
coverage provided (an important protection for a program designed to 
offer coverage to those with a pre-existing condition), and is separate 
from the ``guidelines'' that determine pre-existing condition status 
under section 1101(d)(2)(3) for purposes of eligibility for enrollment 
in a PCIP. These latter eligibility provisions are set forth in subpart 
C of this rule, under section 152.14.
    State laws vary with regard to the definition of a pre-existing 
condition exclusion. For purposes of defining a pre-existing condition 
exclusion, we adopted the definition of pre-existing condition 
currently used in the group market under the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA). We also took into 
account section 1201 of the Affordable Care Act, which prohibits 
denials of coverage because of a pre-existing condition. Thus, we 
specify that pre-existing condition exclusion has the same meaning as 
under 45 CFR 144.103. That is, the term refers to a denial of coverage, 
or limitation or exclusion of benefits, based on the fact that the 
individual denied coverage or benefits had a health condition that was 
present before the date of enrollment for the coverage (or a denial of 
enrollment), whether or not any medical advice, diagnosis, care, or 
treatment was recommended or received before that date. This would 
include exclusions stemming from a condition identified via a pre-
enrollment questionnaire or physical examination, or the review of 
medical records during the pre-enrollment period.

B. PCIP Program Administration (Subpart B, Sec.  152.6 and Sec.  152.7)

    As noted above, section 1101(b) of the Affordable Care Act provides 
that HHS may ``carry out'' the temporary high risk health insurance 
pool program either directly or through contracts with eligible 
entities, which are States and non-profit entities. Eligible entities 
must submit a proposal to carry out a PCIP in a time and manner, and 
containing such information, that the Secretary requires. Section 152.6 
establishes the general rules for administration through either a State 
or by HHS through a non-profit private entity. Section 152.7 then 
describes the proposal process and specifies that in order to contract 
with HHS, the eligible entity's proposal must demonstrate capability to 
perform all functions necessary for the design and operation of a PCIP, 
and that its proposed PCIP is in full compliance with all of the 
requirements of this part.
    These standards establish minimum requirements for PCIPs, and are 
supplemented by other requirements detailed in solicitation documents 
(such as the descriptions of the outreach plan and consumer information 
resources that each PCIP will establish) and incorporated into the 
final contracts with HHS.

B. Eligibility and Enrollment (Subpart C, Sec.  152.14 Through Sec.  
152.15)

    Section 1101(d) of the Affordable Care Act provides the basic 
eligibility criteria for the PCIP program, which are set forth under 
Sec.  152.14. In addition, consistent with the Secretary's general 
authority under section 1101(c)(2)(D) of the Act to establish 
requirements for a PCIP, we set forth enrollment and disenrollment 
requirements in Sec.  152.15.
Eligibility for the PCIP Program (Sec.  152.14)
    Under section 1101(d) of the Affordable Care Act and subparagraphs 
(1), (2) and (3) of Sec.  152.14(a) of this interim final rule, an 
individual is eligible to enroll in a PCIP if he or she: (1) Is a 
citizen or national of the United States or is lawfully present in the 
United States as determined in accordance with section 1411 of the 
Affordable Care Act; (2) has not been covered under creditable 
coverage, as defined in section 2701(c)(1) of the Public Health Service 
Act as of the date of enactment, during the 6-month period prior to the 
date on which he or she is applying for coverage through the PCIP; and 
(3) has a pre-existing condition, as determined in a manner consistent 
with guidance issued by the Secretary. We further provide in Sec.  
152.14(a)(4) that an individual must be a resident of a State that 
falls within the service area of a PCIP.
Eligibility Conditioned on Citizenship and Immigration Status
    Eligibility for the PCIP program is limited to citizens or 
nationals of the United States and individuals who are lawfully present 
in the United States. For the purpose of this regulation, lawfully 
present has the meaning presently used under the Children's Health 
Insurance Program, provided in the State Health Official letter issued 
by

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the Centers for Medicare and Medicaid Services (CMS) on July 1, 2010. 
Section 1101(d)(1) directs the Secretary to make a determination of 
citizenship and immigration status in accordance with section 1411 of 
the Act, which describes procedures to be employed for determining 
eligibility for the Exchanges and provides for these procedures also to 
be used in determining eligibility for the PCIP program. This section 
sets forth detailed requirements governing the type of information that 
applicants must provide and specific verification procedures that the 
Secretary of Health and Human Services, Commissioner of Social 
Security, and Secretary of Homeland Security would be required to 
follow to establish eligibility. Section 1411(c)(4) of the Affordable 
Care Act further provides that the Secretary shall conduct 
verifications and determinations ``through the use of an on-line system 
or otherwise for the electronic submission of, and response to, the 
information submitted * * * with respect to an applicant,'' or by 
``such other method as is approved by the Secretary'' that determines 
``the consistency of the information submitted with the information 
maintained in the records of the Secretary of the Treasury, the 
Secretary of Homeland Security, and the Commissioner of Social 
Security''.
    Under this authority, Sec.  152.15(a)(3) specifies that a PCIP must 
verify that an individual is a United States citizen or national, or 
lawfully present in the United States. A PCIP can verify an 
individual's citizenship or immigration status through the Social 
Security Administration or, if applicable, the Department of Homeland 
Security. In many cases, States may be able to automate verification of 
citizenship and immigration status by leveraging existing data 
exchanges that are currently in place for other programs, such as 
Medicaid and the Children's Health Insurance Program. The Department of 
Homeland Security's U.S. Citizenship and Immigration Services (USCIS) 
Systematic Alien Verification for Entitlements (SAVE) program provides 
online system to verify an individual's immigration status. States can 
access this system after entering into the necessary Memorandum of 
Understanding with USCIS. An automated verification process will be 
used in all States where HHS is administering the PCIP program.
    Some States are not able to have an automated ``on-line system'' or 
``electronic'' process in place when they start accepting enrollments 
into their PCIPs. Therefore, these regulations provide, as an 
``alternative method'' approved by the Secretary, that a PCIP program 
may instead require the individual to provide documentation that 
establishes citizenship or immigration status. Subject to HHS approval, 
States using documentation procedures may switch to an automated system 
in the future. If a PCIP shares such information with the Social 
Security Administration or the Department of Homeland Security, 
consistent with the Privacy Act, the regulation specifies that a PCIP 
must include a disclosure that the information provided on the 
enrollment request may be shared with other government agencies for 
purposes of establishing eligibility. The type(s) of documentation 
PCIPs may use is subject to approval by HHS under the terms of the 
contract.
Eligibility Based on a 6-Month Period Without Insurance Coverage
    Eligibility for the PCIP program is limited to individuals with no 
creditable coverage during the 6-month period prior to the date on 
which they apply for coverage through the PCIP. Section 2701(c)(1) of 
the Public Health Service Act on the date of enactment and 45 CFR Sec.  
146.113(a)(1) define creditable coverage as coverage of an individual 
under a group health plan, health insurance coverage as defined at 45 
CFR 144.103, Medicare Part A or Part B, Medicaid, the Children's Health 
Insurance Program, the TRICARE program, a medical care program of the 
Indian Health Service or of a tribal organization, a State health 
benefits risk pool (that is, existing State high risk pool), the 
Federal Employee Health Benefits program, a public health plan (for 
example, coverage through the Veterans Administration), or a health 
benefit plan offered under section 5(e) of the Peace Corps Act. Such 
creditable coverage includes health coverage provided to certain former 
employees, retirees, spouses, former spouses, and dependent children 
who are entitled to temporary continuation of health coverage at group 
rates under the Consolidated Omnibus Reconciliation Act of 1985 
(COBRA). We specify under Sec.  152.14(b)(3) that if an individual has 
already satisfied the requirement for a 6-month period without 
creditable coverage in connection with qualifying for a given PCIP 
under section 1101 of the Act, the individual will be considered to 
have satisfied this eligibility requirement for purposes of a PCIP in 
another State, if such individual moves to a different State and wishes 
to enroll in that State's PCIP.
    In light of the unique circumstances presented by infants who are 
less than six months old, the Department will issue guidance on how the 
requirement that the individual not have had creditable coverage during 
the six-month period prior to the application for the PCIP program 
applies to and can be satisfied by such infants. Factors to be 
considered in this guidance include whether coverage in the hospital 
under the mother's plan at birth counts, current practices regarding 
insurers' coverage of newborns, and the anti-dumping rules that direct 
the Secretary to prevent disenrollment of individuals from existing 
insurance due to their health status.
Eligibility Based on Having a Pre-Existing Condition
    Under section 1101(d)(3), eligibility for the PCIP program is 
conditioned on individuals having a pre-existing condition, as 
``determined in a manner consistent with guidance issued by the 
Secretary.'' We specify at Sec.  152.14(c)(1) that a PCIP in a State, 
or the PCIP run by a non-profit in States that are not carrying out the 
PCIP program, may determine that an individual has a pre-existing 
condition, for purposes of PCIP eligibility, based on satisfying any 
one or more of the following criteria, subject to HHS approval: (1) The 
individual provides documented evidence that an insurer has refused, or 
has provided clear indication that it would refuse, to issue individual 
coverage on grounds related to the individual's health; (2) the 
individual provides documented evidence that he or she has been offered 
individual coverage but only with a rider that excludes coverage of 
benefits associated with a pre-existing condition; (3) the individual 
provides documented evidence that he or she has a medical or health 
condition specified by the State and approved by the Secretary; or (4) 
other criteria as defined by the PCIP and approved by HHS.
    We believe that these criteria are fully consistent with the intent 
of section 1101(d)(3) of the Act and address the problems that 
individuals with pre-existing conditions face when applying for 
insurance coverage in the individual market. That is, individuals with 
pre-existing conditions are often unable to obtain coverage for reasons 
that include an outright denial and an exclusion of coverage for the 
pre-existing condition. This includes instances when an individual 
applies for coverage and is informed by the carrier's representative or 
Web site that they would be denied for coverage by the carrier due to 
the pre-existing condition. Providing States and non-profit entities 
operating a PCIP

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the option of using these manifestations of having a pre-existing 
condition, rather than relying on a list of medical conditions, is 
consistent with the PCIP program goal of covering people who both have 
a pre-existing condition and otherwise cannot access insurance. We note 
that in some cases, individuals with pre-existing conditions are unable 
to obtain outright written coverage denials, but instead are told that 
carriers will not accept their applications. These regulations will 
permit PCIPs to exercise flexibility in determining exactly what type 
of communication constitutes a refusal to issue coverage.
    Under Sec.  152.14(c)(3), we specify that a PCIP may determine that 
an individual has a pre-existing condition based on evidence of the 
existence or history of certain medical or health conditions, as 
approved by the Secretary. This provision comports with our intention 
to permit the continuing use of eligibility standards that States use 
in their existing high risk pools, and permits a State that has 
guaranteed issue and community rated premiums to use an alternative 
test to showing a denial of coverage.
    Finally, we provide at Sec.  152.14(c)(4) that HHS may approve 
other criteria for meeting the definition of pre-existing condition 
under a given PCIP.
    We anticipate that the first two criteria will be used in all 
States where individuals may be denied coverage or offered coverage 
with exclusionary riders. In the PCIP program serving States that have 
elected not to play a role in operating a PCIP program, only the first 
two criteria will be used, except with respect to individuals who are 
guaranteed to be issued a policy. PCIPs administered by States or non-
profit entities may choose to utilize the additional criteria with HHS 
approval.
Eligibility for a PCIP Conditioned on Residing in the Plan's Service 
Area
    Eligibility for a PCIP is limited to individuals who reside in the 
service area of the PCIP. At Sec.  152.14(a)(4), we provide that an 
individual must be a resident of one of the 50 States or the District 
of Columbia which constitutes or is within the service area of the 
PCIP.
    The statute explicitly acknowledges the role of a State (defined in 
section 1304(d) of the Act as the 50 States and the District of 
Columbia) with respect to the administration of PCIP, with no reference 
to ``Territories'' (see 1101(b)(2) and (3), 1101(e)(3), 1101(g)(3)(A) 
and (5)). Unlike section 1204(a) of the Health Care and Education 
Reconciliation Act of 2010, (which amended the Affordable Care Act and 
clearly specified a role for territories in the operation of 
Exchanges), the Congress made no similar reference to Territories in 
connection with the PCIP program.
Enrollment and Disenrollment Process (Sec.  152.15)
    Under our authority in section 1101(c)(2)(D) of the Act to impose 
``appropriate'' requirements that PCIPs would be required to meet, 
Sec.  152.15(a) and (b) require PCIPs to establish a process for 
enrolling and disenrolling individuals that is approved by HHS. Our 
intent is to permit the use of established enrollment policies and 
procedures in place under existing State high risk pools, to the extent 
that they are consistent with the statute.
    Section 152.15(a)(2) of this interim final rule specifies that a 
PCIP must allow an individual to remain enrolled unless the individual 
is disenrolled under specified circumstances (for example, the 
individual moves out of the service area or obtains other creditable 
coverage) or the PCIP program is terminated. Our intent is to promote 
continuity of coverage for individuals who enroll in a PCIP until they 
are able to obtain coverage through the Exchange, under which 
participating insurers cannot exclude individuals with pre-existing 
conditions. We understand, however, that to the extent individuals can 
obtain other coverage, for example, by becoming entitled to Medicare or 
enrolling in employer-based health insurance, such coverage would 
obviate the need for coverage provided by the PCIP. Leveraging the 
availability of such coverage, by exiting the PCIP, enables other 
qualified individuals to enroll.
    A PCIP is required to establish, consistent with Sec.  152.15(b) of 
this interim final rule, a disenrollment process that is approved by 
HHS. As noted above, we seek to support States' ability to participate 
in this program by allowing them to adopt policies and procedures in 
use under existing high risk pool programs. We understand that current 
practice in State high risk pools is that an individual who does not 
pay his or her premiums on a timely basis may be disenrolled. We 
provide in Sec.  152.15(b)(2) that, under these circumstances, the 
enrollee will receive sufficient notice and reasonable grace period for 
payment prior to any disenrollment taking effect not to exceed 61 days 
(the longest period currently provided for by States). The consequence 
of failing to pay premiums and any subsequent disenrollment is that an 
individual loses access to coverage and may not be able to re-enroll 
for 6 months. Thus, we believe that it is the PCIP's responsibility to 
inform its enrollees prior to making a disenrollment effective. There 
are other circumstances in which involuntary disenrollment is 
appropriate and thus we establish at Sec.  152.15(b)(3) that a PCIP 
must disenroll an individual in cases of death, where an individual 
obtains creditable coverage or no longer resides in the PCIP's service 
area, and other exceptional circumstances as established by HHS. We 
envision that such circumstances would include cases of fraud or 
intentional misrepresentation of material fact, and it is our intent to 
work with PCIPs to develop policies in these areas via sub-regulatory 
guidance. As we explain under our discussion of eligibility, an 
individual who is disenrolled because he or she no longer resides in 
the service area of a PCIP does not have to satisfy another 6-month 
continuous period without creditable coverage before applying to enroll 
in a PCIP in the new State of residence.
    Section 152.15(c) requires that a PCIP establish rules governing 
effective dates of enrollments and disenrollments. In particular, a 
PCIP program must specify the deadline for receiving an enrollment 
application that would take effect on the first of the following month. 
In general, an individual who submits a complete enrollment request by 
an eligible individual by the 15th day of a month could access coverage 
by the 1st day of the following month. Exceptions to this policy will 
be subject to approval by HHS.
    Finally, given the capped appropriation for this program, we 
recognize that PCIPs need sufficient programmatic flexibility to manage 
their costs and enrollment, to help ensure that the PCIP program's 
funding allocation is sufficient to cover claims and other program 
costs for the entire duration of the program. Thus, we establish 
authority under Sec.  152.15(d) for a PCIP program to employ strategies 
to manage enrollment over the course of the program that may include 
enrollment capacity limits, phased-in (delayed) enrollment, premium and 
benefit adjustments that indirectly affect enrollment, and other 
measures, as defined by the PCIP and approved by HHS.

Benefits--(Subpart D, Sections 152.19 Through 152.22)

Covered Benefits (Sec.  152.19)
Required Benefits (Sec.  152.19(a))
    The required benefit list in Sec.  152.19(a) builds off of the 
essential health benefits under the new section 2707 of the Public 
Health Service Act, as enacted in the Affordable Care Act, for which

[[Page 45018]]

guidance has yet to be issued. The list is consistent with the most 
commonly covered services offered in existing State high risk pools, 
according to a survey conducted by the National Association of State 
Comprehensive Health Insurance Plans (NASCHIP) in 2009. Its benefits 
are also parallel to the benefits offered by the Federal Employees 
Health Benefits Plan (FEHBP).
Excluded Services (Sec.  152.19(b))
    Section 152.19(b) sets forth a list of services that shall not be 
covered by any PCIP. While the specific benefits to be included and 
excluded by any PCIP are generally subject to HHS approval and review 
through the PCIP contracting process, this excluded services list 
addresses several areas where providing coverage is unequivocally 
prohibited. This list of excluded services parallels that of FEHBP.
    The subject of Federal funding of abortion services with respect to 
the Affordable Care Act was addressed in the Executive Order issued by 
the President on March 24, 2010: The enactment of the Affordable Care 
Act left in place current restrictions that prohibit the use of Federal 
funds for abortion services, except in cases of rape or incest, or 
where the life of the woman would be endangered. Exec. Order No. 
13,535, 75 FR 15,599 (Mar. 24, 2010). These restrictions currently 
apply to certain Federal programs that are similar to the PCIP program. 
The PCIP program is Federally-created, funded, and administered 
(whether directly or through contract); it is a temporary Federal 
insurance program in which the risk is borne by the Federal government 
up to a fixed appropriation. As such, the services covered by the PCIP 
program shall not include abortion services except in the case of rape 
or incest, or where the life of the woman would be endangered.
Pre-Existing Conditions Exclusions (Sec.  152.20)
    Section 1101(c)(2)(A) of the Act requires that a PCIP established 
under this section not impose any pre-existing condition exclusions 
with respect to covered services. The Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) includes limitations for pre-
existing conditions in the group market. This protection was expanded 
under section 1201 of the Affordable Care Act, which prohibits any pre-
existing condition exclusions from being imposed by group health plans 
or group and individual health insurance coverage beginning January 1, 
2014. The interim final rules issued pursuant to section 2704 of the 
Public Health Service Act (as amended by the Affordable Care Act) under 
Sec.  147 adopt, with minor modifications, the definition of pre-
existing condition currently used under HIPAA.
    Similarly, our rule prohibits PCIPs from applying any pre-existing 
condition exclusion to covered services, and consistent with the 
regulations implementing section 1201 of the Act, defines a pre-
existing condition exclusion as a limitation or exclusion of benefits 
based on the fact that the condition was present before the date of 
enrollment in coverage (or a denial of enrollment), whether or not any 
medical advice, diagnosis, care, or treatment was recommended or 
received before that date.
    Pursuant to the authority provided to the Secretary under section 
1101(c)(2)(D), this interim final rule also prohibits PCIPs from 
imposing any type of coverage waiting period upon eligible individuals. 
For purposes of this rule, a waiting period is defined as the period 
immediately following the effective date of enrollment in which some or 
all benefits in the coverage are not provided. Accordingly, once an 
individual is enrolled in a PCIP consistent with the rules set forth in 
subpart C, full coverage must be provided to the individual starting 
with the effective date of enrollment.
Premiums and Cost-Sharing (Sec.  152.21)
Standard Rate
    Section 1101(c)(2)(C)(iii) of the Act requires that premium rates 
charged for coverage under the high risk pool program be established at 
``a standard rate for a standard population''. The National Association 
of Insurance Commissioners (NAIC) Model Health Plan for Uninsurable 
Individuals Act suggests that high risk pool plans ``determine a 
standard risk rate by considering the premium rates charged by other 
insurers offering health insurance coverage to individuals.'' 
Furthermore, section 2245(g)(2) of the Public Health Service Act 
(PHSA), which governs the existing Federal high risk pool grant 
program, defines the ``standard risk rate'' for the high risk pools to 
mean a rate that: (1) Is determined under the State high risk pool by 
considering the premium rates charged by other health insurers offering 
health insurance coverage to individuals in the insurance market 
served; (2) is established using reasonable actuarial techniques; and 
(3) reflects anticipated claims experience and expenses for the 
coverage involved.
    In keeping with the methodology suggested by the NAIC Model Act and 
the Federal grant program, Sec.  152.21 of this interim final rule 
generally interprets the phrase ``standard rate for a standard 
population'' to refer to the premium rates offered in the individual 
market in a given State. While existing State high risk pools' premiums 
vary between 105-250 percent of the standard rate of the individual 
market, the Act requires that premiums in the PCIP program be at the 
standard rate, rather than a higher proportion of that rate. Therefore, 
this rule provides that a PCIP established under this section must not 
offer enrollees premiums at a rate that exceeds 100 percent of the 
standard individual market rate in the PCIP service area.
    This interim final rule does not mandate a specific formula for 
calculating the standard rate. Instead, we specify that a PCIP may 
calculate the standard rate using reasonable actuarial techniques, as 
approved by the Secretary, that reflect anticipated experience and 
expenses. This requirement should accommodate reasonable variations in 
the methods that PCIPs may use to calculate a standard risk rate.
    We also recognize that individual market rates in each State can 
vary as a consequence of individual State insurance laws. For example, 
some States require that insurers issue all applicants a policy or 
offer coverage at a community rate. In such situations, the standard 
individual rate may be considerably higher than in a State that permits 
insurers to reject applicants or set premiums on the basis of health 
status or other factors. To account for these variations, Sec.  
152.21(a) of these rules provides that, subject to approval by HHS, a 
PCIP may use other methods of determining the standard rate in the 
State. The exact methodology must be submitted and approved through the 
proposal process as specified in Sec.  152.8 of this part.
Premium Variation
    Section 1101(c)(2)(C)(ii) of the Act specifies that premium rates 
in a PCIP can vary on the basis of age by a factor not greater than 4 
to 1. Section 2701(a)(3) of the PHSA as amended by the Affordable Care 
Act requires HHS, in consultation with NAIC, to define permissible age 
bands for rating purposes in the individual and group markets. However, 
the rating bands established under section 2701 will not be effective 
until January 1, 2014, and no such requirement exists for the PCIP 
program. Given these factors, this rule does not establish standard age 
bands

[[Page 45019]]

for the PCIP program beyond the statutory requirements. Thus, Sec.  
152.21(a)(2) of this rule simply follows the statutory requirement of 
section 1101(c)(2)(C)(ii) of the Act and provides that premiums charged 
in the PCIP can vary by age on a factor of not greater than 4 to 1. 
Specific age band rating will be established through the PCIP 
contracting process.
    Section 1101(c)(2)(C)(i) of the Act requires that premiums in the 
PCIP program may vary only as provided under section 2701 of the PHSA, 
other than what is allowed in section 1101. Section 2701 permits 
premiums rates to vary in the individual and group markets by a finite 
number of factors. Gender rating, for example, is prohibited in the 
PCIP program.
Limits on Enrollee Costs
    Section 1101(c)(2)(B) of the Act sets limits on enrollee costs in 
the PCIP program. Specifically, the issuer's share of the total allowed 
costs of benefits provided under such coverage cannot be less than 65 
percent of such costs, subject to actuarial review and approval by the 
Secretary. Section 152.21(b)(1) of this rule provides that coverage 
under a plan offered by a PCIP must at a minimum meet this 65 percent 
threshold.
    Section 1101(c)(2)(B)(ii) of the Act requires that coverage 
provided by PCIPs not have an out-of-pocket limit greater than the 
applicable amount described in section 223(c)(2) of the Internal 
Revenue Code, which sets the out-of-pocket limit for high deductible 
health plans associated with a tax favored health savings accounts. 
(This amount is $5,950 for 2010.) Under Sec.  152.2, we define out-of-
pocket costs as the sum of the annual deductible and the other annual 
out-of-pocket expenses, other than for premiums, required to be paid 
under the plan. Section 152.21(b)(2) also notes that, consistent with 
IRS rules, the out-of-pocket limit may be applied only for in-network 
providers, consistent with the terms of PCIP plan benefit package.
Access to Services (Sec.  152.22)
    As noted above, section 1101(c)(2)(D) of the Act provides that 
coverage offered via a PCIP must meet any other requirements determined 
appropriate by the Secretary of HHS. Section 152.22 provides that the 
PCIP may specify the network of providers from whom enrollees may 
obtain services, provided that the PCIP demonstrates to HHS that it has 
a sufficient number and range of providers to ensure that all covered 
services are reasonably available and accessible under such coverage. 
Section 152.22(b) makes clear that, in the case of emergency room 
services, such services must be covered out of network and out of area 
if (1) the enrollee had a reasonable concern that failure to obtain 
immediate treatment could present a serious risk to his or her life or 
health; and (2) the services were required to assess whether a 
condition requiring immediate treatment exists, or to provide such 
immediate treatment where warranted. We believe these requirements are 
in keeping with generally accepted standards with respect to the 
provision of emergency services in plans with network limits, such as 
those in place in the Medicare Advantage program under title XVIII of 
the Social Security Act and the commercial health insurance market.

E. Oversight (Subpart E, Sections 152.26 Through 152.28)

Appeals Procedures (Sec.  152.26)
    Section 1101(f)(1) of the Act requires the establishment of an 
appeals process to enable individuals to appeal determinations under 
the PCIP program. We are interpreting this provision to apply both to 
determinations with respect to benefit coverage determinations and 
determinations with respect to an individual's eligibility for the 
program, including whether an individual is a citizen or national of 
the United States, or lawfully present in the United States.
    Rather than establishing detailed, proscriptive requirements with 
respect to appeals procedures, Sec.  152.26 of this interim final rule 
establishes minimum requirements that all PCIPS must meet. Section 
152.26(b) specifies that a PCIP must provide for a timely 
redetermination of an eligibility or coverage determination; coverage 
determinations include both whether an item or service is covered and 
the amount paid by the PCIP. For coverage determinations, Sec.  
152.26(b)(3) further specifies that an enrollee has the right to a 
timely second-level appeal, or ``reconsideration,'' by an independent 
entity.
    The requirement for independent review of a plan's coverage 
redetermination ensures that the entity providing the reconsideration 
would have no stake of any kind in the outcome, and was not involved in 
the initial or reconsidered determination being reviewed. This 
requirement could be satisfied under a variety of arrangements, 
including (1) An existing appeal mechanism provided for under State 
law; (2) in the case of a State-administered PCIP, a review process 
created by the State; or (3) an independent contractor, such as the 
independent review entities with which HHS contracts to review coverage 
determinations under the Medicare program.
    These requirements are intended to permit States to use existing 
appeals or review mechanisms provided for under State law, and to 
permit other non-profit entities to utilize their existing internal 
appeals mechanisms. The actual appeals mechanisms will be subject to 
the Secretary's approval as part of the contracting process. Given both 
the temporary nature of the program and the statutory implementation 
timeframe for the new program, we believe that using these existing 
mechanisms is necessary and appropriate.
Fraud, Waste, and Abuse (Sec.  152.27)
    Section 1101(f)(2) of the Affordable Care Act requires the 
Secretary to establish procedures to protect against fraud, waste, and 
abuse. To that end, Sec.  152.27(a) of this interim final rule requires 
the PCIP to develop, implement, and execute operating procedures to 
prevent, detect, recover payments (when applicable or allowable), and 
promptly report to HHS incidences of waste, fraud, and abuse. These 
procedures are required to include identifying situations in which 
enrollees, potential enrollees, or their family members had access to 
employer-based coverage, and may have been discouraged from enrolling 
in that coverage. Should HHS become aware of instances involving fraud, 
waste, or abuse within the PCIP's operation, HHS will take appropriate 
action within the terms of the contract, or as otherwise provided by 
law. As stated in Sec.  152.27(b), the PCIP shall cooperate with 
Federal law enforcement and oversight authorities in cases involving 
waste, fraud and abuse, and shall report cases in which an individual 
may have been discouraged from enrolling in other coverage to 
appropriate authorities. For example, if the coverage was an employer 
group health plan subject to ERISA, which prohibits discrimination 
based on health status, the matter should be reported to the Department 
of Labor for investigation and possible enforcement action.
Preventing Insurer Dumping (Sec.  152.28)
    There is an incentive for employers and issuers to single out high 
risk and thus high-cost individuals and offer incentives for them to 
disenroll from their coverage and obtain coverage in PCIPs which offer 
such individuals guaranteed access to coverage without pre-existing 
condition exclusion at a standard premium, if they are uninsured

[[Page 45020]]

for at least six months. Congress recognized this potential issue and 
directed the Secretary under section 1101(e)(2) of the Act to establish 
criteria for determining whether health insurance issuers and 
employment-based health plans have discouraged individuals from 
remaining enrolled in prior coverage based on the health status of 
those individuals, and specifies certain criteria that shall be 
included in those established by the Secretary. Section 152.28 of this 
interim final rule thus sets forth these criteria, and requires that 
PCIPs establish procedures to identify and report to HHS instances 
where health insurance issuers or group health plans are discouraging 
high-risk individuals from remaining enrolled in their current 
coverage, in instances where such individuals subsequently are eligible 
to enroll in the PCIP.
    Consistent with section 1101(e)(2) of the Affordable Care Act, 
section 152.28(c) of the interim final rule provides that if, in 
applying the criteria in section 152.28(b), it is determined that a 
dumping under section 152.28(a) has occurred, the Secretary may bill 
the issuer or group health plan for any medical expenses incurred by 
the PCIP for such enrollees. In these situations, the interim final 
rule also makes clear that the issuer or group health plan will be 
referred to appropriate Federal and State authorities for other 
enforcement action that may be warranted depending on the facts and 
circumstances. Finally, section 152.28(d) specifies that nothing in the 
subsection may be construed as constituting exclusive remedies for 
violations of the section or preventing States from applying or 
enforcing this section or other provisions of law with respect to 
health insurance issuers, consistent with section 1101(c)(3) of the 
Affordable Care Act. Additional guidance will be issued to prevent 
``dumping'' from public programs like Medicaid and the Children's 
Health Insurance Program.

F. Funding (Subpart F, Sections 152.32 Through 152.35)

Use of Funds (Sec.  152.32)
    Section 1101(g) of the Affordable Care Act appropriates 
$5,000,000,000 to pay the claims and administrative costs of the PCIP 
program established under this section that are in excess of the amount 
of premiums collected from enrollees. Traditionally, in State high risk 
pools, as well as other insurance programs, the funds collected from 
enrollees as premiums and other funding streams are expended across two 
chief areas. The majority of funds collected as premiums are expended 
to pay the health expenses for covered services incurred by enrollees. 
Administrative expenses, the costs of operating the program, make up 
the second major expense category. Section 152.32(a) of this interim 
final rule thus provides that all funds awarded under this program must 
be used exclusively to pay the allowable claims and administrative 
costs of a PCIP established under this section. Such costs include 
those incurred in the development and operation of the PCIP program, to 
the extent that those costs are in excess of the amounts or premiums 
collected from individuals enrolled in the program. PCIP program funds 
are not available for any other uses, such as to pay expenses or defray 
premiums of existing State high risk pools.
    Although the Act does not specify the amount that a PCIP can spend 
on administrative expenses, Sec.  152.32(b) of this rule permits PCIPs 
to spend no more than 10 percent of its total allotted funds towards 
administrative expenses. The 10 percent limitation is similar to what 
is imposed under the Children's Health Insurance Program (CHIP). 
Typical examples of the types of administrative costs and expenses that 
we expect to be incurred by PCIPs include: Start-up and program 
implementation activities, the production and distribution of 
information and outreach materials, eligibility determination and 
enrollment processing, claims processing, costs associated with 
prevention and detection of fraud, waste and abuse, and other ancillary 
services such as operation of a customer service call center, account 
maintenance, and appeals. We note that, given the start-up costs for 
the new PCIPs established under this program, and the need for 
expeditious implementation, this 10 percent cap applies to the total 
allotment for the duration of the program, as opposed to spending in a 
given year.
Initial Allocation of Funds (Sec.  152.33)
    Section 1101(g) of the Act does not specify exactly how HHS should 
allocate funds for the purpose of this program. At the outset of the 
program, as specified under section 152.33, the Secretary has 
established initial allotment ceilings for PCIPs in each State using a 
methodology consistent with the funding allocation methodology used in 
CHIP, as set forth under 42 CFR Part 457, subpart F, Payment to States. 
(Note that, subject to these allocation ceilings, the estimated funding 
amounts available under the PCIP program contracts are established 
through the contracting process based on the projected number of PCIP 
enrollees and their projected claims costs. Actual payments to PCIPs 
will be based on their reported cost statements during the life of the 
contract.)
    Thus, the initial ceilings on PCIP funding allocations are based on 
a blended formula based on the State population, number of uninsured 
individuals under 65, and geographic health care costs. Under this 
formula, one half of the available funds are allocated based on the 
number of the nonelderly population in each State, compared to the 
total U.S. nonelderly population. This gives more populous States more 
funding and does not penalize those States that employ mechanisms to 
reduce the number of uninsured persons in their States.
    The health care cost index that HHS will use to adjust the funding 
allocations will be based on the wages of employees in the health 
services industry, and is consistent with what we have used under the 
Children's Health Insurance Program. These wage data were developed by 
the Bureau of Labor Statistics of the Department of Labor through its 
Quarterly Census of Employment and Wages. This will include a weighted 
average of the wages in the health services industry represented by 
ambulatory health care services, hospitals, and nursing and residential 
care facilities. As in the CHIP formula, 15 percent of the cost factor 
is held constant, while 85 percent reflects how each State's average 
wage compares to the U.S. average. In order to insure that the 
geographic variation and cost adjustments accurately reflect statistics 
on population and the number of uninsured, the same year of data will 
be used to calculate population, number of uninsured, geographic health 
care costs, and cost adjustments.
Reallocation of Funds (Sec.  152.34)
    As noted above, over time, spending under the PCIP program will be 
determined based on the actual enrollment and cost experience of the 
PCIPs across the country. Thus, we recognize that there may be a need 
to reallocate funds if actual experience indicates that, in a given 
State, not all of funds available under the allocation formula will be 
used. Section 152.34 accounts for this possibility by giving HHS 
explicit authority to reallocate funds among States if HHS determines 
that the PCIP in a given State will not make use of the total estimated 
funding originally allotted to that State. HHS will be receiving 
monthly reports on the program costs of each PCIP and will consult 
closely with PCIPs in evaluating these reports and making any decisions

[[Page 45021]]

with respect to the need for reallocations.
Insufficient Funds (Sec.  152.35)
    Section 1101(g)(2) of the Affordable Care Act states that if HHS 
estimates for any fiscal year that the aggregate amounts available for 
the payment of the expenses of the high risk pool will be less than the 
actual amount of such expenses, HHS shall make such adjustments as are 
necessary to eliminate this deficit. Further, section 1101(g)(4) of 
this Act states that HHS has the authority to stop taking applications 
for participation in the program to comply with the funding 
limitations. Accordingly, Sec.  152.35(c) of this rule provides that 
the PCIP, subject to HHS approval, may adjust premiums, alter required 
benefits, limit PCIP applications or take other measures to eliminate a 
projected deficit. Particularly in view of the capped appropriation for 
the PCIP program, HHS is committed to working very closely with the 
PCIPs to monitor PCIP enrollment and claims experience. To that end, 
the PCIP contracts include detailed reporting responsibilities with 
respect to PCIP enrollment and spending, as well as spelling out PCIP 
responsibilities for the development of mitigation strategies and 
recommended adjustments should the amounts available under a contract 
be less than the projected expenses. Lastly, Sec.  152.35(d) ensures 
that, if the Secretary estimates that aggregate amounts available for 
PCIP expenses will be less than the actual amount of expenses, HHS 
reserves the right to make such adjustments as are necessary to 
eliminate such deficit, consistent with the terms of the PCIP contract.

G. Relationship to Existing Laws and Programs (Subpart G, Sec.  152.39 
Through Sec.  152.40)

Relationship to Other Federal Health Insurance Regulation
    We note that subtitles A and C of Title I of the Affordable Care 
Act contain new requirements that apply to group health plans and 
issuers of health insurance in the individual health insurance market 
which are governed by title XXVII of the PHSA. Some of these provisions 
address the same areas as the above provisions in section 1101 
governing the PCIP program (e.g., premium amounts, beneficiary out-of-
pocket expenses, and pre-existing conditions). These insurance reforms 
do not apply to the PCIP established under section 1101 of the 
Affordable Care Act and implemented in this interim final rule since 
the high risk pools do not meet the definition of a group health plan 
or a health insurance issuer pursuant to sections 2791(a)(1) and 
2791(b)(2) of the PHS Act.
Maintenance of Effort (Sec.  152.39)
    Section 1101(b)(3) of the new law imposes a maintenance of effort 
requirement, which specifies that in order for a State to enter into a 
contract to administer a PCIP, a State must agree not to reduce the 
annual amount it expended on the operation of an existing State high 
risk pool in the year preceding the year in which a PCIP contract 
begins. We believe that the clear intent of this provision is to 
prohibit the shifting of costs of existing State high risk pools to the 
Federal government. The maintenance of effort requirement both ensures 
that the fixed $5 billion in funding is used to meet the PCIP program 
goals and also reinforces the limitation of eligibility to individuals 
who are uninsured, as opposed to those already insured through a State 
high risk pool. At the same time, we recognize that States now use 
different sources of funds to support the operation of existing high 
risk pools. For example, many States rely upon assessments on the 
health insurance industry or health insurance providers to support 
their high risk pools, and States also commonly allow insurers to 
reduce premium tax payments by all or a percentage of such assessment.
    Given the various funding models that are now in place in different 
States, we believe it is appropriate to permit States some latitude in 
terms of ways in which they can satisfy this requirement subject to 
Secretarial approval. Accordingly, section 152.39(a) specifies that in 
order for a State to enter into a contract with the Secretary it must 
comply with the maintenance of effort requirement set forth in section 
1101(b)(3) of the Affordable Care Act in a manner approved by the 
Secretary. We anticipate that permissible methods of meeting this 
requirement would include, but are not limited to, maintaining either 
the total amount or the total per capita amount of State funding for 
the operation of an existing high risk pool (given that a State would 
be maintaining its effort per enrollee, and cannot control 
disenrollment), maintaining the same formula for providing funding for 
a State high risk pool, or establishing an altered formula that the 
Secretary determines will not reduce the total funds expended on the 
existing high risk pool. (Note that options such as the per capita 
approach would need to be evaluated in terms of other policies in 
effect in a State that could negatively influence enrollment in an 
existing State high risk pool.) Again, all such approaches are subject 
to the approval of the Secretary.
    Section 152.39(b) specifies that in situations where a State enters 
into a contract with HHS under this part, HHS shall take appropriate 
action, such as terminating the PCIP contract, against any State that 
fails to maintain funding levels for existing State high risk pools.
Relation to State Laws (Sec.  152.40)
    Section 152.40 of this interim final rule reflects the provision in 
section 1101(g)(5) that specifies State standards that might otherwise 
apply to the coverage offered under a PCIP program are pre-empted, with 
the exception of laws relating to licensing or solvency. This language 
tracks similar language that applies to State regulation of health 
plans offering Medicare Advantage plans under Medicare Part C or drug 
coverage under Medicare Part D under title XVIII of the Social Security 
Act, and we would expect to interpret the language for purposes of the 
PCIP program in a manner similar to the way HHS has applied it under 
those programs.

H. Transition to Exchanges (Subpart H, Sec.  152.44 Through Sec.  
152.45)

End of PCIP Coverage (Sec.  152.44)
    Section of 152.44 of this interim final rule specifies that, 
consistent with section 1101(g)(3)(A) of the Affordable Care Act, 
enrollee coverage under the PCIP program will end effective January 1, 
2014, because affordable coverage will be available under the Exchanges 
and insurance plans will no longer be permitted to exclude coverage for 
pre-existing conditions. Note that PCIP program contracts will remain 
in effect to provide for appropriate contractual close out periods, but 
coverage of claims under the PCIP program will extend only to the costs 
of covered services provided up through December 31, 2013.
Transition to the Exchanges (Sec.  145.45)
    As provided by section 1101(g)(3)(B) of the Affordable Care Act, 
HHS will develop procedures to transition PCIP enrollees to the 
Exchanges (exchanges) that are established under sections 1311 or 1321 
of the Act, in order to ensure there are no lapses in coverage for 
individuals enrolled in the PCIP program. Since these exchanges are 
still in the developmental stages, we believe it would be premature to 
specify transition procedures in this interim final rule. Thus, section 
152.45 simply establishes that HHS will develop such transition 
procedures, and we encourage

[[Page 45022]]

comments on the best ways to carry out the transition.

III. Response to Comments

    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 respond to the 
comments in the preamble to that document.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking (NPRM) in the 
Federal Register and invite public comment on the proposed rule before 
publishing a final rule that responds to comments and sets forth final 
regulations that generally take effect sixty days later. This procedure 
can be waived, however, if an agency finds good cause that a 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.
    The Affordable Care Act was enacted on March 23, 2010, and requires 
that a temporary high risk pool program be in place ``not later than 90 
days'' after enactment. The publication of proposed regulations in an 
NPRM could not govern implementation of the high risk pool program, as 
they would constitute mere proposals with no force of law. The normal 
sixty-day public comment period provided for in the case of regulations 
proposed in an NPRM would by itself consume two-thirds of the time the 
statute provides for implementation. Under these circumstances, it 
would be impracticable and contrary to the public interest to delay 
putting regulations into effect that are necessary to implement the 
program until the rules have been subjected to prior notice and comment 
procedures.
    Therefore, we find good cause to waive the notice of proposed 
rulemaking and to issue this final rule on an interim basis. We are 
providing a 60-day public comment period. Also, because these 
regulations need to be in effect in order to undertake full 
implementation of the program, we also find good cause for waiving the 
normal delay in effective date that would apply, and these regulations 
are effective on July 30, 2010.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day 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 Proposal Process (Sec.  152.7)

    Section 152.7 states that a proposal from a State or from a 
nonprofit private entity shall demonstrate that the eligible entity has 
the capacity and technical capability to perform all functions 
necessary for the design and operation of a Pre-Existing Condition 
Insurance Plan (PCIP), and that its proposed PCIP is in full compliance 
with all of the requirements of this part. Specifically, the proposal 
shall demonstrate that the proposed PCIP satisfies at least the 
conditions listed at Sec.  152.7(a)(1) through (9).
    If there are States that do not submit acceptable proposals as 
described in Sec.  152.7, HHS will solicit proposals from nonprofit 
entities to contract with HHS to operate a PCIP in those States. 
Nonprofits may submit proposals to contract directly with HHS to 
operate a PCIP program.
    The burden associated with this requirement is the time and effort 
necessary for a State or nonprofit entity to develop and submit a 
proposal to operate a PCIP, which is a one-time i