Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2015, 72321-72392 [2013-28610]
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Vol. 78
Monday,
No. 231
December 2, 2013
Part IV
Department of Health and Human Services
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45 CFR Parts 144, 147, 153, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2015; Proposed Rule
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DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Parts 144, 147, 153, 155, and
156
[CMS–9954–P]
RIN 0938–AR89
Patient Protection and Affordable Care
Act; HHS Notice of Benefit and
Payment Parameters for 2015
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
AGENCY:
This proposed rule sets forth
payment parameters and oversight
provisions related to the risk
adjustment, reinsurance, and risk
corridors programs; cost-sharing
parameters and cost-sharing reductions;
and user fees for Federally-facilitated
Exchanges. It also proposes additional
standards with respect to composite
rating, privacy and security of
personally identifiable information, the
annual open enrollment period for 2015,
the actuarial value calculator, the
annual limitation in cost sharing for
stand-alone dental plans, the
meaningful difference standard for
qualified health plans offered through a
Federally-facilitated Exchange, patient
safety standards for issuers of qualified
health plans, and the Small Business
Health Options Program.
DATES: To be assured consideration,
comments must be received at one of
the addresses provided below, no later
than 5 p.m. on December 26, 2013.
ADDRESSES: In commenting, please refer
to file code CMS–9954–P. 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 ‘‘Submit a comment’’ instructions.
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–
9954–P, P.O. Box 8016, Baltimore,
MD 21244–8016.
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
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SUMMARY:
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Human Services, Attention: CMS–
9954–P, Mail Stop C4–26–05, 7500
Security Boulevard, Baltimore, MD
21244–1850.
4. By hand or courier. Alternatively,
you may deliver (by hand or courier)
your written comments ONLY to the
following addresses prior to the close of
the comment period:
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, call
telephone number (410) 786–7195 in
advance to schedule your arrival with
one of our staff members.
Comments erroneously mailed to the
addresses indicated as appropriate for
hand or courier delivery may be delayed
and received after the comment period.
For information on viewing public
comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: For
general information: Sharon Arnold,
(301) 492–4286; Laurie McWright, (301)
492–4311; or Jeff Wu, (301) 492–4305.
For matters related to student health
insurance coverage and composite
rating: Jacob Ackerman, (301) 492–4179.
For matters related to the risk
adjustment program generally, the small
group counting requirements, the risk
adjustment methodology, and the
methodology for determining the
reinsurance contribution rate and
payment parameters: Kelly Horney,
(410) 786–0558.
For matters related to reinsurance
generally, oversight of the premium
stabilization programs, distributed data
collection, and administrative appeals:
Adrianne Glasgow, (410) 786–0686.
For matters related to reinsurance
contributions: Adam Shaw, (410) 786–
1019.
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For matters related to risk corridors:
Jaya Ghildiyal, (301) 492–5149.
For matters related to cost-sharing
reductions, the premium adjustment
percentage, and Federally-facilitated
Exchange user fees: Johanna Lauer,
(301) 492–4397.
For matters related to the annual
limitation on cost sharing for standalone dental plans, privacy and security
of personally identifiable information,
the annual open enrollment period for
the 2015 benefit year, and the
meaningful difference standard: Leigha
Basini, (301) 492–4380.
For matters related to the Small
Business Health Options Program: Scott
Dafflitto, (301) 492–4198.
For matters related to the actuarial
value calculator: Allison Wiley at
(410)786–1740.
For matters related to patient safety
standards for issuers of qualified health
plans: Nidhi Singh Shah, (301) 492–
5110.
For matters related to netting of
payments and charges: Pat Meisol, (410)
786–1917.
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://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be 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.
Table of Contents
I. Executive Summary
II. Background
A. Legislative Authority
B. Stakeholder Consultation and Input
C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of
Benefit and Payment Parameters for 2015
A. Part 144—Requirements Relating to
Health Insurance Coverage
B. Part 147—Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
1. Composite Rating
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2. Student Health Insurance Coverage
C. Part 153—Standards Related to
Reinsurance, Risk Corridors, and Risk
Adjustment under the Affordable Care
Act
1. Provisions and Parameters for the
Permanent Risk Adjustment Program
a. Risk adjustment user fees
b. HHS risk adjustment methodology
considerations
c. Small group determination for risk
adjustment
d. Risk adjustment data validation
e. HHS audits of issuers of risk adjustment
covered plans
2. Provisions and Parameters for the
Transitional Reinsurance Program
a. Major medical coverage
b. Self-insured plans without third party
administrators
c. Uniform reinsurance contribution rate
d. Uniform reinsurance payment
parameters
e. Adjustment options
f. Deducting cost-sharing reduction
amounts from reinsurance payments
g. Audits
h. Same covered life
i. Reinsurance contributions and enrollees
residing in the territories
j. Form 5500 counting method
3. Provisions for the Temporary Risk
Corridors Program
a. Definitions
b. Compliance with risk corridors
standards
c. Participation in the risk corridors
program
e. Adjustment options for transitional
policy
4. Distributed Data Collection for the HHSoperated Risk Adjustment and
Reinsurance Programs
a. Discrepancy resolution process
b. Default risk adjustment charge
D. Part 155—Exchange Establishment
Standards and Other Related Standards
under the Affordable Care Act
1. Election to Operate an Exchange after
2014
2. Ability of States to Permit Agents and
Brokers to Assist Qualified Individuals,
Qualified Employers, or Qualified
Employees Enrolling in Qualified Health
Plans
3. Privacy and Security of Personally
Identifiable Information
4. Annual Open Enrollment Period for
2015
5. Functions of a Small Business Health
Options Program
6. Eligibility Determination Process for
SHOP
7. Application Standards for SHOP
E. Part 156—Health Insurance Issuer
Standards under the Affordable Care Act,
Including Standards Related to
Exchanges
1. Provisions Related to Cost Sharing
a. Premium adjustment percentage
b. Reduced maximum annual limitation on
cost sharing
c. Design of cost-sharing reduction plan
variations
d. Advance payments of cost-sharing
reductions
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2. Provisions on User Fees for a Federallyfacilitated Exchange
a. FFE user fee for the 2015 benefit year
b. Adjustment of FFE user fee
3. Actuarial Value Calculation for
Determining Level of Coverage
4. National Annual Limit on Cost Sharing
for Stand-alone Dental Plans in an
Exchange
5. Additional Standards Specific to SHOP
6. Meaningful Difference Standard for
Qualified Health Plans in the FFEs
7. Quality Standards: Establishment of
Patient Safety Standards for QHPs
Issuers
8. Financial Programs
a. Netting of payments and charges
b. Confirmation of HHS payment and
collections reports
c. Administrative appeals
IV. Collection of Information Requirements
V. Response to Comments
VI. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice
Provisions
D. Regulatory Flexibility Act
E. Unfunded Mandates
F. Federalism
G. Congressional Review Act
VII. Regulations Text
Acronyms
Affordable Care Act—The collective term
for the Patient Protection and Affordable
Care Act (Pub. L. 111–148) and the
Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152)
AV—Actuarial Value
CFR—Code of Federal Regulations
CMS—Centers for Medicare & Medicaid
Services
EHB—Essential Health Benefits
ERISA—Employee Retirement Income
Security Act of 1974 (Pub. L. 93–406)
FFE—Federally-facilitated Exchange
FF–SHOP—Federally-facilitated Small
Business Health Options Program
FPL—Federal poverty level
HCC—Hierarchical condition category
HHS—United States Department of Health
and Human Services
HIPAA—Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104–
191)
IRS—Internal Revenue Service
MLR—Medical Loss Ratio
NAIC—National Association of Insurance
Commissioners
OMB—Office of Management and Budget
OPM—United States Office of Personnel
Management
PHS Act—Public Health Service Act
PII—Personally identifiable information
PSO—Patient Safety Organization
PRA—Paperwork Reduction Act of 1985
PSES—Patient safety evaluation system
QHP—Qualified health plan
SHOP—Small Business Health Options
Program
The Code Internal Revenue Code of 1986
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I. Executive Summary
Qualified individuals and qualified
employers are now able to purchase
private health insurance coverage that
begins as early as January 1, 2014,
through competitive marketplaces
called Affordable Insurance Exchanges,
or ‘‘Exchanges’’ (also called Health
Insurance Marketplaces, or
‘‘Marketplaces’’).1 Individuals who
enroll in qualified health plans (QHPs)
through individual market Exchanges
may receive premium tax credits to
make health insurance more affordable
and financial assistance to reduce cost
sharing for health care services. In 2014,
HHS will also operationalize the
premium stabilization programs
established by the Affordable Care Act—
the risk adjustment, reinsurance, and
risk corridors programs—which are
intended to mitigate the impact of
possible adverse selection and stabilize
the price of health insurance in the
individual and small group markets. We
believe that these programs, together
with other reforms of the Affordable
Care Act, will make high-quality health
insurance affordable and accessible to
millions of Americans.
HHS has previously outlined the
major provisions and parameters related
to the advance payments of the
premium tax credit, cost-sharing
reductions, and premium stabilization
programs. This proposed rule proposes
additional provisions related to the
implementation of these programs.
Specifically, we propose certain
oversight provisions for the premium
stabilization programs, as well as key
payment parameters for the 2015 benefit
year.
The Patient Protection and Affordable
Care Act; HHS Notice of Benefit and
Payment Parameters for 2014 final rule
(78 FR 15410) (2014 Payment Notice)
finalized the risk adjustment
methodology that HHS will use when it
operates risk adjustment on behalf of a
State. This proposed rule proposes
minor updates to this risk adjustment
methodology for 2014 to account for
certain private market Medicaid
expansion plans, and seeks comment on
how to adjust the geographic cost factor
in the payment transfer formula to
account for less populous rating areas in
future benefit years. In this proposed
rule, we also propose to clarify the
counting methods for determining small
1 The word ‘‘Exchanges’’ refers to both State
Exchanges, also called State-based Exchanges, and
Federally-facilitated Exchanges (FFEs). In this
proposed rule, we use the terms ‘‘State Exchange’’
or ‘‘FFE’’ when we are referring to a particular type
of Exchange. When we refer to ‘‘FFEs,’’ we are also
referring to State Partnership Exchanges, which are
a form of FFE.
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group size for participation in the risk
adjustment and risk corridors programs.
Using the methodology set forth in the
2014 Payment Notice for determining
the uniform reinsurance contribution
rate and uniform reinsurance payment
parameters, we propose in this rule a
2015 uniform reinsurance contribution
rate of $44 annually per capita, and the
2015 uniform reinsurance payment
parameters—a $70,000 attachment
point, a $250,000 reinsurance cap, and
a 50 percent coinsurance rate. We also
propose to decrease the attachment
point for 2014 from $60,000 to $45,000.
Additionally, in order to maximize the
financial effect of the transitional
reinsurance program, we propose that if
reinsurance contributions collected for a
benefit year exceed the requests for
reinsurance payments for the benefit
year, we would increase the coinsurance
rate on our reinsurance payments,
ensuring that all of the contributions
collected for a benefit year are expended
for claims for that benefit year.
We also propose several provisions
related to cost sharing. First, we propose
a methodology for estimating average
per capita premium and for calculating
the premium adjustment percentage for
2015 which is used to set the rate of
increase for several parameters detailed
in the Affordable Care Act, including
the maximum annual limitation on cost
sharing and the maximum annual
limitation on deductibles for health
plans in the small group market for
2015. We also propose to set the same
reduced maximum annual limitations
on cost sharing for the 2015 benefit year
as we established for the 2014 benefit
year for cost-sharing reduction plan
variations. Additionally, we are
proposing certain modifications to the
methodology for calculating advance
payments for cost-sharing reductions for
the 2015 benefit year. We also propose
standards for updating the actuarial
value (AV) calculator.
This proposed rule provides for a
2015 Federally-facilitated Exchange
(FFE) user fee rate of 3.5 percent of
premium. Additionally, we propose a
user fee adjustment allowance for
administrative costs in the 2015 benefit
year to reimburse third party
administrators that provide payment for
contraceptive services for enrollees in
certain self-insured group health plans
that receive an accommodation from the
obligation to cover these services in
2014.
On November 14, 2013, the Federal
government announced a policy under
which it will not consider certain nongrandfathered health insurance coverage
in the individual or small group market
renewed between January 1, 2014, and
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October 1, 2014, under certain
conditions to be out of compliance with
specified 2014 market rules, and
requested that States adopt a similar
non-enforcement policy.2
Issuers have set their 2014 premiums
for individual and small group market
plans by estimating the health risk of
enrollees across all of their plans in the
respective markets, in accordance with
the single risk pool requirement at 45
CFR 156.80. These estimates assumed
that individuals currently enrolled in
the transitional plans described above
would participate in the single risk
pools applicable to all nongrandfathered individual and small
group plans, respectively (or a merged
risk pool, if required by the State).
Individuals who elect to continue
coverage in a transitional plan (forgoing
premium tax credits and cost-sharing
reductions that might be available
through an Exchange plan, and the
essential health benefits package offered
by plans compliant with the 2014
market rules, and perhaps taking
advantage of the underwritten
premiums offered by the transitional
plan) may have lower health risk, on
average, than enrollees in individual
and small group plans subject to the
2014 market rules.
If lower health risk individuals
remain in a separate risk pool, the
transitional policy could increase an
issuer’s average expected claims cost for
plans that comply with the 2014 market
rules. Because issuers would have set
premiums for QHPs in accordance with
45 CFR 156.80 based on a risk pool
assumed to include the potentially
lower health risk individuals that enroll
in the transitional plans, an increase in
expected claims costs could lead to
unexpected losses.
To help address the effects of this
transitional policy on the risk pool, we
are exploring modifications to a number
of programs. We have outlined various
options under consideration throughout
this proposed rule, including
adjustments to the reinsurance and risk
corridors programs. We are seeking
comment on these proposals, as well as
soliciting suggestions for alternate
proposals. As the impact of the
transitional policy becomes clearer, we
will determine what, if any, adjustments
are appropriate.
The success of the premium
stabilization programs depends on a
robust oversight program. This proposed
rule expands on provisions of the
2 Letter to Insurance Commissioners, Center for
Consumer Information and Insurance Oversight,
November 14, 2013. See https://www.cms.gov/
CCIIO/Resources/Letters/Downloads/commissionerletter-11–14–2013.PDF.
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Premium Stabilization Rule (77 FR
17220), the 2014 Payment Notice (78 FR
15410), and the first and second final
Program Integrity Rules (78 FR 54070
and 78 FR 65046). In this proposed rule,
we propose that HHS may audit Stateoperated reinsurance programs,
contributing entities, and issuers of risk
adjustment covered plans and
reinsurance eligible-plans. We also
clarify participation standards for the
risk corridors program, and outline a
proposed process for validating risk
corridors data submissions and
enforcing compliance with the
provisions of the risk corridors program.
We also propose several provisions
regarding the HHS-operated risk
adjustment data validation process. On
June 22, 2013, we issued ‘‘The
Affordable Care Act HHS-operated Risk
Adjustment Data Validation Process
White Paper’’ 3 and on June 25, 2013, we
held a public meeting to discuss how to
best ensure the accuracy and
consistency of the data we will use
when operating the risk adjustment
program on behalf of a State. In this
proposed rule, we propose standards for
risk adjustment data validation,
including a sampling methodology for
the initial validation audit and detailed
audit standards. These proposed
standards would be tested for 2 years
before they are used as a basis for
payment adjustments. This proposed
rule also includes a proposal to
implement, over time, the requirements
related to patient safety standards that
QHP issuers must meet, and proposes
reducing the time period for which a
State electing to operate an Exchange
after 2014 must have in effect an
approved, or conditionally approved,
Exchange Blueprint and operational
readiness assessment from at least 12
months to 6.5 months prior to the
Exchange’s first effective date of
coverage. We also propose provisions
related to the privacy and security of
personally identifiable information (PII),
the annual open enrollment period for
2015, the annual limitation on cost
sharing for stand-alone dental plans,
and the meaningful difference standards
for QHPs offered through an FFE. We
also propose certain standards for the
Small Business Health Options Program
(SHOP) and for composite rating in the
small group market.
II. Background
A. Legislative and Regulatory Overview
The Patient Protection and Affordable
Care Act (Pub. L. 111–148) was enacted
3 Available at: https://www.regtap.info/uploads/
library/ACA_HHS_OperatedRADVWhitePaper_
062213_5CR_062213.pdf
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on March 23, 2010. The Health Care and
Education Reconciliation Act of 2010
(Pub. L. 111–152), which amended and
revised several provisions of the Patient
Protection and Affordable Care Act, was
enacted on March 30, 2010. In this
proposed rule, we refer to the two
statutes collectively as the ‘‘Affordable
Care Act.’’
Section 1302 of the Affordable Care
Act directs the Secretary of Health and
Human Services (referred to throughout
this rule as the Secretary) to define
EHBs and provides for cost-sharing
limits and AV requirements. Sections
1302(d)(1) and (d)(2) of the Affordable
Care Act describe the determination of
the levels of coverage based on AV.
Consistent with section 1302(d)(2)(A) of
the Affordable Care Act, AV is
calculated based on the provision of
EHB to a standard population. Section
1302(d)(3) of the Affordable Care Act
directs the Secretary to develop
guidelines that allow for de minimis
variation in AV calculations.
Section 1311(b)(1)(B) of the
Affordable Care Act directs that the
SHOP assist qualified small employers
in facilitating the enrollment of their
employees in QHPs offered in the small
group market. Under section
1312(f)(2)(B) of the Affordable Care Act,
beginning in 2017, States will have the
option to allow issuers to offer QHPs in
the large group market through the
SHOP.
Section 1311(c)(6)(B) of the
Affordable Care Act states that the
Secretary is to require an Exchange to
provide for annual open enrollment
periods for calendar years after the
initial enrollment period.
Section 1311(h)(1) of the Affordable
Care Act specifies that a QHP may
contract with health care providers and
hospitals with more than 50 beds only
if they meet certain patient safety
standards, including use of a patient
safety evaluation system, a
comprehensive hospital discharge
program, and implementation of health
care quality improvement activities.
Section 1311(h)(2) of the Affordable
Care Act also provides the Secretary
flexibility to establish reasonable
exceptions to these patient safety
requirements and section 1311(h)(3) of
the Affordable Care Act allows the
Secretary flexibility to issue regulations
to modify the number of beds described
in section 1311(h)(1)(A) of the
Affordable Care Act.
Section 1313 of the Affordable Care
Act, combined with section 1321 of the
Affordable Care Act, provides the
Secretary with the authority to oversee
the financial integrity of State
Exchanges, their compliance with HHS
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standards, and the efficient and nondiscriminatory administration of State
Exchange activities. Section 1321(a) of
the Affordable Care Act provides
general authority for the Secretary to
establish standards and regulations to
implement the statutory requirements
related to Exchanges, QHPs, and other
components of Title I of the Affordable
Care Act.
When operating an FFE under section
1321(c)(1) of the Affordable Care Act,
HHS has the authority under sections
1321(c)(1) and 1311(d)(5)(A) of the
Affordable Care Act to collect and spend
user fees. In addition, 31 U.S.C. 9701
permits a Federal agency to establish a
charge for a service provided by the
agency. Office of Management and
Budget (OMB) Circular A–25 Revised
establishes Federal policy regarding
user fees and specifies that a user charge
will be assessed against each
identifiable recipient for special benefits
derived from Federal activities beyond
those received by the general public.
Section 1341 of the Affordable Care
Act requires the establishment of a
transitional reinsurance program in each
State to help pay the cost of treating
high-cost enrollees in the individual
market from 2014 through 2016. Section
1342 of the Affordable Care Act directs
the Secretary to establish a temporary
risk corridors program that provides for
the sharing in gains or losses resulting
from inaccurate rate setting from 2014
through 2016 between the Federal
government and certain participating
plans. Section 1343 of the Affordable
Care Act establishes a permanent risk
adjustment program that is intended to
provide increased payments to health
insurance issuers that attract higher-risk
populations, such as those with chronic
conditions, and thereby reduce
incentives for issuers to avoid higherrisk enrollees. Sections 1402 and 1412
of the Affordable Care Act establish a
program for reducing cost sharing for
individuals with lower household
income and Indians.
Section 1411(g) of the Affordable Care
Act provides that any person who
receives information specified in section
1411(b) provided by an applicant or
information specified in section 1411(c),
(d), or (e) from a Federal agency must
use the information only for the purpose
of and to the extent necessary to ensure
the efficient operation of the Exchange,
and may not disclose the information to
any other person except as provided in
that section. Section 6103(l)(21)(C) of
the Code additionally provides that
return information disclosed under
section 6103(l)(21)(A) or (B) may be
used only for the purpose of and to the
extent necessary in establishing
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eligibility for participation in the
Exchange, verifying the appropriate
amount of any premium tax credit or
cost-sharing reduction, or determining
eligibility for participation in a health
insurance affordability program as
described in that section.
1. Premium Stabilization Programs
In the July 15, 2011 Federal Register
(76 FR 41930), we published a proposed
rule outlining the premium stabilization
programs. We implemented the
premium stabilization programs in a
final rule, published in the March 23,
2012 Federal Register (77 FR 17220)
(Premium Stabilization Rule). In the
December 7, 2012 Federal Register (77
FR 73118), we published a proposed
rule outlining the benefit and payment
parameters for 2014 to expand the
provisions related to the premium
stabilization programs and set forth
payment parameters in those programs
(proposed 2014 Payment Notice). We
published the 2014 Payment Notice in
the March 11, 2013 Federal Register (78
FR 153410).
As discussed above, we published a
white paper on risk adjustment data
validation on June 22, 2013, and hosted
a public meeting on June 25, 2013, to
discuss the white paper.
2. Program Integrity
In the June 19, 2013 Federal Register
(78 FR 37032), we published a proposed
rule that proposed certain program
integrity standards related to Exchanges
and the premium stabilization programs
(proposed Program Integrity Rule). The
provisions of that proposed rule were
finalized in two rules, the ‘‘first final
Program Integrity Rule’’ published in
the August 30, 2013 Federal Register
(78 FR 54070) and the ‘‘second final
Program Integrity Rule’’ published in
the October 30, 2013 Federal Register
(78 FR 65046).
3. Exchanges, Essential Health Benefits,
Actuarial Value
A proposed rule relating to EHBs and
AV was published in the November 26,
2012 Federal Register (77 FR 70644).
We proposed standards related to the
premium adjustment percentage in the
Standards Related to Essential Health
Benefits, Actuarial Value, and
Accreditation Final Rule, published in
the February 25, 2013 Federal Register
(78 FR 12834) (EHB Rule). We
established standards for the
administration and payment of costsharing reductions and the SHOP in the
2014 Payment Notice and in the
Amendments to the HHS Notice of
Benefit and Payment Parameters for
2014 interim final rule, published in the
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March 11, 2013 Federal Register (78 FR
15541). The provisions established in
the interim final rule were finalized in
the second final Program Integrity Rule.
We set forth standards related to
Exchange user fees in the 2014 Payment
Notice. We also established an
adjustment to the FFE user fee in the
Coverage of Certain Preventive Services
Under the Affordable Care Act final
rule, published in the July 2, 2013
Federal Register (78 FR 39870)
(Preventive Services Rule).
A Request for Comment relating to
Exchanges was published in the August
3, 2010 Federal Register (75 FR 45584).
An Initial Guidance to States on
Exchanges was issued on November 18,
2010. A proposed rule was published in
the July 15, 2011 Federal Register (76
FR 41866) to implement components of
the Exchange. A proposed rule
regarding Exchange functions in the
individual market, eligibility
determinations, and Exchange standards
for employers was published in the
August 17, 2011 Federal Register (76 FR
51202). A final rule implementing
components of the Exchanges and
setting forth standards for eligibility for
Exchanges was published in the March
27, 2012 Federal Register (77 FR 18310)
(Exchange Establishment Rule).
4. Market Rules
Provisions relating to the 2014 market
reforms and rate review were published
in Patient Protection and Affordable
Care Act; Health Insurance Market
Rules; Rate Review proposed rule in the
November 26, 2012 Federal Register (77
FR 70584). A final rule implementing
these provisions was published in the
February 27, 2013 Federal Register (78
FR 13406) (Market Reform Rule).
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5. Medical Loss Ratio
We published a request for comment
on PHS Act section 2718 in the April
14, 2010 Federal Register (75 FR
19297), and published an interim final
rule with a 60-day comment period
relating to the medical loss ratio (MLR)
program on December 1, 2010 (75 FR
74864). A final rule with a 30-day
comment period was published in the
December 7, 2011 Federal Register (76
FR 76574).
B. Stakeholder Consultation and Input
In addition to seeking advice from the
public on risk adjustment data
validation, HHS has consulted with
stakeholders on policies related to the
operation of Exchanges, including the
SHOP and the premium stabilization
programs. HHS has held a number of
listening sessions with consumers,
providers, employers, health plans, the
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actuarial community, and State
representatives to gather public input.
HHS consulted with stakeholders
through regular meetings with the
National Association of Insurance
Commissioners (NAIC), regular contact
with States through the Exchange
Establishment grant and Exchange
Blueprint approval processes, and
meetings with Tribal leaders and
representatives, health insurance
issuers, trade groups, consumer
advocates, employers, and other
interested parties. We considered all of
the public input as we developed the
policies in this proposed rule.
C. Structure of Proposed Rule
The regulations outlined in this
proposed rule would be codified in 45
CFR parts 144, 147, 153, 155 and 156.
The proposed regulations in parts 144
and 147 propose amendments relating
to student health insurance coverage.
The proposed regulations in part 147
also outline market-wide provisions
regarding composite rating. The
proposed regulations in part 153 outline
the 2015 uniform contribution rate and
uniform reinsurance payment
parameters for the 2015 benefit year and
oversight provisions related to the
premium stabilization programs, such as
provisions related to risk adjustment
data validation, risk corridors data
validation, and HHS’s authority to audit
entities participating in these programs.
The proposed regulations in part 153
propose that excess reinsurance
contributions collected for a benefit year
be used for claims for that benefit year.
The proposed regulations in part 155
propose to reduce the time that States
that elect to establish and operate an
Exchange after 2014 must have in effect
an approved or conditionally approved
Exchange Blueprint and readiness
assessment from 12 months to 6.5
months prior to the Exchange’s first
effective date of coverage. The proposed
regulations also include a change to the
annual open enrollment period for the
2015 benefit year and certain proposals
related to the SHOP Exchanges, which
we discuss in greater detail below. We
also propose in part 155 to amend
§ 155.260 to allow the Secretary to
determine that additional uses or
disclosures of PII not specifically
permitted by § 155.260 ensure the
efficient operation of the Exchange. In
addition, we propose to establish a
process under which Exchanges may
seek the Secretary’s approval for other
uses of applicant PII not specifically
permitted by § 155.260. We also propose
to amend § 155.260 to more specifically
define the term ‘‘non-Exchange entity’’
and to provide a baseline for the privacy
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and security standards to which
Exchanges must bind non-Exchange
entities through written contracts or
agreements.
The proposed regulations in part 156
set forth provisions related to cost
sharing, including the premium
adjustment percentage, the maximum
annual limitation on cost sharing, the
maximum annual limitation on
deductibles for health plans in the small
group market, the reductions in the
maximum annual limitation for cost
sharing plan variations, and the
methodology to calculate advance
payments of cost-sharing reductions for
2015. They also outline the 2015 FFE
user fee rate and propose a user fee
adjustment to reimburse third party
administrators that pay for
contraceptive services for enrollees in
certain self-insured group health plans
that receive an accommodation from the
obligation to cover these services. They
also include provisions related to
parameters for making updates to the
AV calculator in future plan years. The
proposed 2015 AV Calculator and a
proposed 2015 AV Calculator
methodology, which would supersede
the 2014 versions of these documents
incorporated by reference in the EHB
Rule, are being incorporated by
reference in this proposed rule. In part
156 we also propose a meaningful
difference standard for QHPs offered
through an FFE and patient safety
standards for issuers of QHPs. Finally,
we propose an administrative appeals
process applicable to the premium
stabilization, cost-sharing reduction,
advance payments of the premium tax
credit, and FFE user fee programs.
In parts 155 and 156, we also propose
the following provisions related to the
SHOP:
• We propose to permit all SHOPs
performing premium aggregation to
establish one or more standard
processes for premium calculation,
payment, and collection.
• We propose that in the FF–SHOPs,
for plan years when premium
aggregation is available, employers be
required to make premium payments to
the FF–SHOP according to a timeline
and process established by HHS. We
further propose that for plan years
beginning on or after January 1, 2015,
unless the QHP issuer receives a
cancellation notice from the FF–SHOP,
the issuer would be required to
effectuate coverage.
• We propose a standard premium
pro-rating methodology for the FF–
SHOPs, for plan years when premium
aggregation is available, providing that
groups will be charged for the portion
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of the month for which an enrollee is
enrolled.
• We propose to make explicit our
interpretation of current regulations that
no SHOPs would be permitted to collect
information on a SHOP application
unless that information is necessary to
determine SHOP eligibility or effectuate
enrollment through the SHOP.
• We propose that no SHOPs would
be permitted to perform individual
market Exchange eligibility
determinations or verifications.
• We propose that a qualified
employer that becomes a large employer
but continues to purchase coverage
through a SHOP would continue to be
rated as a small employer.
• We propose to limit the employer
and employee eligibility adjustment
periods to circumstances when the
SHOP has an optional verification
process, and collects information
through that verification process that is
inconsistent with the information
provided by an employer or employee
on a SHOP application.
• We propose for plan years
beginning on or after January 1, 2015 to
give SHOPs in States that permit this
activity under State law, the option of
permitting enrollment in a SHOP
through the Internet Web site of an
agent or broker.
• We propose to limit the availability
of composite premiums in the FF–
SHOPs after employee choice and
premium aggregation become available.
• We propose methods for employers
in the FF–SHOPs to offer stand-alone
dental coverage after employee choice
becomes available in those SHOPs.
• We propose for plan years
beginning on or after January 1, 2015 to
permit FF–SHOPs to give employers the
flexibility to define different premium
percentage contributions for full-time
employees and non-full-time
employees.
We note that nothing in these
proposed regulations would limit the
authority of the Office of the Inspector
General (OIG) as set forth by the
Inspector General Act of 1978 or other
applicable law.
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III. Provisions of the Proposed HHS
Notice of Benefit and Payment
Parameters for 2015
A. Part 144—Requirements Relating to
Health Insurance Coverage
In § 144.103, the term ‘‘policy year,’’
as amended by the second final Program
Integrity Rule, is defined as: (1) With
respect to a grandfathered health plan
offered in the individual health
insurance market, the 12-month period
that is designated as the policy year in
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the policy documents of the individual
health insurance coverage. If there is no
designation of a policy year in the
policy document (or no such policy
document is available), then the policy
year is the deductible or limit year used
under the coverage. If deductibles or
other limits are not imposed on a yearly
basis, the policy year is the calendar
year; and (2) with respect to a nongrandfathered health plan offered in the
individual health insurance market, or
in a market in which the State has
merged the individual and small group
risk pools (merged market), for coverage
issued or renewed beginning January 1,
2014, a calendar year for which health
insurance coverage provides coverage
for health benefits. Further, § 147.104,
as amended by the second final Program
Integrity Rule, establishes individual
market open enrollment periods based
on a calendar policy year and provides
that non-grandfathered coverage in the
individual or merged markets must be
offered on a calendar year basis, with a
policy year beginning on January 1 and
ending on December 31 of each year.
Under regulations at § 147.145(a),
student health insurance coverage is
defined as individual health insurance
coverage. Section 147.145(b), however,
exempts student health insurance
coverage from certain PHS Act and
Affordable Care Act requirements that
apply to individual health insurance
coverage, including certain guaranteed
availability provisions of section 2702 of
the PHS Act, implemented at § 147.104.
As discussed below, because student
health insurance coverage is
traditionally offered on a school year
basis (for example, a policy year
beginning on September 1 of each year
and ending on August 30 of the
following year), we are proposing to
modify § 147.145 to exempt student
health insurance coverage from the
requirement under section 2702 to
establish open enrollment periods and
coverage effective dates that are based
on a calendar policy year, including the
requirement that non-grandfathered
coverage in the individual and merged
markets be offered on a calendar year
basis. We are also proposing conforming
amendments to the definition of ‘‘policy
year’’ to reflect that student health
insurance coverage would not be
required to be offered on a calendar year
basis. We seek comment on this
proposal.
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B. Part 147—Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
1. Composite Rating
Section 2701 of the PHS Act, as added
by section 1201 of the Affordable Care
Act, establishes permissible rating
factors that may be used to vary the
premium rate charged by a health
insurance issuer for non-grandfathered
health insurance coverage (including
QHPs) in the individual and small
group markets beginning in 2014.4 The
factors are: family size, rating area, age,
and tobacco use (within limits). Section
2701(a)(4) of the PHS Act provides that
with respect to family coverage under a
group health plan or health insurance
coverage, any rating variation for age or
tobacco use must be applied based on
the proportion of the premium
attributable to each family member
covered under the plan or coverage.
In the Market Reform Rule, we
applied the per-member rating
requirement of PHS Act section
2701(a)(4) in both the individual and
small group markets. Thus, at
§ 147.102(c), we generally directed that
issuers calculate a separate premium for
each individual covered under the plan
or coverage based on allowable rating
factors including age and tobacco use,
and sum the individual rates to
determine the total premium charged by
the issuer to a family or to a group
health plan.5
We recognized that in the small group
market it is common industry billing
practice to charge an employer a
uniform premium for a given family
composition by adding the per-member
rates and dividing by the total number
of employees covered under the
employer’s health insurance plan. We
indicated that nothing prevents an
issuer from converting per-member rates
into average enrollee premium amounts
(calculated composite premiums),
provided that the total group premium
is the same total amount derived in
accordance with the process established
by the regulations.
Because calculated composite
premiums are average rates for a
particular group, changes in employee
4 Beginning in 2017, States will have the option
to allow issuers to offer QHPs in the large group
market through the SHOP. If a State elects this
option, the rating rules in section 2701 and its
implementing regulations will apply to all coverage
offered in such State’s large group market (except
for self-insured group health plans) under to section
2701(a)(5) of the PHS Act.
5 States that do not permit rating for age or
tobacco use may require health insurance issuers in
the individual and small group markets to use
uniform family tiers and corresponding multipliers
established by the State. § 147.102(c)(2).
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census would typically cause a change
in the average rate. For example, a new
average rate per enrollee would
typically result from employees adding
or dropping coverage during the course
of the plan year, causing employer and
employee contributions to change as
well. We have been asked about such
mid-year changes in group composition
and how issuers should address the
resulting changes in the calculated
composite premium for the group.
In this proposed rule, we propose to
add a provision at § 147.102(c)(3)
clarifying that if an issuer offers a
composite premium calculated when
the employer obtains or renews
coverage, the issuer must ensure that
such amount does not vary for any plan
participant or beneficiary during the
plan year with respect to the particular
plan involved. Under this approach, an
issuer would be required to accept the
group’s composite premium, calculated
based on applicable employee
enrollment at the beginning of the plan
year, as the applicable premium rate for
any new individual who enrolls in the
plan during the plan year.6
Terminations of coverage during the
plan year also would not change the
composite premium. At the time of
renewal, the issuer would recalculate a
group’s composite premium based on
plan enrollment at that time for
subsequent coverage. This will allow
calculated composite premiums, and
thus employer and employee
contributions to coverage, to remain
stable during the plan year, regardless of
changes in the group’s composition.
This proposed policy would generally
apply to health insurance issuers
offering non-grandfathered health
insurance coverage in the small group
market, through a SHOP or outside of a
SHOP, for plan years beginning on or
after January 1, 2015. However, we
encourage issuers to voluntarily adopt
this approach for plan years beginning
in 2014. As discussed in more detail
below, we propose a limited exception
to this policy in § 155.705(b)(11)(ii)(D)
and § 156.285(a)(4)(ii) of this proposed
rule, under which composite rating
would not be available when an
6 In cases where the composite premium does not
incorporate the age or tobacco use rating factor, an
issuer would be required to accept the group’s
composite premium, calculated based on applicable
employee enrollment at the beginning of the plan
year, multiplied by any applicable age or tobacco
rating factor, as the applicable premium for any
new individual who enrolls in the plan during the
plan year. Under § 147.102(a)(1)(iv), rating for
tobacco use is subject to the nondiscrimination and
wellness provisions under section 2705 of the PHS
Act and its implementing regulations, regardless of
whether the composite premium incorporates the
tobacco use rating factor.
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employer participating in a Federallyfacilitated SHOP elects to offer its
employees all QHPs within a single
level of coverage under
§ 155.705(b)(3)(iv)(A).
We are considering establishing a
uniform tiered-composite rating
structure that would apply market wide
unless a State requires and HHS
approves an alternate tiered-composite
rating methodology. Under the approach
we are considering, a small group
market issuer offering composite rating
would calculate the composite premium
for different tiers of enrollees covered
under the employer’s plan. For example,
in a two-tier structure, one composite
premium would be calculated for
covered adults (employees and adult
dependents) and another composite
premium would be calculated for
covered children. Alternatively, in a
three-tier structure, there would be one
composite premium for covered
employees, a second composite
premium for covered adult dependents,
and a third composite premium for
covered children. The premium for a
given family composition would simply
be determined by summing the
applicable tiered-composite rates. We
believe a tiered-composite approach
would promote simplicity for issuers
and employers, and ensure that
premiums for family coverage
appropriately reflect the lower rates for
children.
We seek comments on all aspects of
this approach to composite rating. We
also seek comments on whether to
establish a default uniform tieredcomposite rating structure, including
the appropriate number and types of
enrollee tiers (for example, an
employee-only tier, an adult dependent
tier, and a child dependent tier).
2. Student Health Insurance Coverage
As discussed above, under
§ 147.145(a), student health insurance
coverage is defined as a type of
individual health insurance coverage.
However, § 147.145(b) provides that for
purposes of the guaranteed availability
requirements of section 2702 of the PHS
Act, a health insurance issuer that offers
student health insurance coverage is not
required to accept individuals who are
not students or dependents of student in
such coverage. Because student health
insurance coverage is traditionally
offered on a school year basis that does
not align with the calendar year, we do
not believe student health insurance
should be required to establish open
enrollment periods and coverage
effective dates under § 147.104(b)(1) and
(2) that are based on a calendar policy
year, including the requirement that
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non-grandfathered coverage in the
individual and merged markets be
offered on a calendar year basis.
Accordingly, we are proposing to amend
§ 147.145(b)(1)(ii) to exempt student
health insurance coverage from these
guaranteed availability requirements.
We seek comments on this proposal and
whether other modifications are
necessary for student health insurance
coverage.
C. Part 153—Standards Related to
Reinsurance, Risk Corridors, and Risk
Adjustment under the Affordable Care
Act
1. Provisions and Parameters for the
Permanent Risk Adjustment Program
The risk adjustment program is a
permanent program created by section
1343 of the Affordable Care Act that
transfers funds from lower risk, nongrandfathered plans to higher risk, nongrandfathered plans in the individual
and small group markets, inside and
outside the Exchanges. In subparts D
and G of the Premium Stabilization
Rule, we established standards for the
administration of the risk adjustment
program. A State that is approved or
conditionally approved by the Secretary
to operate an Exchange may establish a
risk adjustment program, or have HHS
do so on its behalf.
a. Risk Adjustment User Fees
If a State is not approved to operate
or chooses to forgo operating its own
risk adjustment program, HHS will
operate risk adjustment on the State’s
behalf. As described in the 2014
Payment Notice, HHS’s operation of risk
adjustment on behalf of States is funded
through a risk adjustment user fee.
Section 153.610(f)(2) provides that an
issuer of a risk adjustment covered plan
must remit a user fee to HHS for each
month equal to the product of its
monthly enrollment in the plan and the
per-enrollee-per-month risk adjustment
user fee specified in the annual HHS
notice of benefit and payment
parameters for the applicable benefit
year.
OMB Circular No. A–25R establishes
Federal policy regarding user fees, and
specifies that a user charge will be
assessed against each identifiable
recipient for special benefits derived
from Federal activities beyond those
received by the general public. The risk
adjustment program will provide special
benefits as defined in section 6(a)(1)(b)
of Circular No. A–25R to an issuer of a
risk adjustment covered plan because it
will mitigate the financial instability
associated with risk selection as other
market reforms go into effect. The risk
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adjustment program also will contribute
to consumer confidence in the health
insurance industry by helping to
stabilize premiums across the
individual and small group health
insurance markets.
In the 2014 Payment Notice, we
estimated Federal administrative
expenses of operating the risk
adjustment program to be $0.96 per
enrollee per year, based on our
estimated contract costs for risk
adjustment operations. For the 2015
benefit year, we propose to use the same
methodology to estimate our
administrative expenses to operate the
program. These contracts cover
development of the model and
methodology, collections, payments,
account management, data collection,
data validation, program integrity and
audit functions, operational and fraud
analytics, stakeholder training, and
operational support. We do not propose
to set the user fee to cover costs
associated with Federal personnel. To
calculate the user fee, we would divide
HHS’s projected total costs for
administering the risk adjustment
programs on behalf of States by the
expected number of enrollees in risk
adjustment covered plans (other than
plans not subject to market reforms and
student health plans, which are not
subject to payments and charges under
the risk adjustment methodology HHS
uses when it operates risk adjustment
on behalf of a State) in HHS-operated
risk adjustment programs for the benefit
year.
We estimate that the total cost for
HHS to operate the risk adjustment
program on behalf of States for 2015
will be approximately $27.3 million,
and that the per capita risk adjustment
user fee would be no more than $1.00
per enrollee per year. We seek comment
on this proposed assessment of user fees
to support HHS-operated risk
adjustment programs.
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b. HHS Risk Adjustment Methodology
Considerations
In the 2014 Payment Notice, we
finalized the methodology that HHS will
use when operating a risk adjustment
program on behalf of a State in 2014. We
propose to use the same methodology in
2015. In this proposed rule, we propose
to clarify the treatment of premium
assistance Medicaid alternative plans in
this risk adjustment methodology, and
seek comment on potential adjustments
to the geographic cost factor in the HHS
risk adjustment model for future years.
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(i) Incorporation of Premium Assistance
Medicaid Alternative Plans in the HHS
Risk Adjustment Methodology
Section 1343(c) of the Affordable Care
Act provides that risk adjustment
applies to non-grandfathered health
insurance coverage offered in the
individual and small group markets. In
some States, expansion of Medicaid
benefits under section 2001(a) of the
Affordable Care Act may take the form
of enrolling newly Medicaid-eligible
enrollees into individual market plans.
For example, these enrollees could be
placed into silver plan variations—
either the 94 percent silver plan
variation or the zero cost sharing plan
variation—with a portion of the
premiums and cost sharing paid for by
Medicaid on their behalf. Because
individuals in these types of Medicaid
expansion plans receive significant costsharing assistance, they may utilize
medical services at a higher rate. To
address this induced utilization in the
context of cost-sharing reduction plan
variations in the HHS risk adjustment
methodology, we increase the risk score
for individuals in plan variations by a
certain factor. We propose to use the
same factor for individuals enrolled in
the corresponding Medicaid expansion
plan variations. Table 1 shows the costsharing adjustments for both 94 percent
silver plan variation enrollees and zero
cost-sharing plan variation enrollees for
silver QHPs as finalized in the 2014
Payment Notice. We propose to
implement these adjustments for 2014.
We plan to evaluate these adjustments
in the future, after data from the initial
years of risk adjustment is available. We
seek comment on this approach.
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separately calculated for catastrophic
plans in a geographic area relative to the
statewide catastrophic pool. However,
several States have defined a large
number of rating areas. Less populous
rating areas raise concerns about the
accuracy and stability of the calculation
of the geographic cost factor because in
less populous rating areas the
geographic cost factor might be
calculated based on a small number of
plans. Inaccurate or unstable geographic
cost factors could distort premiums and
the stability of the risk adjustment
model.
We seek comment on how to best
adjust the geographic cost factors or
geographic rating areas in future years to
address these potential premium
distortions. We also seek comments on
how this adjustment should be
implemented for a separately risk
adjusted pool of catastrophic plans. We
do not intend to make this adjustment
for 2014.
c. Small Group Determination for Risk
Adjustment
For a plan to be subject to risk
adjustment, according to section 1343(c)
of the Affordable Care Act and the
definition of a ‘‘risk adjustment covered
plan’’ in § 153.20, a plan must be offered
in the ‘‘individual or small group
market.’’ The definition of small group
market in § 153.20 references the
definition at section 1304(a)(3) of the
Affordable Care Act.
Section 1304(a)(3) of the Affordable
Care Act, in defining ‘‘small group
market,’’ references the definition of a
‘‘small employer’’ in section 1304(b)(2)
of the Affordable Care Act. That
definition provides that an employer
TABLE 1—COST-SHARING REDUCTION with an average of at least 1 but not
more than 100 employees on business
ADJUSTMENTS
days during the preceding calendar year
Plan variation
Induced utilization factor and who employs at least 1 employee on
the first day of the plan year will be
94 percent Plan
considered a ‘‘small employer.’’
Variation ............
1.12 However, section 1304(b)(3) of the
Zero Cost-Sharing
Affordable Care Act provides that, for
Plan Variation of
plan years beginning before January 1,
Silver QHP ........
1.12
2016, a State may elect to limit ‘‘small
employer’’ to mean an employer with at
(ii) Adjustment to the Geographic Cost
least 1 but not more than 50 employees.
Factor
In the 2014 Payment Notice, we stated
As finalized in the 2014 Payment
that we believe that the Affordable Care
Notice, the geographic cost factor is an
Act requires the use of a counting
adjustment in the payment transfer
method that accounts for part-time
formula to account for plan costs such
employees, and that the full-time
as input prices that vary geographically
equivalent method described in section
and are likely to affect plan premiums.
4980H(c)(2)(E) of the Code is a
For the metal-level risk pool, it is
reasonable method to apply. Thus, we
calculated based on the observed
believe that the risk adjustment program
average silver plan premium in a
must also use a counting method that
geographic area relative to the statewide takes employees that are not full-time
average silver plan premium. It is
into account when determining whether
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a group health plan must participate in
that program.
However, we also recognize that,
because risk adjustment is intended to
stabilize premiums by mitigating the
effects of the rating rules, it is important
that the program be available to plans
that are subject to the rating rules, to the
extent permissible under the Affordable
Care Act. We recognize that a number of
States, which have primary enforcement
jurisdiction over the market rules, may
use counting methods that do not take
non-full-time employees into account.
Thus, we propose to clarify that in
determining which group health plans
participate as small group plans in the
risk adjustment program, we would
apply the applicable State counting
method, unless the State counting
method does not take into account
employees that are not full-time. In that
circumstance, we would apply the fulltime equivalent method described in
section 4980H(c)(2)(E) of the Code.7 We
believe that this approach defers to State
counting methods and aligns with State
enforcement of rating rules, within the
bounds of what is permissible under the
Affordable Care Act. We seek comment
on our interpretation of the permissible
counting rules for purposes of risk
adjustment, the approach described
above, and on alternate counting
methods that may be preferable. We also
seek comment on whether we should
codify these risk adjustment counting
rules in regulation text.
d. Risk Adjustment Data Validation
The 2014 Payment Notice established
a risk adjustment data validation
program that HHS will use when
operating risk adjustment on behalf of a
State. In the 2014 Payment Notice, we
specified a framework for this program
that includes six stages: (1) Sample
selection; (2) initial validation audit; (3)
second validation audit; (4) error
estimation; (5) appeals; and (6) payment
adjustments.
To develop the details of the program,
we sought the input of issuers,
consumer advocates, providers, and
other stakeholders. We issued the
‘‘Affordable Care Act HHS-Operated
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7 We note that the IRS has published a proposed
regulation that contains further details that would
apply to this calculation (54.4980H–2(c)).
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Risk Adjustment Data Validation
Process White Paper’’ on June 22, 2013.
That white paper discussed and sought
comments on a number of potential
considerations for the development of
the risk adjustment data validation
methodology. On June 25, 2013, we held
a public meeting to discuss the topics
considered in the white paper. We
received submissions from 53
commenters, including issuers, issuer
trade groups, advocacy groups, and
consultants. As we noted in the white
paper, our overall goals are to promote
consistency and a level playing field by
establishing uniform audit
requirements, and to protect private
information by limiting data transfers
during the data validation process.
In this proposed rule, we propose
provisions for the risk adjustment data
validation process and methodology
that reflect our analysis of the white
paper comments and our discussions
with stakeholders. We note that a State
operating a risk adjustment program is
not required to adopt these standards.
These proposed rules are consistent
with the white paper and lessons drawn
from our experience with Medicare
Advantage risk adjustment data
validation and thus should be familiar
to issuers.
(i) Sample Selection
The first stage in the HHS-operated
risk adjustment data validation process
is the selection of a sample of an issuer’s
enrollees whose risk adjustment data
will be validated. In the proposed 2014
Payment Notice, we stated that HHS
would choose a sample size of enrollees
such that the estimated risk score errors
would be statistically sound and the
enrollee-level risk score distributions
would reflect enrollee characteristics for
each issuer. We stated that in
determining the appropriate sample size
for data validation, we recognized the
importance of striking a balance
between ensuring statistical soundness
of the sample and minimizing the
operational burden on issuers,
providers, and HHS. Additionally, we
stated that we would ensure that the
sample would cover critical
subpopulations of enrollees for each risk
adjustment covered plan, such as
enrollees with and without hierarchical
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condition categories (HCCs). To develop
a proposed sample size for the first year
of the HHS risk adjustment data
validation program, we propose to use
the methodology outlined in the white
paper. Our goal in determining the
enrollee sample size for the initial 2
years of risk adjustment data validation
is to propose a statistically valid sample
large enough to inform us to the
dynamics of the risk adjustment data
validation process in operation and
estimation of risk score accuracy. As we
established in the 2014 Payment Notice,
for HHS to observe and optimize the
risk adjustment data validation process,
no payment adjustments will be made
based on the risk adjustment data
validation process for the initial 2 years
of HHS-operated risk adjustment.
In general, we propose to select the
initial validation audit sample for a
given benefit year by dividing the
relevant population into a number of
‘‘strata,’’ representing different
demographic and risk score bands. We
are proposing that, for the initial 2 years
of the risk adjustment data validation
program, the initial validation audit
sample will consist of 200 enrollees
from each issuer. We stated in the 2014
Payment Notice that the overall sample
will reflect a disproportionate selection
of enrollees with HCCs. Here, we
discuss in detail our proposed sampling
methodology, including our proposal to
group enrollees to account for age
characteristics and health status. Some
commenters on the white paper
suggested that we also consider
sampling based on plan types and other
characteristics. We will consider other
sampling strategies in the future, but
believe that we do not yet have enough
experience with the risk adjustment
process to determine the most
appropriate sampling groups at this
time.
Therefore, we are proposing a simple
age and risk score stratification for at
least the initial 2 years of the program.
Following the division of the relevant
population into strata, we propose to
use the following formulas to calculate
a proposed sample size for the initial
validation audit each year. In general,
the proposed formula for the overall
sample size for an issuer (n) is:
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For the 2014 benefit year, the
parameters listed above were developed
using data from two principal sources:
Medicare Advantage risk adjustment
data validation net error rates and
variances; and expenditures data from
the Truven Health Analytics 2010
MarketScan® Commercial Claims and
Encounters database (MarketScan®). We
chose to use Medicare Advantage error
rates because Medicare Advantage
utilizes an HCC-based methodology
similar to the one used for HHS risk
adjustment, and because it uses a
similar risk adjustment data validation
process to determine payment error
rates.
We also chose to use the MarketScan®
expenditure database because of the
comprehensiveness of the database,
which was the primary source for
calibration for the HHS risk adjustment
models. The database contains enrolleespecific claims utilization,
expenditures, and enrollment across
inpatient, outpatient, and prescription
drug services from a selection of large
employers and health plans. The
database includes de-identified data
from approximately 100 payers, and
contains more than 500 million claims
from insured employees, spouses, and
dependents.
We used enrollee predicted
expenditure results from our risk
adjustment model calibration, which
was based on the MarketScan® data, to
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performed nine times for the HCC
population—once for each of the three
risk-based strata within each of the three
age groups. We set the minimum risk
score for enrollees without HCCs in the
tenth stratum.
This method of stratification is similar
to that used in the Medicare Advantage
risk adjustment data validation program.
That program divides enrollees into
three strata, representing low, medium,
and high risk expenditures. Error rates
and variances are calculated for each of
these strata. In the initial year, before
error rate and standard deviation data
for the population subject to the HHSoperated risk adjustment program are
available, we propose to use the
Medicare Advantage error rates and
variances to calculate sample sizes.
After the initial year, we will evaluate
whether sufficient HHS-operated risk
adjustment error rate and standard
deviation data are available to calculate
sample sizes.
We propose to use the lowest error
rate across all HCC strata as the error
rate for the stratum of enrollees without
HCCs, and we propose to use the
variance associated with that error rate
to calculate the standard deviation of
the error for the stratum of enrollees
without HCCs. If error rates and
variances are smaller than assumed for
this stratum, the resulting sampling
precision may increase.
Because the Medicare Advantage error
rates and variances are not calculated
for different age bands, and therefore are
available only for three risk-score
differentiated subgroups, we used the
same risk score error rates and standard
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ep02de13.009</GPH>
stratify the population (by age group for
enrollees with HCCs, and within a
single group for enrollees with no
HCCs), then calculated risk scores for
the predicted expenditures to relate
them to the average expenditures. To
estimate a sample size for each issuer,
an average issuer size was estimated
based on the total expected insured
population and the total expected
number of issuers. The average issuer
population containing enrollees with
and without HCCs was assumed to be
split 20 percent with HCCs and 80
percent without HCCs, consistent with
the MarketScan® data.
We propose to group each issuer’s
enrollee population into 10 strata based
on age group, risk level, and presence of
HCCs, as follows:
• Strata 1–3 would include low,
medium, and high risk adults with the
presence of at least one HCC.
• Strata 4–6 would include low,
medium, and high risk children with
the presence of at least one HCC.
• Strata 7–9 would include low,
medium, and high risk infants with the
presence of at least one HCC.
• Stratum 10 will include the NoHCC population, which will not be
further stratified by age or risk level,
because we assume this stratum has a
uniformly low error rate.
We calculated a predicted risk score
for each individual in each stratum by
dividing the predicted expenditures for
that individual by the average predicted
expenditures for the entire population.
Using these individual predicted risk
scores, we calculated the overall average
risk score for all individuals in each
risk-based stratum. This calculation was
As noted above, we propose a sample
size of 200 enrollees from each issuer
for the initial 2 years of the program.
The formula above would be used after
this initial 2-year period to calculate a
more precise, issuer-specific sample size
for each issuer.
The proposed formula for calculating
the sample size for each stratum is:
ep02de13.008</GPH>
percent margin of error in the estimated
risk score); and
z-value is the z-value associated with the
desired confidence level (for example,
1.96 for a two-sided 95 percent
confidence level).
Where:
Nh is the population size of the hth stratum;
n is the overall sample size; and
Sh represents the standard deviation of risk
score error for the hth stratum.
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Where:
H is the number of strata;
Nh is the population size of the hth stratum;
Y is the average risk score of the population,
adjusted based upon the estimated risk
score error;
Sh represents the standard deviation of risk
score error for the hth stratum;
Prec represents the desired precision level
(for example, 10 percent, meaning a 10
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deviation for the age bands for a risk
category. Thus, we used the same risk
score error rate and standard deviation
assumptions for the adult, child, and
infant strata associated with each risk
score band. We do not anticipate the
expected risk score error rate and
variance to be uniform for all age
groups; however, in the absence of data,
we made this simplifying assumption.
In general, we believe the Medicare
Advantage error rates and variances
likely overstate the corresponding error
rates and assumptions for the HHS risk
adjusted population, and therefore, the
estimated precision of our error
estimates may be understated.
The formulas identified above require
data on error rates and standard
deviations for the strata, and also a
target confidence interval and sampling
precision level (or margin of error). For
the initial year, we propose to use a 10
percent relative sampling precision at a
two-sided 95 percent confidence level.
That is, we wish to obtain a sample size
such that 1.96 8 multiplied by the
standard error, divided by the estimated
adjusted risk score, equals 10 percent or
less. After actual data are collected from
the initial year, we will test and
evaluate the data for use in determining
the sample size in future years.
Once the proposed overall sample
size is calculated, the enrollee count
will be distributed among the
population based on the second formula
above for calculating the sample size of
each stratum. Because strata with
enrollees with HCCs have a higher
standard deviation of risk score error,
the overall sample will be
disproportionately allocated to enrollees
with HCCs (Strata 1–9), helping to
ensure adequate coverage of the higher
risk portion of the enrollee population.
In the proposed rule for the 2014
Payment Notice, we suggested that an
issuer’s initial validation audit sample
for risk adjustment data validation
would consist of approximately 300
enrollees. After conducting the
calculations described above, we believe
that we can achieve acceptable sampling
precision with a sample size of 200
enrollees for the initial years of HHSoperated risk adjustment data
validation. Therefore, we are proposing
a sample size of 200 enrollees in the
initial 2 years of the program. As noted
above, we may provide for different, or
issuer-specific, sample sizes in future
years.
When data becomes available from
the program’s first year, we expect to
examine our sampling assumptions
8 Critical value for the two-sided 95 percent
confidence level.
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using actual enrollee data. We anticipate
that at least in the initial years of the
risk adjustment data validation program,
the stratification design will remain
consistent with the design outlined
above—nine HCC strata and one NoHCC stratum. However, the specific size
and allocation of the sample to each
stratum may be refined based on average
issuer enrollee risk score distributions.
For example, in future years, we are
considering using larger sample sizes for
larger issuers or issuers with higher
variability in their enrollee risk scores,
and smaller sample sizes for smaller
issuers or issuers with lower variability
in their enrollee risk scores. The
sampling design may also consist of a
minimum and maximum sample size
per stratum for each average issuer
(large, medium, small) to follow when
selecting the sample.
We seek comments on this approach,
including our proposed sample size of
200 enrollees for the initial 2 years of
HHS-operated risk adjustment data
validation.
(ii) Initial Validation Audit
The second stage of the HHS-operated
risk adjustment data validation process
is the initial validation audit. In
§ 153.630(b)(1), we require an issuer of
a risk adjustment covered plan to engage
one or more independent auditors to
perform an initial validation audit of a
sample of its risk adjustment data
selected by HHS, which will include
individually identifiable health
information subject to HIPAA.9 In this
section of this proposed rule, we discuss
proposed standards and guidelines
regarding the qualifications of the initial
validation auditor, including conflict of
interest standards, standards for the
initial validation audit, rater
consistency and reliability, and
confirmation of risk adjustment errors.
As discussed in the white paper, we
considered existing best practices and
standards for independent auditors,
such as those of Medicare Quality
Improvement Organizations and the
National Committee for Quality
Assurance, when establishing our
standards for initial validation auditors.
(1) Initial Validation Auditor
The 2014 Payment Notice established
certain standards for the initial
validation auditor. In § 153.630(b)(2)
9 Whether any given organization is a HIPAA
business associate is a fact-specific inquiry. We
expect that most independent auditors operating on
behalf of an issuer of a health plan would be
performing activities that would render them a
business associate of the covered plan, and would
be required to enter into and maintain a business
associate agreement with the health plan.
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and (b)(3), we direct the issuer to ensure
that the initial validation auditor is
reasonably capable of performing an
initial validation audit, and is
reasonably free of conflicts of interest,
such that it is able to conduct the initial
validation audit in an impartial manner
with its impartiality not reasonably
open to question.
In the white paper, we elaborated on
options for ensuring that an initial
validation auditor meets these criteria,
including standardized auditor
certification processes and
promulgation of best practices. Many
commenters sought additional
information and guidance regarding
initial validation auditor selection and
requested that HHS define conflicts of
interest between an issuer and the
initial validation auditor. We propose
certain guidance on these topics here.
We are considering the following
criteria for assessing conflicts of interest
between the issuer and the initial
validation auditor:
• Neither the issuer nor any member
of its management team (or any member
of the immediate family of such a
member) may have any material
financial or ownership interest in the
initial validation auditor, such that the
financial success of the initial validation
auditor could be seen as materially
affecting the financial success of the
issuer or management team member (or
immediate family member) and the
impartiality of the initial validation
audit process could reasonably be called
into question, or such that the issuer or
management team member (or
immediate family member) could be
reasonably seen as having the ability to
influence the decision-making of the
initial validation auditor;
• Neither the initial validation
auditor nor any member of its
management team or data validation
audit team (or any member of the
immediate family of such a member)
may have any material financial or
ownership interest in the issuer, such
that the financial success of the issuer
could be reasonably seen as materially
affecting the financial success of the
initial validation auditor or management
team or audit team member (or
immediate family member) and the
impartiality of the initial validation
audit process could reasonably be called
into question, or such that the initial
validation auditor or management or
audit team member (or immediate
family member) could be seen as having
the ability to influence the decisionmaking of the issuer;
• Owners, directors and officers of
the issuer may not be owners, directors
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or officers of the initial validation
auditor, and vice versa;
• Members of the data validation
audit team of the initial validation
auditor may not be married to, in a
domestic partnership with, or otherwise
be in the same immediate family as an
owner, director, officer, or employee of
the issuer; and
• The initial validation auditor may
not have had a role in establishing any
relevant internal controls of the issuer
related to the risk adjustment data
validation process when HHS is
operating risk adjustment on behalf of a
State, or serve in any capacity as an
advisor to the issuer regarding the initial
validation audit. In addition, we are
considering standards under which
issuers would verify that no key
individuals involved in supervising or
performing the initial validation audit
have been excluded from working with
either the Medicare or Medicaid
program, are on the Office of the
Inspector General exclusion list, or are
under investigation with respect to any
HHS programs.
We note that we intend to review the
initial validation auditor’s qualifications
and relationship to the issuer to verify
that the initial validation auditor is
qualified to perform the audit, and that
the issuer and initial validation auditor
are free of actual or apparent conflicts
of interest, including those stated above.
We note that HHS could gather
information through external reporting
to support that review. Although we are
confident that most issuers will exercise
diligence in selecting an initial
validation auditor that will be able to
comply with HHS audit standards, we
intend to monitor the performance of
initial validation auditors to determine
whether certification or additional
safeguards are necessary.
We propose to amend § 153.630(b)(1)
to specify that the issuer of a risk
adjustment covered plan must provide
HHS with the identity of the initial
validation auditor, and must attest to
the absence of conflicts of interest
between the initial validation auditor
(or the members of its audit team,
owners, directors, officers, or
employees) and the issuer (or its
owners, directors, officers, or
employees). We propose to consider any
individual with a significant ownership
stake in an entity such that the
individual could reasonably be seen to
have the ability to influence the
decision making of the entity to be an
‘‘owner,’’ and propose to consider any
individual that serves on the governing
board of an entity to be a director of the
entity. We are contemplating beginning
the initial validation process at the end
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of the first quarter of the year following
the benefit year, with the issuer’s
submission of the initial validation
auditor’s identity. We expect to identify
the enrollee sample for the initial
validation audit in the summer of the
year following the benefit year. We are
contemplating requiring delivery of the
initial validation audit findings to HHS
in the fourth quarter of that year. We
include a proposed schedule of the risk
adjustment data validation process at
the end of this section.
Once the audit sample is selected by
HHS, we expect issuers would ensure
that the initial validation audit is
conducted in the following manner:
• The issuer would provide the initial
validation auditor with source
enrollment and source medical record
documentation to validate issuersubmitted risk adjustment data for each
sampled enrollee;
• The issuer and initial validation
auditor would determine a timeline and
information-transfer methodology that
satisfies data security and privacy
requirements, including the applicable
provisions of HIPAA, and enables the
initial validation auditor to meet HHS
established timelines;
• The initial validation auditor would
analyze the enrollment and medical
record data to validate the demographic
information, plan or plan variation
enrollment, and health status of each
enrollee in the sample in accordance
with the standards established by HHS;
and
• The initial validation auditor would
provide HHS with the final results from
the initial validation audit and all
requested information for the second
validation audit.
We note that § 153.630(f)(2) is not
changed by this proposal, and that the
issuer would be required to ensure that
its initial validation auditor comply
with the security standards described at
45 CFR 164.308, 164.310, and 164.312
in connection with the initial validation
audit. We seek comments on these
proposals.
(2) Standards for the Initial Validation
Audit
We propose to add a new paragraph
(b)(5) to § 153.630, in which we propose
that an initial validation audit review of
enrollee health status be conducted by
medical coders certified after
examination by a nationally recognized
accrediting agency for medical coding,
such as the American Health
Information Management Association
(AHIMA) or the American Academy of
Professional Coders (AAPC). We seek
comment on other nationally recognized
accrediting agencies that may be
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appropriate to certify medical coders
who are performing the initial
validation audit review of enrollee
health status.
(3) Validation of Enrollees’ Risk Scores
An enrollee’s risk score is derived
from demographic and health status
factors, which requires the use of
enrollee identifiable information. Thus,
we propose to add paragraph (b)(6) to
§ 153.630, to require an issuer to
provide the initial validation auditor
and the second validation auditor with
all relevant information on each
sampled enrollee, including source
enrollment documentation, claims and
encounter data, and medical record
documentation (defined below) from
providers of services to enrollees in the
applicable sample without unreasonable
delay and in a manner that reasonably
assures confidentiality and security of
data in transmission (‘‘data in transit’’).
We note that existing privacy and
security standards, such as standards
under HIPAA and those detailed at
§ 153.630(f)(2), would apply. This
information will be used to validate the
enrollment, demographic, and health
status data of each enrollee. Only source
documentation for encounters with
dates of services within the applicable
benefit year would be considered
relevant. This would require issuers to
collect the appropriate enrollment and
claims information from their own
systems, as well as from all relevant
providers (particularly with respect to
medical record documentation). We
note that only a very small percentage
of an issuer’s records containing
personally identifiable information
would be made available to auditors as
part of the risk adjustment data
validation process, and that similar
transmissions are required today for
data validation for the Medicare
Advantage program. As we describe in
this section at (viii), regarding data
security standards, we are seeking
comment on the applicability and
effectiveness of current standards, as
well as what other standards HHS
should promulgate to ensure data
security and privacy protections.
We also propose to add paragraph
(b)(7) to § 153.630 to describe the
standards for validating each factor of
an enrollee’s risk score. In paragraph
(b)(7)(i), we propose that the initial
validation auditor must validate
demographic data and enrollment
information by reviewing plan source
enrollment documentation, such as the
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834 transaction,10 which is the HIPAAstandard form used for plan benefit
enrollment and maintenance
transactions. These enrollment
transactions reflect the data the issuer
captured for an enrollee’s age, name,
sex, plan of enrollment, and enrollment
periods in the plan. We note that certain
identifying information from these
enrollment transactions, such as the
enrollee’s name, would be used to
ensure that the appropriate medical
documentation has been provided.
The sample audit pool will consist of
enrollees with and without risk
adjustment-eligible diagnoses within
eligible dates of service. For each
enrollee in the sample with risk
adjustment HCC scores, the initial
validation auditor would validate
diagnoses through a review of the
relevant risk adjustment-eligible
medical records. We consider medical
record documentation generated with
respect to dates of service that occurred
during the benefit year at issue to be
relevant for these purposes. For
enrollees without risk adjustment HCCs
for whom the issuer has submitted a risk
adjustment-eligible claim or encounter,
we would require the initial validation
auditor to review all medical record
documentation for those risk
adjustment-eligible claims or
encounters, as provided by the issuer, to
determine if HCC diagnoses should be
assigned for risk score calculation,
provided that the documentation meets
the requirements for the risk adjustment
data validation audits. Documents used
to validate all components of the risk
score must reflect dates of service
during the applicable benefit year. In
the initial years of the data validation
program, we plan to accept certain
supplemental documentation, such as
health assessments, to support the risk
adjustment diagnosis. We expect to
provide additional details on acceptable
supplemental documentation in future
guidance.11
Therefore, in § 153.630(b)(7)(ii), we
propose that the validation of enrollee
health status (that is, the medical
diagnoses) occur through medical
10 Issuers and State Exchanges use the ASC X12
Standards for Electronic Data Interchange Technical
Report Type 3—Benefit Enrollment and
Maintenance (834), August 2006, ASC X12N/
005010X220, as referenced in § 162.1502, or ‘‘834
form’’ to transmit and update enrollment and
eligibility to HHS as often as daily but at least
monthly. In Federal operations, HHS and the issuer
exchange and update data via this same form.
11 See ‘‘HHS-Operated Data Collection Policy
FAQ’’ for a discussion of chart review as an
acceptable source of supplemental diagnosis codes.
Additional detail will be provided in future
guidance. https://www.regtap.info/uploads/library/
HHS_OperatedDataCollectionPolicyFAQs_062613.
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record review, that the validation of
medical records include a check that the
records originate from the provider of
the medical services, that they align
with the dates of service for the medical
diagnosis, and that they reflect
permitted providers and services. In this
paragraph, we also propose, for
purposes of § 153.630, that ‘‘medical
record documentation’’ mean: ‘‘clinical
documentation of hospital inpatient or
outpatient treatment or professional
medical treatment from which enrollee
health status is documented and related
to accepted risk adjustment services that
occurred during a specified period of
time.’’ Medical record documentation
must be generated in the course of a
face-to-face or telehealth visit
documented and authenticated by a
permitted provider. We expect to
provide additional guidance on
telehealth services in future guidance.
In § 153.630(b)(7)(iii), we propose that
medical record review and abstraction
be performed in accordance with
industry standards for coding and
reporting. Current industry standards
are set forth in the International
Classification of Diseases, Ninth
Revision, Clinical Modification (ICD–9–
CM), or the International Statistical
Classification of Diseases and Related
Health Problems, Tenth Revision, 4th
Edition (ICD–10–CM) guidelines for
coding and reporting.
(4) Confirmation of Risk Adjustment
Errors
We note that the data validation audit
processes may identify various
discrepancies, many of which will have
no impact on an enrollee’s risk score.
For example, if a medical diagnosis
underlying an enrollee’s HCC was
present on a claim but was not
supported by medical record
documentation, but the same HCC was
supported by the medical record for a
different diagnosis, we propose that no
risk adjustment error be assessed for the
enrollee’s HCC. However, if none of the
medical record documentation supports
a particular HCC diagnosis for an
enrollee, we propose that a risk
adjustment error be assessed.
We consider a risk adjustment error to
occur when a discrepancy uncovered in
the data validation audit process results
in a change to the enrollee’s risk score.
A risk adjustment error may result from
incorrect demographic data, an
unsupported HCC diagnosis, or a new
HCC diagnosis identified during the
medical record review. An unsupported
HCC diagnosis could be the result of
missing medical record documentation,
medical record documentation that does
not reflect the diagnosis, or invalid
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medical record documentation (such as
an unauthenticated record or a record
that does not meet risk adjustment data
collection standards for the applicable
benefit year).
We propose in § 153.630(b)(7)(iv) that
a senior reviewer must confirm any
finding of a risk adjustment error. We
believe that a senior reviewer is a
reviewer with substantial expertise in
medical record coding such that the
initial validation auditor would
consider the senior reviewer to be the
standard against which to measure
inter-rater reliability and coding
consistency. As such, we propose to
define a senior reviewer as a medical
coder certified by a nationally
recognized accrediting agency who
possesses at least 5 years of experience
in medical coding. We seek comment on
the credentials and expertise that
should be required of a senior reviewer.
(5) Review Consistency and Reliability
Validation audits typically include
methods of evaluating review
consistency and reliability. We believe
such processes help to ensure the
integrity of the data validation process
and strengthen the validity of audit
results. In § 153.630(b)(8), we propose
that the initial validation auditor
measure and report to the issuer and
HHS its inter-rater reliability rates
among its reviewers. Such processes
measure the degree of agreement among
reviewers. We propose to set the
threshold for the acceptable level of
consistency among reviewers at 95
percent for both demographic and
enrollment data review, and health
status data review outcome. Reviews
should be performed using rater-tostandard procedures whereby reviews
conducted by reviewers with extensive
qualifications and credentials are used
to establish testing thresholds or
standards for consistency.
(iii) Second Validation Audit
The initial validation audit will be
followed by a second validation audit,
which will be conducted by an auditor
retained by HHS to verify the accuracy
of the findings of the initial validation
audit.
We propose to select a subsample of
the initial validation audit sample
enrollees for review by the second
validation auditor. The second
validation auditor would perform the
data validation audit of the enrollee
subsample, adhering to the same audit
standards applicable to the initial
validation audit described above, but
would only review enrollee information
that was originally presented during the
initial validation audit. In § 153.630(c),
E:\FR\FM\02DEP2.SGM
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we established standards for issuers of
risk adjustment covered plans related to
HHS’s second validation audit. In
§ 153.630(b)(4), we established that
issuers must submit (or ensure that their
initial validation auditor submits) data
validation information, as specified by
HHS, from their initial validation audit
for each enrollee included in the initial
validation sample. Issuers must transmit
all information to HHS or its second
validation auditor in a timeframe and
manner to be determined by HHS. The
second validation auditor would inform
the issuer of error findings based on its
review of enrollees in the second
validation audit subsample. We will
provide additional guidance on the
manner and timeframe of these
submissions in the future.
As discussed in the white paper, we
are considering selecting the second
validation audit subsample using a
sampling methodology that will allow
for pair-wise means testing to establish
statistical difference between the initial
and second validation audit results. If
the pair-wise means test results suggest
that the difference in enrollee results
between the initial validation audit and
second validation audit is not
statistically significant, the initial
validation audit error results would be
used for error estimation and
calculation of adjustments for plan
average risk score. If the test results
suggest a statistical difference, the
second validation auditor would
perform another validation audit on a
larger subsample of the enrollees
previously subject to the initial
validation audit. The results from the
second validation audit of the larger
subsample would again be compared to
the results of the initial validation audit
using the pair-wise means test. Again, if
no statistical difference is found
between the initial validation audit and
the second validation audit conducted
on the larger subsample, HHS would
apply the initial validation audit error
results for error estimation using all
enrollees selected for the initial
validation audit sample. However, if a
statistical difference is found based on
the second validation audit on the larger
subsample, HHS would apply the
second validation audit error results to
modify the risk scores of the issuer’s
enrollees, as discussed below. We are
considering using a 95 percent
confidence interval, but seek comment
on the appropriate confidence interval
to use with respect to these pair-wise
means tests.
As discussed in the white paper, we
are considering a number of ways to
expedite the second validation audit
and the subsequent appeals processes.
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One possibility would be to begin the
second validation audit on those
enrollees for which the initial validation
audit is complete, even if the entire
initial validation audit has not been
completed. For example, an issuer could
allow its initial validation auditor to
submit data validation documentation
and results a number of months in
advance of the HHS established
deadline for submission of initial
validation audit results. The second
validation auditor would thus be able to
begin its review earlier, permitting more
time to provide feedback to the issuer
on the results of that review and
allowing for more opportunity for
discussion prior to finalizing the second
validation audit findings. Prior to
finalizing the risk score adjustment
based on the second validation audit
findings, the second validation auditor
may request discussions with the initial
validation auditor to identify the source
of the differences, or may review the
initial validation auditor’s processes. If
the initial validation audits are
substantiated, the second validation
auditor may adjust its risk scores
accordingly. This process would not
allow for any additional documentation
to be submitted on those enrollees for
which the second validation audit began
early. The appeals decision from the
expedited, concurrent process would be
final and binding, but would provide
issuers the opportunity to begin the
process earlier. If HHS establishes a
concurrent second validation audit and
appeals process, we would need to
develop intermediate timelines for
initial validation auditor submission of
audit documentation and data to the
second validation auditor. We seek
comments on this approach for
establishing a concurrent second
validation audit and appeals process.
(iv) Error Estimation
The fourth stage in the HHS risk
adjustment data validation process is
error estimation. Upon completion of
the initial and second validation audits,
HHS will derive an issuer-level risk
score adjustment and confidence
interval. This adjustment would be used
to adjust the average risk score for each
risk adjustment eligible plan offered by
the issuer. HHS intends to provide each
issuer with enrollee-level audit results
and the error estimates.
We are proposing a two-phase
procedure to accept or correct the
results of the initial validation audit
based on the results of the second
validation audit. In phase one, as
described above, we conduct a pair-wise
statistical test for consistency between
the initial validation and second
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72335
validation audit results (as described
above for second validation audits). In
phase two, if we determine that the
results of the two audits are
inconsistent, we would adjust the initial
validation audit results based on the
second validation audit results. For
phase two, we describe two options for
using second validation audit results to
derive an estimate of an overall
corrected risk score for each issuer.
Phase One: Consistency Test between
Initial and Second Validation Audit
In phase one, a pair-wise statistical
test would be performed to determine if
the initial validation audit sample
results should be adjusted using the
results of the second validation audit.
To illustrate the underlying statistical
test, consider the following notations:
˜
xi is the ith initial validation audit
risk score observation in the second
validation audit sample of n
observations;
˜
yi is the ith second validation audit
risk score observation in the second
validation audit sample of n
observations;
˜
˜
di is the difference between yi and xi
within the second validation audit
sample;
¯
d is the mean of all di observations
within the second validation audit
sample; and
Sx is standard deviation of all di
observations within the second
validation audit sample.
Assume an issuer submits enrollment
and claims data to its dedicated
distributed data environment that are
used to compute a set of ‘‘original’’ risk
scores. As required by the risk
adjustment data validation process, the
issuer engages an independent
validation auditor, who reviews N
enrollee records, as sampled by HHS,
and validates the original enrollee risk
scores.
From the N enrollees in the initial
validation audit sample, HHS selects a
smaller second validation audit
subsample of n enrollees. For each
second validation audit selected record,
˜
HHS calculates the difference, di = yi ¥
˜
xi. HHS then conducts a pair-wise
means test to determine whether the
¯
mean difference, d, is statistically
significant (that is, unlikely to be zero).
Specifically, HHS would conduct a
statistical test to determine if zero (0) is
contained within the range,
If so, HHS would conclude that there is
no statistically significant difference
between risk scores determined by the
initial and second validation audit
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sroberts on DSK5SPTVN1PROD with PROPOSALS
Phase Two: Adjustment to the Initial
Validation Audit Sample
In phase two, we propose that if the
difference between the initial and
second validation audits is found to be
statistically significant, then HHS would
utilize the risk score error rate
calculated from the larger second
validation audit subsample to adjust the
full initial validation audit sample,
which could in turn be used to adjust
the average risk scores for each plan.
This approach would adjust the entire
initial validation audit sample using a
one-for-one replacement for the
enrollees reviewed by the second
validation audit, and a uniform
adjustment for the enrollees that were
not. We also considered another option,
as discussed in the white paper and
below. Under this alternate approach,
we would use the error rate from the
larger second validation audit
subsample directly in our determination
of whether and by how much to adjust
the risk scores of all enrollees in the
issuer’s risk adjustment covered plans.
This approach would disregard all
enrollees in the initial validation audit
sample that were not reviewed as part
of the larger second validation audit
subsample.
To illustrate these two options under
the phase two adjustment process,
consider the following notations:
M is the total number of enrollees in
the risk adjustment covered plan;
N is the initial validation audit
sample size;
n is the size of the larger second
validation audit subsample;
¯
yN is the mean of the initial validation
audit-adjusted risk scores in the initial
validation audit sample N;
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Under this proposed approach, we
would undertake the following steps to
adjust the risk scores in the initial
validation audit samples:
(1) Replace the initial validation
audit-adjusted risk scores with the
second validation audit-adjusted risk
scores in the n records that were
sampled from N (one-for-one risk score
adjustment).
(2) Apply a uniform adjustment
factor,
to the initial validation audit-adjusted
risk scores in the (N-n) records not
reviewed by the second validation
audit.
Under the alternate approach, the
second validation audit-adjusted risk
scores in the n records in the larger
second validation audit subsample
would be used as the basis for
adjustment of plan-level average risk
scores.
Considering the comments in
response to the white paper, and in
order to estimate error using a narrower
confidence interval, we are proposing to
use the larger second validation audit
subsample to adjust the initial
validation audit sample (by direct
replacement for enrollees reviewed by
the second validation audit, and by
proportional adjustment for the other
enrollees), whose adjusted error rate
could be used as a basis to adjust plan
average risk scores for all risk
adjustment covered plans of the issuer.
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Adjusted Risk Score Projections
Based on the proposals described
above, the results of the initial or second
validation audits could be used as the
basis for projecting a corrected risk
score for each issuer’s population. The
projections described above would be
performed on a stratum-by-stratum level
and weighted accordingly to achieve an
estimate of the corrected risk score for
each issuer. As described in the white
paper, a stratified separate ratio
estimator 12 would be used to estimate
the corrected average risk score for each
issuer. To compute the stratified
separate ratio estimator, HHS would
first extrapolate the total correct risk
score within each stratum, then sum the
stratum-specific projected correct risk
scores for all strata, with the total sum
divided by the total enrollee count to
arrive at the corrected average risk
score. The projected risk score error
could then be calculated as the
difference between the recorded average
risk score across the entire population
and the point estimate.
The stratified separate ratio estimator
of the total correct risk score is
calculated using the following equation:
Where:
ˆ
YR is used to estimate the correct risk
score;
¯
yh is the sample mean of the correct risk
score in stratum h;
¯
xh is the sample mean of the original risk
score in stratum h;
Xh is the total sum of the original risk score
in stratum h; and
H is the total number of strata.
ˆ
YR would then be normalized by the
enrollment count to derive a corrected
average risk score for the issuer.
To estimate the variance of the point
estimate, HHS will first estimate the
variance within each stratum and then
sum the stratum-specific variances for
all strata. The estimated variance of the
stratified separate ratio estimate for the
correct risk score is calculated as
follows:
12 For a discussion of stratified separate ratio
estimators, see Cochran, William G., Sampling
Techniques, third edition, John Wiley & Sons, 1977,
at 164.
E:\FR\FM\02DEP2.SGM
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EP02DE13.014</GPH>
ˆ
yn is the projected correct risk score
across all M records using the error rate
from the larger second validation audit
subsample.
We seek comment on our proposed
approach.
EP02DE13.013</GPH>
¯
yn is the mean of the second
validation audit-adjusted risk scores in
the second validation audit sample n;
¯
xN is the mean of the original risk
scores in the initial validation audit
sample N;
¯
xn is the mean of the original risk
scores in the second validation audit
sample n;
¯
XM is the original risk score total
across all M records;
ˆ
YN is the projected correct risk score
across all M records using the initial
validation error rate; and
EP02DE13.012</GPH>
processes, and would accept the results
of the initial validation audit.
However, if zero (0) is not contained
within this range (that is, the difference
¯
between d and zero is statistically
significant), HHS would expand the
second validation audit subsample to
select a larger subset of N, have the
second validation auditor review the
enrollee files, and again conduct a pairwise means test using this larger
subsample. If the statistical test shows
no statistically significant difference,
HHS would accept the results of the
initial validation audit. If the statistical
test shows a statistically significant
difference between the initial and larger
subsample second validation audit
findings, HHS would conduct phase two
to adjust the full initial validation audit
sample based on the larger subsample
second validation audit findings.
EP02DE13.011</GPH>
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The square root of the estimated
variance is the standard error (SE).
We are proposing to use the issuer’s
corrected average risk score to compute
an adjustment factor, based on the ratio
between the corrected average risk score
and the original average risk score that
could be applied to adjust plan average
risk for all risk adjustment eligible plans
within the issuer. We are considering
two options for applying the adjustment
factor. Under the first option, we are
considering directly applying an
adjustment factor to all of the issuer’s
risk adjustment covered plans. Under
the second option, we are considering
applying this adjustment only if the
corrected average risk score and the
recorded average risk score are
statistically different.
Were we to implement the second
option, a critical parameter of the
statistical test would be the target
confidence interval, which would
determine the stringency of the test. For
example, we could perform the
statistical test at the 90, 95, or 99
percent confidence interval. We note
that the HHS Office of the Inspector
General performs certain similar data
validation tests using a 90 percent
confidence interval, while the Medicare
Advantage risk adjustment data
validation program uses a 99 percent
confidence interval. We also note that
even if the statistical test finds the two
risk scores to be statistically different,
we could apply the adjustment factor to
adjust plan average risk scores based
upon using the point estimate of the
adjusted average risk score, or some
other value within an interval around
the point estimate, such as the upper or
lower bound of a 95 percent confidence
interval around the point estimate.
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The choice among these options poses
a tradeoff between reducing issuers’
incentives to aggressively report or code
diagnoses, and increasing the variability
of issuers’ risk adjustment payments.
Under the first option, an issuer that
reports data that systematically
overstates its risk score would, on
average, assuming the corrected risk
scores are unbiased estimates of the true
risk scores, receive a downward
adjustment to its reported risk score
equal in magnitude to the degree of
overstatement. As a result, this option
could eliminate an issuer’s incentive to
overstate its risk score. On the other
hand, due to sampling variation, the
first option would routinely introduce
significant variability in issuers’ risk
scores (both up and down), even if the
issuer was making no attempt to
manipulate its risk scores. While these
adjustments would make such an
issuer’s risk adjustment payments less
predictable in any given year, they
would not introduce systematic bias in
risk scores (assuming the corrected risk
scores are unbiased estimates of the true
risk scores).
The second option, in contrast, would
only adjust an issuer’s risk scores when
it is very likely that the reported risk
scores deviated from the true values, so
issuers’ risk adjustment payments
would be more predictable. However,
particularly if the confidence level of
the statistical test were set at a high
threshold, this approach would often
fail to make adjustments when an issuer
does in fact overstate its risk score.
Based on commenters’ feedback on
the white paper, we are proposing to use
the second approach described above—
we would adjust the plan average risk
scores of an issuer based upon the ratio
between the correct average risk score
estimate and recorded average risk score
only if the difference between the
estimated and recorded average risk
scores were determined to be
statistically significant. We are
proposing to use a 95 percent
confidence interval to determine if the
adjusted average risk score and the
recorded average risk score are
statistically different. Nevertheless, we
welcome comments on both options
discussed above and on the appropriate
tradeoff between reducing issuers’
incentive to aggressively report or code
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diagnoses and increasing the variability
of issuers’ risk adjustment payments. In
addition, regarding the proposed
approach in particular, we seek
comments on the appropriate
confidence interval to apply when
determining whether an adjustment to
an issuer’s plan average risk score is
necessary.
Error Estimation Example
To illustrate the corrected average risk
score and error estimation process
described above, assume that a sample
of 200 enrollees is selected for initial
validation audit review for a particular
issuer. From this sample, assume that a
subsample of 20 enrollees is selected for
second validation audit review. Assume
the issuer’s average recorded population
risk score is 1.60 and the projected
correct population risk score from the
sample of 200 is 1.40, with a two-sided
95 percent confidence interval of 1.30 to
1.50.
The first step in the error estimation
process will determine if the initial
validation audit results should be
corrected based on the second
validation audit review or accepted
without adjustment. We would perform
a pair-wise means test to compare the
projected risk scores for the sample of
200 enrollees and the subsample of 20
enrollees.
For this example, assume that the
statistical test fails (that is, there is a
statistically significant difference
between the projected risk scores in the
sample of 200 and the subsample of
20).13 We would then select an
expanded subsample from the original
sample of 200 enrollees. Assume that
the larger sample is a sample of 100
enrollees. Following completion of the
larger second validation audit, we
would perform the pair-wise means test
again. Assume the test fails again (that
is, there is a statistically significant
difference in the projected risk scores
between the sample of 200 and the
larger subsample of 100). We would
conclude that the risk scores in the
sample of 200 enrollees need to be
adjusted.
13 If the test passes, then no adjustments would
be made to the sample of 200 and the projected
results from this sample would be used to adjust
average plan liability risk scores.
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nh is the number of enrollees sampled in
stratum h;
Nh is the population frequency in stratum
h;
yih is the corrected risk score for the ith
sampled enrollee in stratum h;
xih is the original risk score for the ith
sampled enrollee in stratum h; and
EP02DE13.015</GPH>
Where:
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In the second step of error estimation,
HHS would adjust the risk scores in the
sample of 200 using a one-for-one
replacement for the risk scores of the
enrollees reviewed by the second
validation auditor, and a uniform
adjustment for the other enrollees in the
initial validation audit sample. The onefor-one replacement will replace the risk
scores calculated based on initial
validation audit findings, with the risk
scores calculated based on the second
validation audit findings for the larger
subsample of 100. The remaining 100
enrollees that were not included in the
second validation audit subsample
would be adjusted based on the ratio of
two projections: (1) the projected correct
population risk score using the second
validation audit findings in the
subsample of 100 (assume this projected
risk score is 1.50, with a two-sided 95
percent confidence interval of 1.30 to
1.70); divided by (2) the projected
correct population risk score using the
initial validation audit findings in the
sample of 200 (equal to 1.40 based on
the assumption noted above). The
adjustment ratio is equal to 1.07 = 1.50/
1.40. Therefore, the risk scores of the
remaining 100 enrollees not included in
the second validation audit subsample
would be increased by 7 percent.
The projected correct population risk
score from the revised sample of 200
would therefore be 1.45, with a twosided 95 percent confidence interval of
1.35 to 1.55.
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(v) Appeals
We anticipate that the risk adjustment
data validation appeals process would
occur annually, beginning in the spring
of the year in which the error rate will
be applied to adjust risk scores and
affect risk adjustment payments and
charges. Because we are not applying
error rates to adjust payments and
charges for the initial 2 years of the risk
adjustment program, the first year for
which payments and charges would
apply would be 2016. Risk scores and
initial payments and charges would be
calculated in the spring of 2017 for that
payment cycle. We anticipate the
appeals process will begin in the spring
of 2018, prior to the 2017 payment
transfers. We will provide additional
guidance on the appeals process and
schedule in future rulemaking.
(vi) Payment Transfer Adjustments
Risk adjustment payment transfer
amounts will be based on adjusted plan
average risk scores. The data validation
audits would be used to develop a risk
score error adjustment for each issuer,
as described above. Each issuer’s risk
score adjustment would be applied to
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adjust the plan average risk score for
each of the issuer’s risk adjustment
covered plans. This adjustment would
be applied on a prospective basis
beginning with the risk adjustment data
for benefit year 2016 (that is, the
adjustments would take effect in 2018,
during payment transfers for 2017).
Because an issuer’s adjusted plan
average risk score is normalized as part
of the risk adjustment payment
calculation, the effect of an issuer’s risk
score error adjustment will depend
upon its magnitude and direction
compared to the average risk score error
adjustment and direction for the entire
market.
We are considering reporting the
following summary findings to issuers
for the initial 2 years of the program:
• State- or market-wide error rates.
• Issuer error rates.
• Initial validation audit or error
rates.
• Projected financial impact of the
proposed risk adjustments, as
determined by the initial and second
validation auditors.
• The 2-year interval before risk
adjustment data validation adjustments
are applied to risk scores and affect
payments and charges will provide
initial validation auditors and issuers
the opportunity to reform existing
processes prior to the implementation of
HHS payment transfer adjustments for
the 2016 benefit year. We believe that
the reports described above will help
issuers and initial validation auditors
better understand the likely effects of
the risk adjustment data validation
program in States where HHS operates
risk adjustment. We seek comment on
considerations for reporting error rates
and any additional information that
could improve transparency in the
markets.
(vii) Oversight
The second final Program Integrity
Rule outlined selected oversight
provisions related to the premium
stabilization programs, such as
maintenance of records, sanctions for
failing to establish a dedicated
distributed data environment, and the
application of a default risk adjustment
charge to issuers in the individual and
small group market that fail to provide
data necessary for risk adjustment. We
are proposing to expand on these
provisions to include oversight related
to risk adjustment data validation when
HHS operates risk adjustment on behalf
of a State.
Section 153.620 provides that an
issuer that offers risk adjustment
covered plans must comply with any
data validation requests by the State or
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HHS on behalf of the State, and that an
issuer that offers risk adjustment
covered plans must also maintain
documents and records, whether paper,
electronic, or in other media, sufficient
to enable the evaluation of the issuer’s
compliance with applicable risk
adjustment standards, and must make
that evidence available upon request to
HHS, OIG, the Comptroller General, or
their designee, or in a State where the
State is operating risk adjustment, the
State or its designee to any such entity.
Based on our authority under section
1321(c)(2) of the Affordable Care Act,
we are proposing in § 153.630(b)(9) that,
when HHS operates risk adjustment on
behalf of a State, an issuer of a risk
adjustment covered plan that does not
engage an initial validation auditor
within the timeframe specified by HHS
of the year following the benefit year, or
that otherwise does not arrange for a
risk adjustment initial validation audit
that complies with applicable
regulations, may be subject to civil
money penalties. We note that we
intend to apply the proposed sanction
so that the level of the enforcement
action would be proportional to the
level of the violation. While we would
reserve the right to impose penalties up
to the maximum amounts proposed in
§ 156.805(c), as a general principle, we
intend to work collaboratively with
issuers to address problems in
conducting the risk adjustment data
validation process. In our application of
the proposed sanction, we would take
into account the totality of the issuer’s
circumstances, including such factors as
an issuer’s previous record (if any), the
frequency and level of the violation, and
any aggravating or mitigating
circumstances. Our intent is to
encourage issuers to address noncompliance and not to severely affect
their business, especially where the
issuer demonstrates good faith in
monitoring compliance with applicable
standards, identifies any suspected
occurrences of non-compliance, and
attempts to remedy any noncompliance.
We also note that HHS will not
perform the initial validation audit for
an issuer that does not hire an initial
validation auditor or otherwise does not
submit initial validation audit results
that comply with the regulations in
subpart G and subpart H of part 153. For
these issuers, we propose in
§ 153.630(b)(10) to assign a default risk
adjustment charge. We are considering
whether this charge should be the same
charge as contemplated in § 153.740(b),
should be based on a default error rate,
or should be calculated based on some
other methodology. We will propose a
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methodology for computing the default
error rate or default charge in future
rulemaking.
Issuers may request technical
assistance from HHS at any stage of the
risk adjustment data validation process.
HHS may also offer such assistance
directly if we become aware of technical
issues arising at any time during the risk
adjustment data validation process. We
plan to provide further assistance and
clarification around the risk adjustment
data validation process through a range
of vehicles, including additional
guidance, training materials, webinars,
and user group calls. We welcome
comment on these proposals.
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(viii) Data Security
We recognize that the risk adjustment
data validation process outlined here
will require the transmission of
sensitive data and documents between
the issuer and the initial and second
validation auditors. HHS takes seriously
the importance of safeguarding
protected health information and
personally identifiable information. As
outlined in the white paper, we believe
that it will be necessary to specify
standards for safeguarding this
information through proper information
storage and transmission methods.
We note that § 153.630(f)(2) requires
issuers to ensure that it and its initial
validation auditor comply with the
security standards described at 45 CFR
164.308, 164.310, and 164.312 in
connection with the initial validation
audit, the second validation audit, and
any appeal. In addition to these
requirements, we are considering
defining standards and expectations that
would apply to issuers and initial and
second validation auditors pertaining to
data security, management, and
transmission. These standards could
require systems to safeguard and
encrypt data ‘‘at rest’’ and ‘‘in transit,’’
and to authenticate identities of users.
They could also prohibit the auditors
from using or disclosing the information
they receive for any purpose other than
the audit and oversight. Similar
standards have been implemented
under the Medicare Advantage risk
adjustment data validation process. We
intend to address these issues and the
treatment of initial and second
validation auditors under HIPAA in
future rulemaking or guidance, and seek
comment on the applicability and
effectiveness of current standards, as
well as what other standards HHS
should promulgate to ensure data
security and privacy protections.
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(ix) Implementation Timeline
For the 2014 benefit year, we expect
to implement risk adjustment data
validation activities in early 2015.
Implementation activities would begin
with issuers submitting the identity of
their initial validation auditor to HHS in
accordance with § 153.630(b)(1). In the
spring of 2015, we would utilize the
data submitted by issuers for risk
adjustment payments and charges and
apply the sampling methodology
described above to select the audit
sample for each issuer for the initial
validation audit. During the same
timeframe, we would train issuers and
initial validation auditors on the risk
adjustment data validation process and
the applicable standards for performing
the initial validation audit, which
would begin in the summer of 2015.
Once the initial validation audit has
concluded in the fall of 2015, HHS
would begin the second validation audit
process, which would continue into
2016. Risk adjustment data validation
implementation activities for the 2014
benefit year data would conclude in
2016 after distribution of HHS findings
to issuers, processing of appeals, and
estimation and reporting of final risk
scores. Since the 2014 benefit year is the
first year of implementation of risk
adjustment data validation, we expect to
report on lessons learned from these
activities, and to use this information to
improve the risk adjustment data
validation process.
We expect that the risk adjustment
data validation implementation
activities would follow a similar
schedule for each subsequent benefit
year. The 2016 benefit year would be
the first year when payments and
charges are adjusted. Those adjustments
would occur after the conclusion of risk
adjustment data validation activities for
the 2016 benefit year, in the summer of
2018.
e. HHS Audits of Issuers of Risk
Adjustment Covered Plans
In order to safeguard Federal funds,
we propose in § 153.620(c) that HHS or
its designee may audit an issuer of a risk
adjustment covered plan, when HHS
operates risk adjustment on behalf of a
State, to assess the issuer’s compliance
with the requirements of subparts G and
H of 45 CFR part 153. The issuer must
also ensure that its relevant contractors,
subcontractors, or agents cooperate with
the audit. We anticipate conducting
targeted audits of issuers of risk
adjustment covered plans informed by,
among other criteria and sources, the
data provided to HHS through the
dedicated distributed data environment
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and any previous history of
noncompliance with these standards.
We will provide further details on this
audit program, including timelines,
procedures, and substantive
requirements, in future rulemaking and
guidance. This audit will focus on those
aspects of the risk adjustment program
that are not validated through the risk
adjustment data validation program,
described above in this proposed rule.
In particular, we anticipate that the
audit will focus on records documenting
that the plan was a risk adjustment
covered plan. For example, the audit
might seek to review records evidencing
the type of plan at issue (for example,
an individual market metal level plan
versus a catastrophic plan), the plan
renewal date (to ensure the plan was
subject to the market reform rules
during the time periods for which data
was submitted to the dedicated
distributed data environment), and, in
the case of an insured group health
plan, the plan size (to ensure the plan
was a small employer plan).
We also propose that if an audit
results in a finding of material weakness
or significant deficiency (as these terms
are defined in GAAS issued by the
American Institute of Certified Public
Accountants, and Government Auditing
Standards issued by the Government
Accountability Office (GAO) 14) for
compliance with any requirement of
subpart G or H of 45 CFR part 153, the
issuer: (i) Within 30 calendar days of the
issuance of the final audit report, must
provide a written corrective action plan
to HHS for approval; (ii) implement that
corrective action plan; and (iii) provide
to HHS written documentation of the
corrective actions once taken. If HHS
determines as the result of an audit that
the issuer of the risk adjustment covered
plan was required to pay additional risk
adjustment charges or has received risk
adjustment payments to which it was
not entitled, it may require the issuer to
pay such amounts to the Federal
government.
To reduce the burden on issuers and
HHS, to the extent practical, we intend
to coordinate any audits of issuers of
risk adjustment covered plans with
related audits of Exchange financial
programs and premium stabilization
programs, such as reinsurance. We seek
comment on this proposal, including
14 See Government Auditing Standards (2011
Revision), available at: https://www.gao.gov/
yellowbook. For public companies, the Public
Company Accounting Oversight Board (PCAOB)
sets audit standards. See https://pcaobus.org/
Standards/Auditing/Pages/default.aspx. For nonpublic companies, the AICPA sets audit standards.
See https://www.aicpa.org/Research/Standards/
AuditAttest/Pages/SAS.aspx.
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the standards that should govern these
audits.
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2. Provisions and Parameters for the
Transitional Reinsurance Program
The Affordable Care Act directs that
a transitional reinsurance program be
established in each State to help
stabilize premiums for coverage in the
individual market from 2014 through
2016. In the 2014 Payment Notice, we
expanded on the standards set forth in
subparts C and E of the Premium
Stabilization Rule and established the
reinsurance payment parameters and
uniform reinsurance contribution rate
for the 2014 benefit year. In this
proposed rule, we propose the
reinsurance payment parameters and
uniform reinsurance contribution rate
for the 2015 benefit year and certain
oversight provisions related to the
operation of the reinsurance program.
a. Major Medical Coverage
Section 1341(b)(3)(B)(i) of the
Affordable Care Act states that ‘‘the
contribution amount for each issuer
[must] proportionally reflect each
issuer’s fully insured commercial book
of business for all major medical
products . . .’’ In the preamble to the
2014 Payment Notice (78 FR 15456), we
included a general description of major
medical coverage for reinsurance
purposes based on the
comprehensiveness of the coverage
provided (for example, a range of
medical, surgical, and preventive
services) and the settings in which the
coverage is provided (for example,
inpatient and outpatient settings).
Commenters requested that HHS codify
a definition of major medical coverage
for purposes of reinsurance
contributions in regulation text.
Codification in regulation text of a
more specific definition of major
medical coverage for reinsurance
contributions purposes would provide
additional clarification for some
contributing entities. Therefore, we
propose to add a definition of major
medical coverage in § 153.20 to mean
health coverage for a broad range of
services and treatments provided in
various settings that provides minimum
value in accordance with § 156.145.
We believe that because minimum
value is calculated on a broad set of
services—comparable to the essential
health benefits applicable to individual
and small group coverage—it is a
reasonable measure of
comprehensiveness of coverage.
Minimum essential coverage under an
employer-sponsored plan generally will
provide minimum value if the plan’s
share of total allowed costs of benefits
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provided under the plan exceeds 60
percent of such costs (see section
36B(c)(2)(C)(II) of the Code). The
minimum value standards established
under § 156.145 also deem coverage that
meets any of the levels of coverage
requirements described in § 156.140 to
satisfy this requirement. Because the
calculation of minimum value is an
objective process, we believe that the
use of the concept of minimum value is
a reasonable way to clarify the
definition of major medical coverage
and reduce uncertainty as to whether
reinsurance contributions are required
of certain unique plan arrangements. In
addition, we believe that the concept of
minimum value will be familiar to
stakeholders, and will not add undue
burden to the determination of whether
a plan offers major medical coverage for
reinsurance purposes. It is important to
note that this definition of major
medical coverage only applies for
determining reinsurance contributions
under section 1341 of the Affordable
Care Act. We seek comment on this
proposed definition.
b. Self-insured Plans Without Third
Party Administrators
Section 1341(b)(1)(A) of the
Affordable Care Act provides that
‘‘health insurance issuers and third
party administrators on behalf of group
health plans’’ must make reinsurance
contributions. We recognize that some
self-insured group health plans selfadminister the benefits and services
provided under the plan, and do not use
the services of a third party
administrator. We believe that section
1341(b)(1)(A) of the Affordable Care Act
clearly applies to both issuers of insured
plans as well as to self-insured plans
that use third party administrators.
However, our continued study of this
issue leads us to believe that this
provision may reasonably be interpreted
in one of two ways—it may be
interpreted to mean that self-insured,
self-administered plans must make
reinsurance contributions, or it may be
interpreted to mean that such plans are
excluded from the obligation to make
reinsurance contributions. For the
reasons discussed below, we propose to
modify the definition of a ‘‘contributing
entity’’ for the 2015 and 2016 benefit
years to exclude self-insured group
health plans that do not use a third
party administrator in connection with
claims processing or adjudication
(including the management of appeals)
or plan enrollment.
Following consideration of the
comments submitted with respect to the
2014 Payment Notice and the proposed
Program Integrity Rule, we propose that
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for the 2015 and 2016 benefit years, the
phrase ‘‘third party administrators on
behalf of group health plans’’ not
include self-insured, self-administered
group health plans. An insured plan and
a self-insured plan administered by a
third party administrator are similar in
that each arrangement involves an
employer and an outside commercial
entity—an issuer or a third party
administrator (which is often an
insurance company or an affiliate)—for
the administration of the core health
insurance functions of claims
processing and plan enrollment. We
note that under section 1341(b)(3)(B) of
the Affordable Care Act and
§ 153.400(a)(1)(ii), reinsurance
contribution amounts are to reflect a
‘‘commercial book of business.’’ Our
consideration of these comments leads
us to believe that a group health plan
administered by a third party
administrator would normally be
viewed as part of the third party
administrator’s ‘‘commercial book of
business,’’ but that a self-insured, selfadministered plan would not normally
be viewed as part of any entity’s
‘‘commercial book of business.’’
Therefore, we propose that for the
2015 and 2016 benefit years, a
‘‘contributing entity’’ would mean: (a) A
health insurance issuer; or (b) a selfinsured group health plan (including a
group health plan that is partially selfinsured and partially insured, where the
health insurance coverage does not
constitute major medical coverage) that
uses a third party administrator in
connection with claims processing or
adjudication (including the management
of appeals) or plan enrollment. The
proposed modification for the 2015 and
2016 benefit years would exclude from
the obligation to make reinsurance
contributions those self-insured plans
that do not use a third party
administrator for their core
administrative processing functions—
adjudicating, adjusting, and settling
claims (including the management of
appeals), and processing and
communicating enrollment information
to plan participants and beneficiaries.
This proposed amendment would
recognize that some self-insured group
health plans, which we believe would
generally not be considered to be using
the core services of a third party
administrator, may use third parties for
ancillary administrative support, and
we would consider these plans to be
self-administered for purposes of the
reinsurance program.
For purposes of the definition of
‘‘contributing entity,’’ we propose to
consider a third party administrator to
be, with respect to a self-insured group
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party administrators for the functions
described above should not be obligated
to make reinsurance contributions, we
also recognize, as a public policy matter,
that it would be disruptive to plans and
issuers to modify the definition of
‘‘contributing entity’’ for the 2014
benefit year at this late date. Health
insurance issuers have already set
premiums and developed operational
processes based on the definition of
‘‘contributing entity’’ that was
previously finalized in the 2014
Payment Notice. To prevent lower
reinsurance payments, the contribution
rate would have to be raised for other
contributing entities, many of whom
have already set their 2014 premiums
based on the contribution rate finalized
in March 2013. Excluding self-insured,
self-administered group health plans
from the set of entities that must
provide reinsurance contributions for
the 2014 benefit year, without raising
the rate on other entities, would
decrease the funds available for
reinsurance payments for that benefit
year, and thus upset settled estimates
with respect to expected reinsurance
payments that were used to establish
premiums.
Therefore, we do not propose to
change the definition of a ‘‘contributing
entity’’ for the 2014 benefit year. That
definition will remain as provided for in
the second final Program Integrity
Rule—a health insurance issuer or a
self-insured group health plan
(including a group health plan that is
partially self-insured and partially
insured, where the health insurance
coverage does not constitute major
medical coverage), regardless of whether
the group health plan uses a third party
administrator. The modification to the
definition of ‘‘contributing entity’’
described above would be effective only
for the 2015 and 2016 benefit years.
Finally, we note that our proposed
change to the definition of a
contributing entity may have
implications for our plan aggregation
rules at § 153.405(g), and seek comment
on whether a plan sponsor that
maintains two or more group health
plans covering the same covered lives,
where one or more group health plans
are insured and one or more are selfinsured and do not use a third party
administrator for core administrative
functions, should be required to treat
the multiple plans as a single group
health plan for purposes of calculating
any reinsurance contribution amount
due.
As discussed in greater detail below, we
are proposing to collect $25.4 million
for administrative expenses for the 2015
benefit year (or 0.4 percent of the $6
billion to be dispersed). Therefore, the
total amount to be collected would be
approximately $8.025 billion. Our
estimate of the number of enrollees in
plans that must make reinsurance
contributions yields an annual per
capita contribution rate of $44 for the
2015 benefit year.
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c. Uniform Reinsurance Contribution
Rate
(i) Uniform Reinsurance Contribution
Rate for the 2015 Benefit Year
Section 153.220(c) provides that HHS
is to publish in the annual HHS notice
of benefit and payment parameters the
uniform reinsurance contribution rate
for the upcoming benefit year. Section
1341(b)(3)(B)(iii) of the Affordable Care
Act specifies that $10 billion for
reinsurance contributions are to be
collected from contributing entities in
2014 (the reinsurance payment pool), $6
billion in 2015, and $4 billion in 2016.
Additionally, sections 1341(b)(3)(B)(iv)
and 1341(b)(4) of the Affordable Care
Act direct that $2 billion in funds are to
be collected for contribution to the U.S.
Treasury in 2014, $2 billion in 2015,
and $1 billion in 2016. Finally, section
1341(b)(3)(B)(ii) of the Affordable Care
Act allows for the collection of
additional amounts for administrative
expenses. Taken together, these three
components make up the total dollar
amount to be collected from
contributing entities for each of the 3
years of the reinsurance program under
the uniform reinsurance contribution
rate.
As discussed in the 2014 Payment
Notice, each year, the uniform
reinsurance contribution rate will be
calculated by dividing the sum of the
three amounts (the reinsurance payment
pool, the U.S. Treasury contribution,
and administrative costs) by the
estimated number of enrollees in plans
that must make reinsurance
contributions:
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health plan, an entity that is not under
common ownership or control with the
self-insured group health plan or its
sponsor that provides administrative
services to the self-insured group health
plan in connection with claims
processing or adjudication (including
the management of appeals) or plan
enrollment. We seek comment on this
definition, and whether certain types of
service providers, such as an attorney
providing legal advice in connection
with claims adjudication, or an issuer
administering an insured component of
a group health plan that is partially selfinsured and partially insured should be
considered a third party administrator
for these purposes.
In addition, we seek comment on
whether the core administrative
functions that we have described
above—claims processing or
adjudication (including the management
of appeals) and plan enrollment—are
the appropriate criteria for this revised
definition, and what other
administrative functions, such as
medical management services, provider
network development, or other support
tasks, should be considered in
determining whether a self-insured
group health plan uses a third party
administrator. We also seek comment on
whether a self-insured plan must
perform these core administrative
functions for all healthcare benefits and
services provided to enrollees under the
plan in order not to be considered to be
using a third party administrator, or
whether certain benefits or services,
such as pharmaceutical benefits or
behavioral health benefits, or a de
minimis or small percentage of all
benefits and services may be performed
by an unaffiliated service provider. If so,
we seek comment on which benefits or
services should be excluded from this
criterion, or how such a de minimis
amount or small percentage should be
measured.
While, upon further consideration of
the issue, we believe the statutory
language can reasonably be read to
support the proposition that self-insured
group health plans that do not use third
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(ii) Timing of Collection of Reinsurance
Contributions
As set forth in the 2014 Payment
Notice, under § 153.405(b), no later than
November 15 of the 2014, 2015, and
2016 benefit years, as applicable, a
contributing entity must submit an
annual enrollment count of the number
of covered lives of reinsurance
contribution enrollees for the applicable
benefit year to HHS. Under
§ 153.405(c)(1), HHS is to notify the
contributing entity of the reinsurance
contribution amount to be paid for the
applicable benefit year within 30 days
of the submission of the annual
enrollment count, or by December 15 of
the applicable benefit year. Under
§ 153.405(c)(2), a contributing entity is
to remit reinsurance contributions to
HHS within 30 days after the date of the
notification.
We recognize that the reinsurance
collections provided for in the
Affordable Care Act—$12 billion for
2014, $8 billion for 2015, and $5 billion
for 2016—will result in substantial upfront payments from contributing
entities for the reinsurance program.
Therefore, we are proposing to modify
our collection schedule for the program,
so that we would collect the reinsurance
contribution amounts for reinsurance
payments and for administrative
expenses earlier in the calendar year
following the applicable benefit year,
approximately in accordance with the
schedule currently described in
§ 153.405(c), but collect the reinsurance
contribution amounts for payments to
the U.S. Treasury in the last quarter of
the calendar year following the
applicable benefit year. Therefore, we
propose to modify § 153.405(c) so that a
contributing entity would make
reinsurance contributions in two
installments to HHS—one at the
beginning of the calendar year following
the applicable benefit year, and one at
the end. As noted in the second final
Program Integrity Rule, the proposed
policy is designed to alleviate the
upfront burden of the reinsurance
contribution, allowing contributing
entities additional time to make the
payment. We note that the proposed
change in the collection schedule would
not affect the amount of funds collected
for reinsurance payments. Additionally,
the amounts allocated to reinsurance
payments and administrative expenses
are needed to operate the reinsurance
program, while the amounts allocated
for payments to the U.S. Treasury are
not needed for the operation of the
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transitional reinsurance program.
Therefore, collecting the amounts
allocated to payments to the U.S.
Treasury later in the calendar year
following the applicable benefit year
will not affect the reinsurance program,
and will alleviate a contributing entity’s
upfront financial burden.
Under this proposal, the first of the
two installments each year would
include the reinsurance contribution
amounts allocated to reinsurance
payments and administrative expenses.
We propose in § 153.405(c)(1) that
following submission of the annual
enrollment count, HHS would notify a
contributing entity of the reinsurance
contribution amount allocated to
reinsurance payments and
administrative expenses to be paid for
the applicable benefit year. If the
enrollment count is timely submitted,
HHS intends to notify the contributing
entity by December of benefit year 2014,
2015, or 2016, as applicable. We note
that, due to our desire to align the
notification of reinsurance contributions
due with our monthly payment and
collections cycle, this schedule differs
slightly from the schedule currently set
forth in § 153.405(c)(3), which provides
for notification by the later of 30 days
of the submission of the annual
enrollment count or by December 15.
We propose in § 153.405(c)(3) that the
contributing entity remit this amount
within 30 days after the date of the first
notification.
The second installment would cover
the portion of the reinsurance
contribution amount allocated to the
payments for the U.S. Treasury to be
paid for a benefit year. We propose in
§ 153.405(c)(2), that in the fourth quarter
of the calendar year following the
applicable benefit year, HHS would
notify the contributing entity of the
portion of the reinsurance contribution
amount allocated for payments to the
U.S. Treasury for the applicable benefit
year. Again, under proposed
§ 153.405(c)(3), a contributing entity
would remit this amount within 30 days
after the date of this second notification.
We note that the contributing entity
would be required to submit an annual
enrollment count only once for each
benefit year under § 153.405(b).
For example, for the 2014 benefit
year, of the $63.00 annual per capita
contribution rate, $52.50 would be
allocated towards reinsurance payments
and administrative expenses, and
$10.50 towards payments to the U.S.
Treasury. Thus, we contemplate that if
a contributing entity submits its
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enrollment count for the 2014 benefit
year in a timely manner (by November
15, 2014), a reinsurance contribution
payment of $52.50 per covered life
would be invoiced in December 2014,
and payable in January, 2015. Another
reinsurance contribution payment of
$10.50 per covered life would be
invoiced in the fourth quarter of 2015,
and payable late in the fourth quarter of
2015.
We propose that for the 2015 benefit
year, the proposed $44 annual per
capita contribution rate be allocated $33
towards reinsurance payments and
administrative expenses, and $11
towards payments to the U.S. Treasury.
These amounts would similarly be
payable in January 2016 and late in the
fourth quarter of 2016, respectively.
We plan to establish the uniform
reinsurance contribution rate for the
2016 benefit year in the HHS notice of
benefit and payment parameters for
2016.
We seek comment on this proposal.
We note that we are considering a
variation of this proposal under which
contributing entities would be provided
the option of paying the entire
reinsurance contribution amount with
the first installment, at the beginning of
the calendar year following the
applicable benefit year. We also clarify
that the two installment payments (or
one, should a contributing entity be
permitted and elect to make the entire
payment with the first installment)
would be reported with 2014 data for
purposes of the risk corridors and MLR
calculations due July 31, 2015, despite
the fact that the later installment would
not have been paid at that time. This has
the effect of leaving the MLR and risk
corridors calculations unchanged.
(iii) Allocation of Uniform Reinsurance
Contribution Rate
Section 153.220(c) provides that HHS
is to set in the annual HHS notice of
benefit and payment parameters for the
applicable benefit year the proportion of
contributions collected under the
uniform reinsurance contribution rate to
be allocated to reinsurance payments,
payments to the U.S. Treasury, and
administrative expenses. In the 2014
Payment Notice, we stated that
reinsurance contributions collected for
2014 will be allocated pro rata to the
reinsurance pool, administrative
expenses, and the U.S. Treasury, up to
$12.02 billion. In Table 2, we specify
these proportions (or amounts, as
applicable):
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TABLE 2—PROPORTION OF REINSURANCE CONTRIBUTIONS COLLECTED UNDER THE UNIFORM REINSURANCE CONTRIBUTION RATE FOR THE 2015 BENEFIT YEAR FOR REINSURANCE PAYMENTS, PAYMENTS TO THE U.S. TREASURY, AND
ADMINISTRATIVE EXPENSES
Reinsurance payments .................
If total contribution collections under the uniform reinsurance contribution rate are less than or equal
to $8.025 billion.
74.8 percent ($6 billion/$8.025 billion) ........................
Payments to the U.S. Treasury ....
Administrative expenses ...............
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Proportion or amount for: .............
24.9 percent ($2 billion/$8.025 billion) ........................
0.3 percent ($25.4 million/$8.025 billion) ....................
As shown in Table 2, if the total
amount of contributions collected is less
than or equal to $8.025 billion, we
propose to allocate approximately 74.8
percent of the reinsurance contributions
collected to reinsurance payments, 24.9
percent of the reinsurance contributions
collected to the U.S. Treasury, and 0.3
percent of the reinsurance contributions
collected to administrative expenses.
We note that the proposed method of
collection would not affect the
allocation to reinsurance payments,
administrative expenses, and payments
to the U.S. Treasury.
To provide that all reinsurance
contributions collected for a benefit year
are paid out for claims for that benefit
year, we propose to amend § 153.230(d)
to provide that if HHS determines that
the amount of all reinsurance payments
requested under the national payment
parameters from all reinsurance-eligible
plans in all States for a benefit year will
not be equal to the amount of all
reinsurance contributions collected for
reinsurance payments under the
national contribution rate in all States
for an applicable benefit year, HHS will
determine a uniform pro rata adjustment
(up or down) to be applied to all such
requests for reinsurance payments for
all States. We propose that each
applicable reinsurance entity, or HHS
on behalf of a State, must reduce or
increase the reinsurance payment
amounts for the applicable benefit year
by any adjustment required under that
paragraph.
For example, for 2014, if HHS collects
$9 billion for the reinsurance payments
pool and $10 billion in reinsurance
payments are requested, HHS and each
applicable reinsurance entity would
reduce all reinsurance payments by 10
percent (effectively decreasing the
coinsurance rate). If HHS collects $11
billion for the reinsurance payments
pool and $10 billion in reinsurance
payments are requested, HHS and each
applicable reinsurance entity would
increase all reinsurance payments by 10
percent (effectively increasing the
coinsurance rate).
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If total contribution collections under the uniform reinsurance contribution rate are more than $8.025
billion.
The difference between total collections and those
contributions allocated to the U.S. Treasury and
administrative expenses.
$2 billion.
$25.4 million.
We seek comment on this payment
proposal, including on whether any
excess collections should be allocated to
increasing coinsurance rates above 100
percent, or whether such funds should
be used instead to change other
reinsurance parameters or used for
future benefit years.
Because our proposal above would
provide that all reinsurance
contributions collected for a benefit year
are paid out for claims for that benefit
year, we propose to delete and reserve
§ 153.235(b), which currently provides
that any excess reinsurance
contributions collected from
contributing entities for any benefit year
but unused for the applicable benefit
year must be used for reinsurance
payments in subsequent benefit years.
For years beyond the 2014 benefit year
(for which we propose to pay out all
reinsurance contributions collected, as
described above), we seek comment on
whether we should have the flexibility
to use excess contributions collected in
the applicable benefit year for that
benefit year or in a subsequent benefit
year.
(iv) Administrative Expenses
In the 2014 Payment Notice, we
estimated that the Federal
administrative expenses of operating the
reinsurance program would be $20.3
million, based on our estimated contract
and operational costs. We propose to
use the same methodology to estimate
the administrative expenses for the 2015
benefit year. These estimated costs
would cover the costs related to
contracts for developing the uniform
reinsurance payment parameters and
the uniform reinsurance contribution
rate, collecting reinsurance
contributions, making reinsurance
payments, and conducting account
management, data collection, program
integrity and audit functions,
operational and fraud analytics, training
for entities involved in the reinsurance
program, and general operational
support. We propose to exclude from
these administrative expenses the costs
associated with work performed by
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Federal personnel. To calculate our
proposed reinsurance administrative
expenses for 2015, we divided HHS’s
projected total costs for administering
the reinsurance programs on behalf of
States by the expected number of
enrollees in reinsurance-eligible plans
for the benefit year.
We estimate this amount to be
approximately $25.4 million for the
2015 benefit year. This estimate has
increased for the 2015 benefit year
because we will be making reinsurance
payments in the 2015 benefit year for
the 2014 benefit year, and as discussed
below, will engage in program integrity
and audit-related activity in 2015 to
oversee the reinsurance program. We
believe that this figure reflects the
Federal government’s significant
economies of scale, which helps to
decrease the costs associated with
operating the reinsurance program.
Based on our estimate of covered lives
for which reinsurance contributions are
to be made for 2015, we are proposing
a uniform reinsurance contribution rate
of $0.14 annually per capita for HHS
administrative expenses. We provide
details below on the methodology we
used to develop the 2015 enrollment
estimates.
For the 2014 benefit year, we
allocated the administrative expenses
equally between contribution and
payment-related activities. Because we
anticipate that our additional activities
in the 2015 benefit year, including our
program integrity and audit activities,
will also be divided approximately
equally between contribution and
payment-related activities, we again
propose to allocate the total
administrative expenses equally
between these two functions. Therefore,
as shown in Table 3, we expect to
apportion the annual per capita amount
of $0.14 of administrative expenses as
follows: (a) $0.07 of the total amount
collected per capita for administrative
expenses for the collection of
contributions from health insurance
issuers and group health plans; and (b)
$0.07 of the total amount collected per
capita for administrative expenses for
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reinsurance payment activities,
supporting the administration of
payments to issuers of reinsuranceeligible plans.
TABLE 3—BREAKDOWN OF ADMINISTRATIVE EXPENSES (ANNUAL, PER
CAPITA)
Activities
Collecting reinsurance contributions from health insurance issuers and group
health plans .......................
Calculation and disbursement of reinsurance payments ................................
Total annual per capita expenses for HHS to perform
all reinsurance functions ...
Estimated
expenses
$0.07
0.07
0.14
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If HHS operates the reinsurance
program on behalf of a State, HHS
would retain the annual per capita fee
to fund HHS’s performance of all
reinsurance functions, which would be
$0.14. If a State establishes its own
reinsurance program, HHS would
transfer $0.07 of the per capita
administrative fee to the State for
purposes of administrative expenses
incurred in making reinsurance
payments, and retain the remaining
$0.07 to offset the costs of collecting
contributions. We note that the
administrative expenses for reinsurance
payments will be distributed to those
States that operate their own
reinsurance program in proportion to
the State-by-State total requests for
reinsurance payments made under the
uniform reinsurance payment
parameters.
d. Uniform Reinsurance Payment
Parameters
Our goal in setting the reinsurance
payment parameters is to achieve the
greatest impact on rate setting, and
therefore premiums, through reductions
in plan risk, while complementing the
current commercial reinsurance market.
Section 1341(b)(2)(B) of the Affordable
Care Act directs the Secretary, in
establishing standards for the
transitional reinsurance program, to
include a formula for determining the
amount of reinsurance payments to be
made to issuers for high-risk individuals
that provides for the equitable allocation
of funds. In the Premium Stabilization
Rule, we provided that reinsurance
payments to eligible issuers will be
made for a portion of an enrollee’s
claims costs paid by the issuer (the
coinsurance rate, meant to reimburse a
proportion of claims while giving
issuers an incentive to contain costs)
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that exceeds an attachment point (when
reinsurance would begin), subject to a
reinsurance cap (when the reinsurance
program stops paying claims for a highcost individual). The coinsurance rate,
attachment point, and reinsurance cap
together constitute the uniform
reinsurance payment parameters.
Given the smaller pool of reinsurance
contributions to be collected for the
2015 benefit year, we are proposing that
the uniform reinsurance payment
parameters for the 2015 benefit year be
established at an attachment point of
$70,000, a reinsurance cap of $250,000,
and a coinsurance rate of 50 percent. We
estimate that these uniform reinsurance
payment parameters will result in total
requests for reinsurance payments of
approximately $6 billion for the 2015
benefit year. We believe setting the
coinsurance rate at 50 percent and
increasing the attachment point allows
for the reinsurance program to help pay
for nearly the same group of high-cost
enrollees as was the case for the 2014
benefit year, while still encouraging
issuers to contain costs. We believe that
maintaining the reinsurance cap for the
2015 benefit year while ensuring that
the coinsurance rate sufficiently
compensates issuers for high risk
individuals will make it easier for
issuers to estimate the effects of
reinsurance. We believe that these
uniform reinsurance payment
parameters will support the reinsurance
program’s goals of promoting
nationwide premium stabilization and
market stability while providing issuers
incentives to continue to effectively
manage enrollee costs. We intend to
continue to monitor individual market
enrollment and claims patterns to
appropriately disburse reinsurance
payments throughout each of the benefit
years of the transitional reinsurance
program.
As discussed in the 2014 Payment
Notice, to assist with the development
of the uniform reinsurance payment
parameters and the premium adjustment
percentage index, HHS developed the
Affordable Care Act Health Insurance
Model (ACAHIM). The ACAHIM
estimates market enrollment,
incorporating the effects of State and
Federal policy choices, and accounting
for the behavior of individuals and
employers. The outputs of the ACAHIM,
especially the estimated enrollment and
expenditure distributions, were used to
analyze a number of policy choices
relating to the uniform reinsurance
contribution rate and uniform
reinsurance payment parameters
proposed in this rule.
The ACAHIM generates a range of
national and State-level outputs for
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2015, including the level and
composition of enrollment across
markets given the eligible population in
each State. The ACAHIM is described
below in two sections: (1) the approach
for estimating 2015 enrollment; and (2)
the approach for estimating 2015
expenditures. The ACAHIM uses recent
Current Population Survey (CPS) data
adjusted for small populations at the
State level, exclusion of undocumented
immigrants, and population growth in
2015 to assign individuals to the various
coverage markets.
Specifically, the ACAHIM assigns
each individual to a single health
insurance market as his or her baseline
(pre-Affordable Care Act) insurance
status. In addition to assuming that
individuals currently in Medicare,
TRICARE, or Medicaid will remain in
such coverage, the ACAHIM takes into
account the probability that a firm will
offer employment-based coverage based
on the CPS distribution of coverage
offers for firms of a similar size and
industry. Generally, to determine the
predicted insurance enrollment status
for an individual or family (the ‘‘health
insurance unit’’ or ‘‘HIU’’), the ACAHIM
calculates the probability that the firm
will offer insurance, then models
Medicaid eligibility, and finally models
eligibility for advance payments of the
premium tax credit and cost-sharing
reductions under the Exchange.
Whenever a transition to another
coverage market is possible, the
ACAHIM takes into account the costs
and benefits of the decision for the HIU
and assigns a higher probability of
transition to those with the greatest
benefit. The ACAHIM assumptions of
the rate at which uninsured individuals
will take up individual market coverage
are based on current take-up rates of
insurance across States, varied by
demographics and incomes and
adjusted for post-Affordable Care Act
provisions, such as advance payments
of the premium tax credit and costsharing reductions.
Estimated expenditure distributions
from the ACAHIM are used to set the
uniform reinsurance payment
parameters so that estimated
contributions from all contributing
entities equal estimated payments for all
reinsurance-eligible plans. The
ACAHIM uses the Health Intelligence
Company, LLC (HIC) database from
calendar year 2010, with the claims data
trended to 2015 to estimate total
medical expenditures per enrollee by
age, gender, and area of residence. The
expenditure distributions are further
adjusted to take into account plan
benefit design, or ‘‘metal’’ level (that is,
‘‘level of coverage,’’ as defined in
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§ 156.20) and other characteristics of
individual insurance coverage in an
Exchange. To describe a State’s coverage
market, the ACAHIM computes the
pattern of enrollment using the model’s
predicted number and composition of
participants in a coverage market. These
estimated expenditure distributions
were the basis for the uniform
reinsurance payment parameters.
e. Adjustment Options
In the 2014 Payment Notice, we
finalized the following uniform
reinsurance payment parameters for the
2014 benefit year—a $60,000 attachment
point, a $250,000 reinsurance cap, and
an 80 percent coinsurance rate.
However, updated information,
including the actual premiums for
reinsurance-eligible plans, as well as
recent policy changes, suggest that our
prior estimates of the payment
parameters may overestimate the total
covered claims costs of individuals
enrolled in reinsurance-eligible plans in
2014. To account for this, we propose to
decrease the 2014 attachment point to
$45,000. We seek comment on this
proposal.
sroberts on DSK5SPTVN1PROD with PROPOSALS
f. Deducting Cost-Sharing Reduction
Amounts From Reinsurance Payments
Subpart H of 45 CFR part 153 governs
the submission of reinsurance claims to
an issuer’s dedicated distributed data
environment. Under § 156.410, if an
individual is determined eligible to
enroll in a QHP in the individual market
offered through an Exchange and elects
to do so, the QHP issuer must assign the
individual to a standard plan or costsharing plan variation based on the
enrollment and eligibility information
submitted by the Exchange. Issuers of
QHPs offered in an individual market
through an Exchange will receive costsharing reduction payments for
enrollees in their plan variations.
Therefore, in the 2014 Payment Notice
(78 FR 15499), we stated that the
enrollee-level data submitted by an
issuer of a reinsurance-eligible plan
must include claims data and data
related to determining cost-sharing
reductions provided through a costsharing plan variation, to permit HHS to
calculate an issuer’s plan paid amounts
on behalf of an enrollee. Here, we
propose to explain the methodology
HHS would use to deduct the amount of
cost-sharing reductions paid on behalf
of an enrollee enrolled in a QHP in an
individual market through an Exchange.
In this section, we first set forth a
methodology for policies that cover only
one enrollee, then policies with more
than one enrollee, such as family plans,
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and finally, for policies under a limited
cost sharing plan variation.
As specified in § 153.230, HHS will
calculate reinsurance payments by
applying the uniform reinsurance
payment parameters for the applicable
benefit year to the issuer’s plan paid
amounts on behalf of each enrollee in a
reinsurance-eligible plan for the benefit
year. However, this calculation may not
always account for the cost-sharing
reduction payments the QHP issuer
receives for an enrollee, resulting in an
issuer receiving payments twice for the
same enrollee’s total costs. We believe
that the cost-sharing amounts provided
by HHS to a QHP issuer for an enrollee
in a plan variation should be deducted
from the total plan paid amounts to
avoid ‘‘double payment’’ 15 to the QHP
issuer of the reinsurance-eligible plan
because the QHP issuer is already being
reimbursed for the value of the costsharing reductions provided.
Under the Secretary’s authority under
section 1341(b)(2)(B) of the Affordable
Care Act to establish a payment formula
for the reinsurance program, we propose
a method through which HHS intends to
account for cost-sharing reduction
payments when calculating reinsurance
payments for QHP issuers for
reinsurance-eligible plans offered in an
individual market. We seek to avoid
requiring QHP issuers to engage in a
complicated re-adjudication of claims to
determine cost-sharing reduction
amounts multiple times throughout the
year. We believe that the proposed
methodology set forth below will
accurately estimate those cost-sharing
reduction payments while also
alleviating the burden on both QHP
issuers and HHS.
We propose that for each enrollee
enrolled in a QHP plan variation, we
will subtract from the QHP issuer’s total
plan paid amounts for the enrollee in a
reinsurance-eligible plan the difference
between the annual limitation on cost
sharing for the standard plan and the
annual limitation on cost sharing for the
plan variation. Because reinsurance
payments are made for enrollees only
when the issuer’s total plan paid
amounts exceeds the attachment point
(for example, $60,000 in the 2014
benefit year), we believe that it is highly
unlikely that an enrollee for which a
QHP issuer is eligible for reinsurance
15 We note an increase in reinsurance claims
spread evenly across the individual market may not
necessarily result in higher reinsurance payments to
all issuers in aggregate. However, increased requests
for reinsurance payments may result in a higher pro
rata reduction to be applied to all reinsurance
payments because total reinsurance payments for a
benefit year cannot exceed the reinsurance
contributions collected for reinsurance payments
(see 45 CFR 153.230(d)).
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72345
payments will not have reached the
annual limitation on cost sharing.
Therefore, the difference between the
two annual limitations on cost sharing
is likely to be an accurate estimate of
cost-sharing reduction payments
provided by HHS to the QHP issuer.16
We propose to apply this approach to
calculating the amounts of cost-sharing
reductions provided for an enrollee in a
silver plan variation or a zero cost
sharing plan variation.
For policies with multiple enrollees,
such as family policies, we propose to
allocate the difference in annual
limitation in cost sharing across all
enrollees covered by the family policy
in proportion to the enrollees’ QHP
issuer total plan paid amounts. We
believe that such an approach is
intuitive and will be easy to
operationalize. We considered an
alternative approach that would allocate
the difference in annual limitation in
cost sharing equally across all enrollees
in a family policy, with any difference
in annual limitations on cost sharing
that exceeds the total plan paid amounts
for a particular enrollee to be reallocated
equally across the other enrollees. That
approach would tend to result in a
higher allocation of cost sharing on lowclaims-cost individuals, which we
believe is unrealistic.
In contrast, we propose not to reduce
the QHP issuer’s plan paid amounts for
purposes of calculating reinsurance
payments for an Indian in a limited cost
sharing plan variation. We note that
such enrollees will have the same
annual limitation on cost sharing as
individuals enrolled in standard plans,
and thus, an approach that calculates
the difference in annual limitations on
cost sharing would yield estimated costsharing reductions of zero. We believe
that this result is reasonable for
individuals with plan paid amounts
greater than the attachment point
because those individuals are likely to
have incurred significant claims costs
with providers for which cost sharing is
not reduced—that is, providers other
16 We note that because the annual limitation on
cost sharing applies only to in-network services, it
is possible that an enrollee could incur additional
cost-sharing reductions on out-of-network services.
However, except in the case of zero cost sharing
plan variations, an issuer is not required to reduce
cost sharing out-of-network, and we believe that an
issuer will rarely choose to do so because the AV
calculator does not recognize any change in AV due
to a reduction in out-of-network cost sharing.
Although it is possible that an enrollee in a zero
cost sharing plan variation could incur significant
out-of-network cost-sharing reductions beyond the
standard plan’s annual limitation on cost sharing,
we believe such a circumstance will be relatively
rare because of the substantial out-of-pocket costs
an enrollee would likely incur in the form of
balance billing.
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than the Indian Health Service and
facilities operated by an Indian Tribe,
Tribal Organization, or Urban Indian
Organization. Thus, we believe that
these individuals are likely to have
reached the full annual limitation on
cost sharing for the standard plan.
We also considered an alternative
approach that would require issuers to
re-adjudicate claims periodically
throughout the year to calculate costsharing reductions provided to date for
an Indian enrolled in a limited cost
sharing plan, but believe that such an
approach would be burdensome to QHP
issuers and only slightly improve the
accuracy of cost-sharing reduction
estimates. Finally, we considered an
approach under which QHP issuers
would submit an estimate of the
effective annual limitation on cost
sharing for limited cost sharing plans.
However, we believe that this will be
difficult for a QHP issuer to estimate
due to the lack of cost-sharing reduction
data for the early years of the
Exchanges.
g. Audits
sroberts on DSK5SPTVN1PROD with PROPOSALS
(i) HHS Audits of State-Operated
Reinsurance Programs
To safeguard the use of Federal funds
in the transitional reinsurance program,
we propose in § 153.270(a) that HHS or
its designee may conduct a financial
and programmatic audit of a Stateoperated reinsurance program to assess
compliance with the requirements of
subparts B and C of 45 CFR part 153. A
State that establishes a reinsurance
program must ensure that its applicable
reinsurance entity and any relevant
contractors, subcontractors, or agents
cooperate with an audit of its
reinsurance program by HHS or its
designee.
Under the proposed rule, HHS may
conduct targeted audits of Stateoperated reinsurance programs based on
the State summary report provided to
HHS for each benefit year described in
§ 153.260(b), the results of the
independent external audit conducted
for each benefit year under § 153.260(c),
and issuer input, among other factors.
Such audits may, for example, examine
the receipt and expenditure of
reinsurance funds, as well as funds
received from HHS for administrative
expenses. The audits may also examine
the reinsurance program’s compliance
with the requirements for the State and
the program under subparts B and C of
45 CFR part 153. We will provide
further details on our audit program,
including timelines, procedures, and
substantive requirements, in future
rulemaking and guidance.
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We propose in § 153.270(b) that if an
audit by HHS results in a finding of
material weakness or significant
deficiency (as these terms are defined in
GAAS issued by the American Institute
of Certified Public Accountants, and
Government Auditing Standards issued
by the Government Accountability
Office (GAO) 17) with respect to the
State-operated reinsurance program’s
compliance with any requirement of
subparts B or C of 45 CFR part 153, the
State must ensure that its applicable
reinsurance entity provide a written
corrective action plan to HHS for
approval within 60 calendar days of the
issuance of the final audit report. The
applicable reinsurance entity must
implement the plan and provide to HHS
written documentation of the corrective
actions once taken. We seek comment
on this proposal, including the
standards that should govern these
audits.
(ii) HHS Audits of Contributing Entities
We propose in § 153.405(i) that HHS
or its designee may audit a contributing
entity to assess its compliance with the
requirements of subpart E of 45 CFR
part 153. We anticipate conducting
targeted audits of contributing entities
based on, among other criteria and
sources, data provided to HHS through
the annual enrollment count submitted
under § 153.405(b) and any previous
history of noncompliance with these
standards. We will provide further
details on this audit program, including
timelines, procedures, and substantive
requirements, in future rulemaking and
guidance. We anticipate that these
audits will focus on records relating to
the enrollment of the applicable selfinsured or insured plan, to confirm that
the number of covered lives was
correctly counted and that the correct
amount of reinsurance contributions
was paid. Audits may also identify
entities that were required to but did not
make reinsurance contributions. If HHS
determines as the result of an audit that
a contributing entity was required to
pay additional reinsurance
contributions, it may require the
contributing entity to pay such amounts
to the Federal government. If the
contributing entity is an issuer subject
to an audit for other Exchange financial
programs or premium stabilization
17 See Government Auditing Standards (2011
Revision), available at: https://www.gao.gov/
yellowbook. For public companies, the Public
Company Accounting Oversight Board (PCAOB)
sets audit standards. See https://pcaobus.org/
Standards/Auditing/Pages/default.aspx. For nonpublic companies, the AICPA sets audit standards.
See https://www.aicpa.org/Research/Standards/
AuditAttest/Pages/SAS.aspx.
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programs, such as risk adjustment, we
intend to coordinate these audits, to the
extent practical, to reduce the burden on
both the contributing entity and HHS.
We seek comment on this proposal,
including the standards that should
govern these audits.
(iii) HHS Audits of Issuers of
Reinsurance-Eligible Plans
We propose in § 153.410(d) that HHS
or its designee may audit an issuer of a
reinsurance-eligible plan to assess its
compliance with the requirements of
subparts E and H of 45 CFR part 153,
and that if an audit results in a finding
of material weakness or significant
deficiency, the issuer must:
• Within 30 calendar days of the
issuance of the final audit report,
provide a written corrective action plan
to HHS for approval;
• Implement that corrective action
plan; and
• Provide to HHS written
documentation of the corrective actions
once taken.
If HHS determines as the result of an
audit that the issuer of a reinsuranceeligible plan has received reinsurance
payments to which it was not entitled,
it may require the issuer to pay such
amounts back to the Federal
government.
We anticipate conducting targeted
audits of issuers of reinsurance-eligible
plans based on, among other criteria and
sources, the data provided to HHS
through the dedicated distributed data
environment and any previous history
of noncompliance with these standards.
We will provide further details on this
audit program, including timelines,
procedures, and substantive
requirements, in future rulemaking and
guidance. We anticipate that this audit
will focus on claims records validating
the requests for reinsurance payments
submitted to the dedicated distributed
data environments, as well as records
indicating the plan was a reinsuranceeligible plan. To reduce the burden on
issuers and HHS, to the extent practical,
we intend to coordinate any audits of
issuers of reinsurance-eligible plans
with related audits of Exchange
financial programs and premium
stabilization programs, such as risk
adjustment.
We seek comment on this proposal,
including the standards that should
govern these audits.
h. Same Covered Life
In the second final Program Integrity
Rule (78 FR 65057), we stated that it is
our intent not to require payment of
reinsurance contributions more than
once for the same covered life. We
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stated that we recognize that certain
complex group health plan
arrangements can lead to situations in
which lives are covered by multiple
arrangements, where it is unclear
whether more than one health plan or
issuer must make reinsurance
contributions, and that we intended to
provide clarity on the matter in future
rulemaking.
Therefore, we propose to make two
changes to § 153.400. In § 153.400(a)(1),
we propose to clarify the general
principle that reinsurance contributions
are required for major medical coverage
that is considered to be part of a
commercial book of business, but are
not required to be paid more than once
with respect to the same covered life.
In addition, we propose to add
paragraph (vi) to § 153.400(a)(1), which
would provide that no reinsurance
contributions would be required in the
case of employer-provided group health
coverage where (A) such coverage
applies to individuals who are also
enrolled in individual market health
insurance coverage for which
reinsurance contributions are required;
or (B) such coverage is supplemental or
secondary to group health coverage for
which reinsurance contributions must
be made for the same covered lives. This
language would address situations in
which a person covered under a group
health plan also obtains individual
market coverage, and in which multiple
group health plans cover the same lives,
such as if a union offers a plan that
supplements a group health plan offered
by the employer. It would also address
a situation in which two spouses are
each covered as dependents by the
respective group health plans offered by
their two independent employers.
If it is not clear from the terms of the
health plans which group health plan is
supplemental, we propose, in keeping
with § 153.400(a)(3), that the group
health plan that offers the greater
portion of inpatient hospitalization
benefits be deemed the primary health
plan. If it is not clear from the terms of
the health plans which group health
plan is primary and which is secondary,
we propose to defer to the arrangements
on primary and secondary liability
worked out by the respective plan
sponsors, in accordance with applicable
State coordination of benefit laws and
regulations. In such a situation, we
would hold a plan sponsor harmless
from non-compliance actions for failure
to pay reinsurance contributions to the
extent the sponsor relied in good faith
upon a written representation by the
other sponsor that the other sponsor’s
coverage has primary liability for claims
for particular covered lives.
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We seek comment on these proposals,
including which entity should be
responsible for the reinsurance
contributions, how that responsibility
should be determined, and what
arrangements should be required
between the entities to assure efficient
coordination of the responsibility for the
reinsurance contributions, and what
other situations we should address in
which reinsurance contributions might
be required to achieve the goal of
preventing more than one contribution
per covered life.
i. Reinsurance Contributions and
Enrollees Residing in the Territories
Section 1323(a)(1) of the Affordable
Care Act provides that a U.S. territory
may establish an Exchange, and any
territory that elects to establish an
Exchange will be ‘‘treated as a State’’ for
purposes of the Exchange standards in
sections 1311 through 1313 of the
Affordable Care Act. In a letter dated
December 10, 2012 to the governors of
the U.S. territories (Territories Letter),
HHS stated that ‘‘if a territory
establishes an approved Exchange, it
may elect to establish a transitional
reinsurance program . . . consistent
with the provisions in section 1341 . . .
of the Affordable Care Act.’’ The
Territories Letter further stated that if a
territory does not establish a transitional
reinsurance program, HHS would not do
so on the territory’s behalf, and that in
order to operate a reinsurance program
for the 2014 benefit year, the territory
was required to notify HHS of its
intention to do so by March 1, 2013. No
territory has notified HHS of an
intention to operate a reinsurance
program.
In this proposed rule, we propose that
a contributing entity is not required to
make reinsurance contributions on
behalf of enrollees who reside in a
territory that does not operate a
reinsurance program. We propose to add
in § 153.400(a)(1)(v) an exception for
when a contributing entity must make
reinsurance contributions for its selfinsured group health plans and health
insurance coverage. To the extent that
the coverage applies to enrollees with
primary residence in a territory when
that territory does not operate a
reinsurance program, a contributing
entity would not be required to make
reinsurance contributions for those
enrollees. We believe that this proposal
aligns with the goals of the reinsurance
program because reinsurance
contributions would only be required
with respect to those jurisdictions that
benefit from the premium stabilization
effects of the reinsurance program.
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We propose that a contributing entity
may use any reasonable method to
determine the primary residence of an
enrollee, including using the last-known
mailing address of the principal
subscriber on the enrollee’s policy. We
seek comment on other methods that
would be acceptable for determining the
primary residence of an enrollee,
including the principal work location of
the principal subscriber on the
enrollee’s policy.
We note that a contributing entity is
required to allocate its covered lives by
primary residence between the
territories, on the one hand, and the 50
States and the District of Columbia, on
the other hand, only if it wishes to
exclude covered lives from reinsurance
contributions under proposed
§ 153.400(a)(1)(v).
j. Form 5500 Counting Method
In the 2014 Payment Notice (78 FR
15463), we established counting
methods for calculating the annual
enrollment for determining reinsurance
contributions for self-insured group
health plans, fully insured health plans,
and plans that are partially insured and
partially self-insured. One of the
allowable methods for a self-insured
group health plan is the Form 5500
counting method in § 153.405(e)(3). In
this proposed rule, we seek to clarify
§ 153.405(e)(3), by changing the
references from ‘‘benefit year’’ to ‘‘plan
year’’ 18 to clarify that a self-insured
group health plan may use the
enrollment set forth in the Form 5500
even if the group health plan is based
on a plan year other than the benefit
year, which is defined in § 153.20 and
§ 155.20 as a calendar year for which a
health plan provides coverage for health
benefits. Therefore, a self-insured group
health plan that chooses to use the Form
5500 counting method and offers selfonly coverage would calculate the
number of lives covered by adding the
total participants covered at the
beginning and end of the most current
plan year, as reported on the Form 5500,
then dividing by two. A self-insured
group health plan that offers both selfonly coverage and coverage other than
self-only coverage would calculate the
number of lives covered by adding the
total participants covered at the
beginning and the end of the most
current plan year, as reported on the
Form 5500.
18 Plan year as defined in 45 CFR 155.20 as a
consecutive 12 month period during which a health
plan provides coverage for health benefits. A plan
year may be a calendar year or otherwise.
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3. Provisions for the Temporary Risk
Corridors Program
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a. Definitions
In the first final Program Integrity
Rule, we provided that, in 45 CFR part
153, subpart F, regarding risk corridors,
any reference to a ‘‘qualified health
plan’’ or ‘‘QHP’’ includes plans that are
the ‘‘same’’ as a QHP or ‘‘substantially
the same’’ as a QHP. We noted that
plans that are substantially the same as
a QHP will continue to be considered
substantially the same even if they differ
in terms of benefits, premium, provider
network or cost-sharing structure,
provided that the differences are tied
directly and exclusively to Federal or
State requirements or prohibitions on
the coverage of benefits that apply
differently to plans depending on
whether they are offered through an
Exchange or outside of an Exchange.
In the first final Program Integrity
Rule, we recognized that OPM might
issue additional standards for multiState plan (MSP) issuers in the future
(for example, standards related to
provider networks) that could create
situations analogous to the ones we
discuss above. We are considering
whether a plan that differs from a QHP
(as defined at § 155.20) based on these
standards would be considered to be
‘‘substantially the same’’ as a QHP for
the purposes of participating in the risk
corridors program, and are considering
amending the definition of a QHP at
§ 153.500 in response. We seek
comment on this approach.
b. Compliance With Risk Corridors
Standards
The risk corridors program requires
the Federal government and
participating plans to share in profits or
losses resulting from inaccurate rate
setting for benefit years 2014 through
2016. A robust oversight process is
critical for this program because risk
corridors payments are Federal funds. In
this proposed rule, we outline our
proposed process for validating risk
corridors data submissions and
enforcing compliance with the risk
corridors requirements in subpart F of
45 CFR part 153. Because the MLR
program and the risk corridors program
will require similar data, we propose to
closely align the data submission, data
validation, audit provisions, and
sanctions for the two programs. We note
that the risk corridors oversight
provisions will apply to all plans,
including QHPs and plans that are
substantially the same as QHPs (as
defined in the first final Program
Integrity Rule) that are subject to the
risk corridors program, whether these
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plans are offered through the Exchange
or outside of the Exchange.
For the 2014 benefit year, we propose
to collect risk corridors data through the
same form used for MLR data collection,
at the same time (July 31 of the year
following the applicable benefit year).
We note that we would modify the
collection instrument and adjust the
operational aspects of data submission
as necessary to ensure that the data
collection process adheres to the
requirements for both programs. We
would leverage data validation
procedures that are used by the MLR
program to uncover data
inconsistencies, and would add
additional validation steps that would
allow us to identify QHP issuers and
verify QHP-specific premium
information. In addition, we are
considering conducting an internal
quality check of risk corridors data to
ensure that the information submitted is
consistent with information submitted
for other programs (for example,
premiums and claims reported in the
dedicated distributed data
environment). Similar to the MLR
process, we anticipate requiring issuers
to resubmit corrected data after risk
corridors data errors are identified. We
request comment on this approach.
To ensure the integrity of risk
corridors data reporting, we propose in
§ 153.540(a) to establish HHS authority
to conduct post-payment audits of QHP
issuers. Because similar data is used in
the risk corridors and MLR calculations,
we are considering conducting the risk
corridors audits using the existing MLR
auditing process set forth at § 158.402 to
reduce the time and expense (for both
HHS and issuers) of conducting
multiple audits on similar data. We are
further contemplating conducting risk
corridors audits under an overall issuer
audit program so that we may
simultaneously obtain the financial
information necessary to determine
compliance with other programs, such
as the risk adjustment and reinsurance
programs. We believe that this may
further reduce the overall audit burden
on issuers. Some States already review
data and audit issuer information
related to MLR reporting and rebate
obligations; HHS does not intend to
review information that would be
duplicative of a review that has been
completed by a State. However, because
States may not examine all data
required to be examined for the risk
corridors program, HHS could audit a
QHP issuer’s risk corridors data to the
extent not examined by the State. We
request comments on all aspects of this
approach, including appropriate criteria
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for identifying issuers for audit in any
particular benefit year.
The second final Program Integrity
Rule provides that a QHP issuer on an
FFE that fails to comply with the risk
corridors provisions may be subject to
decertification or civil money penalties
(CMPs), but does not extend this remedy
to a QHP issuer on a State Exchange.
State Exchange issuers that fail to
submit risk corridors charges, and
consequently owe HHS money, would
be subject to the Federal debt collection
processes; however, without risk
corridors data, HHS will be unable to
determine whether a debt is owed or the
amount of a debt. Therefore, in
§ 153.540(b) we propose to extend our
CMP authority under sections 1321(a)(1)
and (c)(2) of the Affordable Care Act to
all QHP issuers that fail to provide
timely, accurate, and complete data
necessary for risk corridors calculations,
or that otherwise do not comply with
the standards in subpart F of 45 CFR
part 153. We propose to assess CMPs on
QHP issuers in State Exchanges in
accordance with the same enforcement
and sanction procedures that apply to
QHP issuers on FFEs, under § 156.805.
For purposes of calculating the
maximum CMP amount, we may
consider using enrollment information
acquired from other internal sources (for
example, risk adjustment and
reinsurance enrollment data from the
dedicated distributed data
environment). Under this approach, we
would either use enrollment
information from all of an issuer’s nongrandfathered plans within a State
market, or would limit calculation of the
CMP amount to the number of enrollees
in an issuer’s QHPs (including enrollees
in plans that are substantially the same
as a QHP). We note that, consistent with
our general approach relating to the
application of sanctions, we would take
various factors into account when
determining the amount of a CMP,
including an issuer’s record of prior
compliance with risk corridors
requirements, the gravity and the
frequency of the violation, and the
issuer’s demonstrated success in
correcting violations that HHS has
identified (for example, errors identified
in corrective action plans).19 We request
comments on all aspects of this
approach, particularly for the
methodology that we should use to
determine a CMP amount for a QHP
19 We note that the good faith provision at
§ 156.800(c) will not be applicable in this context
because risk corridors activities, such as data
submission and payment, occur beginning in 2015.
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issuer that does not comply with risk
corridors data requirements.
c. Participation in the Risk Corridors
Program
Because the premium stabilization
programs, including the risk corridors
program, are intended to mitigate
pricing uncertainty associated with the
2014 market reforms, particularly the
rating rules at section 2701 of the PHS
Act and § 147.102, we believe that the
protections of these programs should be
for plans that are subject to the premium
rating rules. Therefore, in the 2014
Payment Notice, we clarified that under
the methodology HHS will use when
operating risk adjustment on behalf of a
State, a plan that is not subject to the
market reform rules, including the
premium rating rules, is not a risk
adjustment covered plan. In the second
final Program Integrity Rule, we further
clarified that stand-alone dental plans
would not be subject to the risk
corridors program because they are not
subject to the premium rating rules, and
therefore do not require the protections
of the risk corridors program. In this
proposed rule, we are similarly
proposing to amend the risk corridors
rules to provide that a plan that is not
subject to the market reform rules and
premium rating rules would not
participate in the risk corridors
program. We propose to add a paragraph
(f) to § 153.510 to provide that the risk
corridors program would apply only to
qualified health plans, as defined in
§ 153.500, including all plans offered
through the individual market Exchange
or SHOP, regardless of employer size,
that are subject to the following
provisions within title 45 of the CFR:
• § 147.102 (fair health insurance
premiums).
• § 147.104 (guaranteed availability of
coverage).
• § 147.106 (guaranteed renewability
of coverage).
• § 147.150 (essential health benefits).
• § 156.80 (single risk pool) and
subpart B of 45 CFR part 156 (essential
health benefits package).
We believe that this approach is
consistent with how QHPs have
determined their pricing for the 2014
benefit year. We note that a QHP that
must adhere to the premium rating rules
as a condition of participation on the
SHOP is a plan that is ‘‘subject to the
rating rules’’ for the purposes of this
policy.
We are also proposing that the
employee counting method applicable
under State law would determine
whether a plan is considered to be
offered in the small group market for
purposes of the risk corridors program
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even if the State definition does not take
non-full-time employees into account,
and thus could include some employers
as small employers that would be large
employers under the Federal definition.
Given our broad authority to establish
the risk corridors program, we believe
that we have the discretion to include
such employers in the program even if
they do not meet the Federal definition
of small employer that would apply for
other purposes. We believe that the
inclusion of such employers in the
definition of small employers for
purposes of the risk corridors program
would maintain consistency between
the risk corridors calculation and
implementation of the single risk pool
provision, which is generally enforced
by the State. We further believe that
clearly specifying the employee
counting method that is specific to the
risk corridors program would provide
clarity for QHP issuers with plans that
could either be excluded from or subject
to the risk corridors program, depending
on the employee counting method used.
We note that permitting the use of a
State employee counting method that is
inconsistent with Federal law for
purposes of the risk corridors program
differs from the approach taken under
the MLR program and the proposed
counting method for the risk adjustment
program that is described elsewhere in
this proposed rule. Under these
programs, non-full-time employees must
be counted. We note that the State’s
employee counting method would also
be used to determine whether a plan
that is not a QHP is part of the nongrandfathered individual or small group
market within a State, and would,
therefore, be part of a QHP issuer’s risk
corridors data submission under
§ 153.530. We also note that the State’s
employee counting method would
determine whether any plan offered
outside of an Exchange that is the
‘‘same’’ as or ‘‘substantially similar’’ to
an Exchange QHP (under the definition
set forth in § 153.500) would be part of
the individual or small group market for
purposes of the risk corridors program,
and, therefore whether it is eligible to
receive or make risk corridors payments.
This proposed approach would serve to
align the market-wide rating rules with
the protections of the premium
stabilization programs. However, the
approach could likely lead to a more
complex data submission for risk
corridors and MLR, because we may not
be able to align the market definitions
between the two programs.
We seek comment on our proposal
that a QHP must be subject to the
market reform rules in order to
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participate in the risk corridors
program. We also seek comment on our
proposal to use the State employee
counting method to define plans in the
small group market for purposes of
determining which plans participate in
the risk corridors program, even where
that would include employers that
would be large employers under the
Federal definition, or whether we
should instead use the counting method
used for the MLR program and proposed
for risk adjustment purposes. We also
seek comments on whether we should
explicitly codify the applicable counting
rules for each program in regulations
text.
d. Adjustment Options for Transitional
Policy
As discussed earlier, on November 14,
2013, the Federal government
announced a policy under which it will
not consider certain health insurance
coverage in the individual or small
group market between January 1, 2014,
and October 1, 2014, under certain
conditions to be out of compliance with
specified 2014 market rules, and
requested that States adopt a similar
non-enforcement policy.20 CMS noted
in a letter to the insurance
commissioners of the 50 States and the
District of Columbia that while this
transitional policy would not have been
anticipated by issuers in setting rates for
2014, the risk corridors program should
ameliorate the effect of this policy. We
also stated that we intended to explore
ways to modify the risk corridors
program to address any unanticipated
effects of this policy.
Therefore, for the 2014 benefit year,
we are considering whether we should
make an adjustment to the risk corridors
formula that would help to further
mitigate any unexpected losses for
issuers of plans subject to risk corridors
that are attributable to the effects of the
transition policy. One potential option
we are considering would be to
implement an adjustment to the risk
corridors formula set forth in subpart F
of part 153 for each of the individual
and small group markets by increasing
the profit margin floor (from 3 percent
of after-tax profits) and the allowable
administrative costs ceiling (from 20
percent of after-tax profits) in an amount
sufficient to offset the effects of the
transitional policy upon the claims costs
of a model plan (that is, a plan with an
80 percent allowable costs-to-premium
ratio). This adjustment could serve to
20 Letter to Insurance Commissioners, Center for
Consumer Information and Insurance Oversight,
November 14, 2013. See https://www.cms.gov/
CCIIO/Resources/Letters/Downloads/commissionerletter-11-14-2013.PDF.
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increase a QHP issuer’s risk corridors
ratio and its risk corridors payment
amount to help offset the loss in
premium revenue and profit that might
occur under the transitional policy as a
result of predicted increased claims
costs that were not accounted for when
setting 2014 premiums. We are
considering applying this adjustment
only to plans whose allowable costs (as
defined at 45 CFR 153.500) are at least
80 percent of their after-tax premiums,
because issuers under this threshold
would generally be required to pay out
rebates to consumers. We note that for
plans whose ratio of allowable costs to
after-tax premium are below 80 percent,
the 3 percent risk corridors profit
margin and 20 percent allowable
administrative cost ceiling would
continue to apply for these plans.
The effect on the risk pool of plans
compliant with the 2014 market rules
may vary significantly from State to
State, depending upon the extent to
which each State elects not to enforce
the 2014 market rules, as recommended
under the transition policy, and upon
the market dynamics of the health
insurance market within the State. We
believe that the State-wide effect on this
risk pool will increase with the increase
in the percentage enrollment in
transitional plans in the State, and so
we are considering having the Statespecific percentage adjustment to the
risk corridors formula also vary with the
percentage enrollment in these
transitional plans in the State.
We are considering calculating the
State-specific percentage adjustment by
analyzing the effects of the transitional
policy upon a plan with specified
characteristics. For example, our
actuaries believe the following are
reasonable plan assumptions: allowable
costs (including claims) equal to 80
percent of premiums, federal income
taxes equal to 35 percent of pre-tax
profits, other tax liability equal to 7.5
percent of premiums, and other
administrative costs equal to 8 percent
of premiums.
We are considering calculating the
State-specific percentage adjustment to
the risk corridors profit margin floor and
allowable administrative costs ceiling in
a manner that would help to offset the
effects of the transitional policy upon
the model plan’s claims costs.
We propose to estimate the effect of
the transitional policy upon the model
plan’s claims costs by assuming that
allowable costs (including claims)
among the transitional plans are 80
percent of the allowable costs that
would have resulted from the broad risk
pool, in the absence of the transitional
policy. After consulting our actuaries,
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we believe that this assumption is a
reasonable reflection of the effects of
underwriting on the transitional plans.
To estimate this State-specific effect of
the transitional policy on average claims
costs, we propose to require all issuers
participating in the individual and
small group markets in a State to submit
to HHS a member-month enrollment
count for transitional plans and nontransitional plans in the individual and
small group markets. This submission
would occur in 2015 prior to the risk
corridors submission. HHS would
analyze that data, and publish the Statespecific adjustments that issuers would
use in the risk corridors calculations for
the 2014 benefit year.
We have proposed a State-wide
adjustment for reasons of administrative
simplicity and due to the analytical
difficulty in estimating this effect on an
issuer-by-issuer basis. Although the
adjustment that we are considering
would affect each issuer differently,
depending on its particular claims
experience and administrative cost rate,
we believe that, on average, the
adjustment would suitably offset the
losses that a standard issuer might
experience as a result of the transitional
policy. We also note that, because the
risk corridors program applies only to
certain plans defined to be qualified
health plans at 45 CFR 153.500, the
extent to which an issuer may receive
the full effect of this adjustment would
depend upon the portion of an issuer’s
individual and small group enrollees in
plans subject to risk corridors.
Another option we are considering
would be to make a similar modification
to the medical loss ratio formula. We
would use our authority under section
2718(c) of the Public Health Service Act
to ‘‘take into account . . . special
circumstances of different types of
plans’’ to ensure that the proposed
adjustment to the risk corridor program
does not distort the implementation of
MLR requirements, so that the rebates
that would be owed absent the
transitional policy and this adjustment
would not substantially change. We
seek comment on the best way to make
such a modification, and whether such
a modification is required.
We request comment on all aspects of
these potential approaches to help
mitigate any potential impact of the
transitional policy. As we continue to
analyze its potential impacts, we will
determine whether such approaches and
modifications are warranted. We seek
comment on alternate ways of
implementing adjustments to current
risk corridors and reinsurance program
policy that would help offset issuers for
any unexpected losses that might be
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incurred as a result of the transitional
policy. In particular, we seek comment
on whether this risk corridors
adjustment should depend upon Statewide market characteristics, as we have
proposed, or whether it should be
national, tailored to each issuer, or
based upon different State-wide
characteristics.
We also seek comment on whether the
characteristics of the standard plan we
have outlined above are the appropriate
characteristics to use for our modeling.
We seek comment on the data that we
should collect to measure the key
characteristics for this adjustment, and
who we should collect that data from.
We seek comment on whether particular
ceilings and floors should be placed
upon the amount of the adjustment. We
also seek comment on whether the
adjustment should apply to QHP issuers
with allowable costs that are below 80
percent of after-tax premiums.
4. Distributed Data Collection for the
HHS-operated Risk Adjustment and
Reinsurance Programs
a. Discrepancy Resolution Process
(i) Confirmation of HHS Dedicated
Distributed Data Environment Reports
Because the accuracy of the data on
an issuer’s dedicated distributed data
environment is critical to the accuracy
of the HHS-operated risk adjustment
and reinsurance calculations, we are
proposing an iterative discrepancy
reporting process that would allow an
issuer of a risk adjustment covered plan
or a reinsurance-eligible plan to notify
HHS in a timely fashion of data and
calculation discrepancies related to the
data the issuer uploaded to its dedicated
distributed data environment. We
anticipate that this process would allow
HHS and issuers sufficient time to
resolve discrepancies, prior to HHS
notifying issuers of final risk adjustment
payments and charges and reinsurance
payments. This process would also
enable HHS to identify and address
issues that affect multiple issuers
throughout the benefit year.
Interim dedicated distributed data
environment reports: Beginning in 2014,
HHS anticipates sending interim
dedicated distributed data environment
reports to issuers of risk adjustment
covered plans and reinsurance-eligible
plans that have loaded data onto their
dedicated distributed data
environments. (We also intend to issue
these interim reports to issuers of risk
adjustment covered plans and
reinsurance-eligible plans that do not
load data, to verify this result.) We
anticipate that issuers of risk adjustment
covered plans would receive interim
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reports that include preliminary risk
scores based on this data. We anticipate
that issuers of reinsurance-eligible plans
would receive interim reports that
include an estimate of the issuer’s
aggregated total claims eligible for
reinsurance payments based on this
data. Therefore, we propose in
§ 153.710(d) that within 30 calendar
days of the receipt of an interim
dedicated distributed data environment
report from HHS, the issuer must either
confirm to HHS that the information in
the interim report accurately reflects the
data to which the issuer has provided
access to HHS through its dedicated
distributed data environment in
accordance with § 153.700(a) for the
timeframe specified in the report, or else
must describe to HHS any discrepancy
it identifies in the interim report.
Following the identification of a
discrepancy in an interim dedicated
distributed data environment report,
HHS would review the evidence
submitted by the issuer, along with any
other relevant data, and would
determine if the preliminary risk score
or estimated payment amount at issue
was properly calculated using the
applicable data. We believe that the 30calendar-day timeframe would provide
sufficient opportunity for an issuer to
verify the preliminary risk scores and
estimated reinsurance payment
amounts, but note that an issuer may
notify HHS of a newly discovered
discrepancy in connection with
responses to later interim or final
dedicated distributed environment
reports until 15 calendar days after the
final dedicated distributed data
environment report is issued, as
discussed below. We anticipate that the
interim dedicated distributed data
environment reports would allow
issuers to proactively address any data
discrepancies regarding the data the
issuer made accessible to HHS on the
dedicated distributed data environment
and HHS’s analysis of the data.
We note that under § 153.700(a), an
issuer of a risk adjustment covered plan
or a reinsurance-eligible plan in a State
where HHS operates the risk adjustment
or reinsurance program on behalf of the
State, must establish a dedicated
distributed data environment and
provide data access to HHS, in a manner
and timeframe specified by HHS, for
any HHS-operated risk adjustment or
reinsurance program. For the issuer and
HHS to effectively address and resolve
discrepancies through the proposed
interim reporting process, we propose
that once an issuer’s dedicated
distributed data environment is
established, the issuer would be
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required, on a quarterly basis, to make
a complete and current enrollment file
accessible to HHS through the dedicated
distributed data environment, and
would be required to make good faith
efforts to make accurate and current
claims files accessible to HHS through
the dedicated distributed data
environment. An issuer may later (up
until April 30 of the year after the
benefit year, as provided for in
§ 153.730) adjust these files with the
most current information to account for
changing enrollments or more current
adjudications of claims in later periods.
However, we believe it is critical for
issuers to provide quarterly uploads of
enrollment and claims files to permit
issuers and HHS to monitor data
collection.
We note that, as part of the process for
making these files available to HHS on
a dedicated distributed data
environment, we anticipate providing
an issuer a transactional process report
that will identify data that has been
attempted to be uploaded, but that has
been rejected. To fulfill its obligation to
make these files available to HHS, an
issuer would be required to either
correct or accept the rejection of this
data for the submission process to be
considered complete.
Final dedicated distributed data
environment report: We propose that
HHS would provide issuers with a final
dedicated distributed data environment
report following the applicable benefit
year, after the April 30 data submission
deadline. The final dedicated
distributed data environment report
would include final risk scores and
claims amounts eligible for reinsurance
payments, each calculated from the
issuer’s data that was timely loaded
onto the dedicated distributed data
environment. As with the interim
reports discussed above, we propose in
§ 153.710(e) that the issuer be required,
within 15 calendar days of receipt of the
final report, to either confirm to HHS
that the information in the final
dedicated distributed data environment
report accurately reflects the data to
which the issuer has provided access to
HHS through its dedicated distributed
data environment in accordance with
§ 153.700(a) for the benefit year
specified in the report, or to describe to
HHS any discrepancy it identifies in the
final dedicated distributed data
environment report. The shorter 15calendar-day reporting timeframe for the
final dedicated distributed data
environment report is necessary so that
HHS can notify issuers of their final risk
adjustment payments and charges and
final reinsurance payments by June 30
of the year following the applicable
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benefit year, as required under
§ 153.310(e) and § 153.240(b)(1)(ii). We
seek comment on these proposals.
Notification of payments and charges:
Last, as required under § 153.310(e) and
§ 153.240(b)(1)(ii), HHS will provide
issuers a report detailing their final risk
adjustment payments and charges and
reinsurance payments for the applicable
benefit year by June 30 of the year
following the applicable benefit year.
We also anticipate providing a report on
cost-sharing reduction reconciliation
payments and charges for that benefit
year in the same timeframe. Although
we anticipate that the interim and final
dedicated distributed data environment
reports would permit HHS and issuers
to resolve most data and payment
discrepancies for risk adjustment and
reinsurance before the June 30 report is
issued, we recognize that some
discrepancies might remain unresolved.
Therefore, we propose in § 153.710(f)
that if a discrepancy that is first
identified in an interim or final
dedicated distributed data environment
report in accordance with proposed
§ 153.710(d)(2) or § 153.710(e)(2)
remains unresolved after issuance of the
June 30 report, an issuer of a risk
adjustment covered plan or reinsuranceeligible plan may make a request for
reconsideration using the process
proposed in § 156.1220(a). To promote
the goals of the premium stabilization
programs and to ensure that risk
adjustment and reinsurance payments
are provided to an issuer of a risk
adjustment covered plan or reinsuranceeligible plan in a timely fashion, HHS
would assess charges and make
payments based on the amounts listed
in the June 30 report, whether or not the
issuer had submitted a request for
reconsideration under proposed
§ 156.1220(a), and would later correct
any charges or payments determined to
be inaccurate under the reconsideration
or administrative appeals process.
(ii) Reporting of Payments and Charges
Under Reconsideration
Because risk adjustment payment and
charge amounts and reinsurance
payment amounts are factors in an
issuer’s risk corridors and MLR
calculations, a delay in resolving final
risk adjustment payments and charges
and reinsurance payments could make it
difficult for issuers to comply with
reporting requirements under the risk
corridors and MLR programs. Therefore,
to clarify how issuers are to comply
with these reporting requirements, we
propose in § 153.710(g)(1) that,
notwithstanding any discrepancy report
made under paragraph § 153.710(d)(2)
or (e)(2), or any request for
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reconsideration under § 156.1220(a),
unless the dispute has been resolved, an
issuer must report, as applicable, for
purposes of the risk corridors and the
MLR program, the risk adjustment or
reinsurance payment to be made to the
Federal government, or the risk
adjustment charge assessed by the
Federal government, as reflected in the
June 30 report.
If the amount of cost-sharing
reductions a QHP issuer has provided is
at issue because the issuer requested
reconsideration of a cost-sharing
reduction reconciliation payment or
charge under the process proposed in
§ 156.1220(a), we propose that for the
purposes of the risk corridors and the
MLR program, a QHP issuer would be
required to report a cost-sharing
reduction amount equal to the amount
of the advance payments of cost-sharing
reductions paid to the issuer by HHS for
the benefit year as reflected in the HHS
report on cost-sharing reduction
reconciliation payments and charges.
Additionally, if a QHP issuer requests
reconsideration of risk corridors
payments or charges under the process
proposed in § 156.1220(a), then for
purposes of MLR reporting, the QHP
issuer would be required to report the
risk corridors payment to be made to the
Federal government or charge assessed
by the Federal government as reflected
in the notification provided under
§ 153.510(d).
Finally, we propose in § 153.710(g)(2)
that an issuer must report any
adjustment made following any
discrepancy report made under
paragraph (d)(2) or (e)(2), or any request
for reconsideration under § 156.1220(a)
with respect to any risk adjustment
payment or charge, including an
assessment of risk adjustment user fees,
reinsurance payment, cost-sharing
reconciliation payment or charge, or risk
corridors payment or charge, or
following any audit, where the
adjustment has not been accounted for
in a prior risk corridors or medical loss
ratio report, in the next following risk
corridors and medical loss ratio report.
We seek comment on these proposals.
b. Default Risk Adjustment Charge
As described in the second final
Program Integrity Rule, if an issuer does
not establish a dedicated distributed
data environment or submits inadequate
risk adjustment data, HHS would not
have the required risk adjustment data
from the issuer to calculate risk scores
or payment transfers for the issuer. As
a result, HHS would not be able to
properly calculate risk adjustment
payments and charges for the entire
applicable market for the State. Under
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§ 153.740(b), if an issuer of a risk
adjustment covered plan fails to
establish a dedicated distributed data
environment or fails to provide HHS
with access to risk adjustment data in
such environment by April 30 of the
year following the applicable benefit
year in accordance with §§ 153.610(a),
153.700, 153,710, or 153.730, such that
HHS cannot apply its Federally certified
risk adjustment methodology to
calculate the plan’s risk adjustment
payment transfer amount in a timely
fashion, HHS will assess a default risk
adjustment charge.
As described in the second final
Program Integrity Rule, the total risk
adjustment default charge for a risk
adjustment covered plan would equal a
per member per month (PMPM) amount
multiplied by the plan’s enrollment.
Tn = Cn × En
Where:
Tn = total default risk adjustment charge for
a plan n;
Cn = the PMPM amount for plan n; and
En = the total enrollment (total billable
member months) for plan n.
In the second final Program Integrity
Rule, we provided that En could be
calculated using an enrollment count
provided by the issuer, using enrollment
data from the issuer’s MLR and risk
corridors filings for the applicable
benefit year, or using other reliable data
sources.
We are considering several methods
to calculate Cn—the PMPM amount for
a plan. As discussed in the proposed
Program Integrity Rule, one method
would be to set a PMPM amount that is
equal to the highest PMPM transfer
charge that HHS calculates based on risk
adjustment data submitted by risk
adjustment covered plans in the
applicable risk pool in the applicable
market in the State. Such a method
could yield a PMPM amount that would
reflect a PMPM charge that reflects the
high end of the PMPM distribution in
certain States. However, in a situation in
which the risk adjustment covered plans
that provide the necessary risk
adjustment data have very similar risk
scores, a PMPM amount calculated
under this method may yield a
relatively low risk adjustment charge,
and fail to provide adequate incentive
for prompt establishment of a compliant
distributed data system.
A second option would be to assess a
PMPM amount based on the standard
deviation of the PMPM charge among all
risk adjustment covered plans in the
applicable risk pool in the applicable
market in the State. The PMPM amount
used to calculate the default risk
adjustment charge would be an amount
equal to the mean PMPM amount plus
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two such standard deviations. Such an
approach could also yield a PMPM
amount that is high but reflects the
PMPM distribution in certain situations,
but, again, low in others. The amount
might also be quite unpredictable ex
ante.
A third option would be to assess a
charge equal to a fixed percentage of the
State-wide weighted average premium,
which would be calculated as the
enrollment-weighted mean of all plan
average premiums of risk adjustment
covered plans in the applicable risk
pool in the applicable market in the
State. This option might be relatively
straightforward to implement, but
would yield a charge that is not linked
to the distribution of PMPM amounts
within the relevant risk pool in the
market in the State.
We note the many possible variations
of these methods. For example, instead
of the highest PMPM amount in the risk
pool in the market in the State, the
PMPM amount could be a fixed
percentile along the distribution of
PMPM charges for the risk pool in the
market in the State—thus, we could use
the 75th percentile or an amount equal
to 10 percent above the 100th
percentile, for example. Instead of the
amount based on the mean PMPM
amount and two standard deviations, a
different number of standard deviations
could be used. Also, instead of using a
fixed percentage of the State-wide
weighted average premium, a fixed
percentage of the plan’s premium, or a
fixed percentage of the average premium
of a subpopulation of risk adjustment
covered plans in the State, such as those
plans in the applicable risk pool, or
those plans paying risk adjustment
charges, could be used.
Commenters to the proposed Program
Integrity Rule also suggested an
approach under which the PMPM
amount would be the highest amount
calculated under each of the three
methods described above. Finally, to
ensure that a total default charge is not
excessive for a particular plan, we are
considering setting an upper limit on
the total default charge for a plan based
on a percentage of the plan’s own total
premiums. We seek comment on these
methods, or other appropriate methods
for calculating a default risk adjustment
charge.
D. Part 155—Exchange Establishment
Standards and Other Related Standards
under the Affordable Care Act
1. Election to Operate an Exchange After
2014
HHS has learned through the process
of approving or conditionally approving
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the first generation of State Exchanges
that it is challenging to make an
accurate assessment of a State’s progress
and ability to complete an Exchange
build 10 months prior to open
enrollment and a year prior to the first
date that coverage would become
effective. We are therefore proposing to
reduce the time that the State must have
in effect an approved or conditionally
approved Exchange Blueprint and
readiness assessment from 12 months to
6.5 months prior to the Exchange’s first
effective date of coverage. We propose
to amend § 155.106(a)(2) by moving the
deadline for the approval of the
Exchange Blueprint for States electing to
establish and operate an Exchange after
2014 to June 15th of the previous plan
year rather than January 1st of the
previous plan year. We believe that this
proposal will give States more time
prior to approval of the Blueprint to
prepare for the transition from an FFE
or State Partnership Exchange to a State
Exchange. It will also enable HHS to
gauge the State’s actual technical,
business and operational progress as
more indicative milestones should be
reached by June 15th. It should be noted
that § 155.106(a)(2) sets the date by
which a State electing to operate an
Exchange after 2014 must ‘‘[h]ave in
effect’’ an ‘‘approved, or conditionally
approved, Exchange Blueprint and
operational readiness assessment’’ and
that the rule is silent about the date by
which such a State must submit the
Exchange Blueprint. HHS, therefore,
proposes to extend the date by which a
State must submit the Exchange
Blueprint from November 15th to June
1st.
2. Ability of States to Permit Agents and
Brokers to Assist Qualified Individuals,
Qualified Employers, or Qualified
Employees Enrolling in QHPs
In § 155.220, we propose to add new
paragraph (i) to provide that current
paragraph (c)(3), which addresses
enrollment through an Internet Web site
of an agent or broker, and currently
applies only to the individual market
Exchanges, would apply to the SHOPs
for plan years beginning on or after
January 1, 2015. Agents and brokers
have traditionally assisted employers in
the small group market, and many of
them use Internet Web sites to assist
employers. Permitting an employer to
complete QHP selection through the
Internet Web site of an agent or broker
would provide an additional potential
SHOP enrollment option for small
employers. Under this proposal,
employers that have not traditionally
worked with agents and brokers but
have, in the past, utilized Internet Web
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sites of agents and brokers for
purchasing insurance would have
another option to learn about and
participate in the SHOPs, in a manner
similar to that already available in the
current market. We propose to allow
SHOPs, in States that allow this activity
under State law, to permit enrollment in
a SHOP QHP through an Internet Web
site of an agent or broker under the
standards outlined in § 155.220(c)(3) if a
State SHOP or the FF–SHOP has the
technical capability to make this
possible. We invite comment on this
proposal.
3. Privacy and Security of Personally
Identifiable Information
Section 1411(g)(2)(A) of the
Affordable Care Act provides that
Exchanges may use information
provided by an applicant ‘‘. . . only for
the purposes of, and to the extent
necessary in, ensuring the efficient
operation of the Exchange . . .’’ Section
155.260(a)(1) provides the specific
circumstances under which an
Exchange may use or disclose PII the
Exchange creates or collects for the
purposes of determining eligibility for
enrollment in a QHP; determining
eligibility for other insurance
affordability programs as defined at
§ 155.20; or determining eligibility for
exemptions from the individual
responsibility provisions in section
5000A of the Code (collectively referred
to as ‘‘eligibility and enrollment PII’’).
We believe, based on considerations
that have been brought to our attention
by States as we work together to
implement the Exchanges, that
§ 155.260(a)(1) unduly limits the ability
of an Exchange to ensure its efficient
operation. We therefore propose to
amend § 155.260(a)(1) to permit an
Exchange to use or disclose eligibility
and enrollment PII to ensure the
efficient operation of an Exchange
through uses or disclosures that may not
be directly connected to the Exchange
minimum functions described at
§ 155.200, subject to privacy and
security standards.
We anticipate that there may be uses
or disclosures of eligibility and
enrollment PII that present additional
opportunities to ensure the efficient
operation of the Exchange, consistent
with the strict protections of section
1411(g)(2)(A) of the Affordable Care Act.
Therefore, we propose in
§ 155.260(a)(1)(ii) that the Secretary may
approve other uses and disclosures of
eligibility and enrollment PII, provided
that HHS determines that the
information will be used only for the
purposes of and to the extent necessary
in ensuring the efficient operation of the
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Exchange consistent with section
1411(g)(2)(A) of the Affordable Care Act
and determines that the use or
disclosure is appropriate and
permissible under relevant law and
policy. In addition, prior to an Exchange
using eligibility and enrollment PII for
such an approved function, the
individual would need to provide
consent before his or her eligibility and
enrollment PII could be used or
disclosed for this additional function.
We anticipate providing additional
information in future guidance about
uses or disclosures determined by the
Secretary that ensure the efficient
operation of the Exchange while
maintaining information privacy and
security, and we seek comment on such
uses and disclosures.
Further, in § 155.260(a)(1)(iii) we
propose a process under which
Exchanges may seek approval from the
Secretary for uses or disclosures of
eligibility and enrollment PII not
explicitly described in § 155.260(a)(1)(i)
or (ii). Requestors must show that the
proposed use or disclosure will ensure
the efficient operation of the Exchanges
consistent with section 1411(g)(2)(A) of
the Affordable Care Act and describe
how the information to be used or
disclosed will be protected by privacy
and security standards that are
compliant with § 155.260. In addition,
any time an Exchange is using eligibility
and enrollment PII for such an approved
function, the individual would need to
provide consent before his or her
eligibility and enrollment PII could be
used or disclosed. We anticipate
providing additional information in
future guidance about this process and
about the facts and circumstances that
will be considered in determining
whether a proposed use or disclosure
will ensure the efficient operation of an
Exchange while maintaining
information privacy and security and is
also an appropriate and permissible use
or disclosure under relevant law and
policy. We seek comment on this
proposed process, as well as other
factors or information that should be
considered when determining whether a
proposed use or disclosure should be
approved pursuant to this proposed
process.
We further recognize the imperative
to maintain safeguards for eligibility and
enrollment PII when it is used or
disclosed to support functions beyond
those described in § 155.200. Exchanges
would be required to limit the
disclosure of eligibility and enrollment
PII to the extent necessary to
accomplish the proposed function and
obtain an individual’s consent. The
proposed use and disclosure would be
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subject to privacy and security
standards that § 155.260 requires
Exchanges to establish in relation to
non-Exchange entities.
In light of the proposed amendments
to § 155.260(a)(1), we further propose to
amend § 155.260(a)(2) to delete the
specific reference to § 155.200 minimum
functions and to indicate that all
permitted uses under § 155.260(a)(1)
must be consistent with § 155.260.
Section 155.260(a)(3) provides that
Exchanges must establish and
implement privacy and security
standards consistent with the eight
principles in § 155.260(a)(3)(i) through
(a)(3)(viii). Section 155.260(b) addresses
situations in which Exchanges share PII
with ‘‘non-Exchange entities,’’ including
‘‘. . . individuals or entities, such as
Navigators, agents, and brokers.’’
Through public comment to the
Program Integrity Proposed Rule, we
received requests for clarification on the
definition of ‘‘non-Exchange entities’’
and also received questions asking if the
regulatory language ‘‘individuals or
entities, such as Navigators, agents, and
brokers,’’ was meant to be an exhaustive
list. In the preamble to the first final
Program Integrity Rule (78 FR 54082),
we stated that we would issue further
guidance on this topic. We now propose
to amend the regulation text to address
these questions.
In § 155.260(b)(1), we propose that
any individual or entity that gains
access to PII submitted to an Exchange
or collects, uses or discloses PII
gathered directly from applicants,
qualified individuals, or enrollees while
that individual or entity is performing
the functions agreed to with the
Exchange, be considered a nonExchange entity, such that a nonExchange entity is defined based on
access to PII and not based on a
representative or exhaustive list of
entities. As clarification, we believe that
entities that would qualify as ‘‘nonExchange entities’’ based on this
proposed definition include, but are not
limited to, Medicaid agencies; CHIP
agencies; Certified Application
Counselors; in person assisters; agents
and brokers, including Web-brokers;
QHP issuers; Navigators; and other third
party contractors. We feel very strongly
about the importance of requiring
privacy and security standards and
believe that this proposed definition of
non-Exchange entity makes even more
clear which entities are subject to these
standards.
At § 155.260(b)(2), we propose to
maintain the existing requirement for
Exchanges to enter into a contract or
agreement with non-Exchange entities,
while providing more details regarding
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the required elements of these contracts
and agreements. We propose that the
contract or agreement between an
Exchange and a non-Exchange entity
must include at least five elements.
First, we believe it is important to
define in this contract or agreement the
functions that the non-Exchange entity
will perform so that both parties agree
to the circumstances and tasks during
which the privacy and security
standards will be applicable, and
propose to include this requirement in
§ 155.260(b)(2)(i). This requirement
already exists in § 155.260(b)(2), where
reference is made to a non-Exchange
entity performing the functions outlined
in the agreement with the Exchange.
Second, we propose in
§ 155.260(b)(2)(ii) that in the required
contract or agreement, the Exchange
must impose a requirement for
compliance with privacy and security
standards and specifically list or
incorporate by reference the privacy and
security standards and obligations with
which the non-Exchange entity must
comply. A similar requirement also
already exists in the current text of
§ 155.260(b), where an Exchange must
require the same or more stringent
privacy and security standards as a
condition of contract or agreement with
the non-Exchange entity. The nature of
these standards will be discussed in
greater detail in the next paragraph.
Third, we propose in § 155.260(b)(2)(iii)
that in the contract or agreement, the
Exchange must require the nonExchange entity to monitor, periodically
assess, and update its security controls
and related system risks to ensure the
continued effectiveness of those
controls in accordance with
§ 155.260(a)(5). It is assumed that the
Exchange would expect this type of
assessment to occur any time the nonExchange entity has a major change in
the operational or technical
environment employed to meet the
duties outlined in their contracts or
agreements with the Exchange, and at
the time of renewal of the contract or
agreement. Fourth, we propose in
§ 155.260(b)(2)(iv) that in the contract or
agreement, the Exchange must require
the non-Exchange entity to inform the
Exchange of any change in its
administrative, technical, or operational
environment defined within the
contract that would require an alteration
of the standards within the contract or
agreement. The intent of this
requirement is to provide an
opportunity to assess and revise
standards to ensure that the standards
remain relevant. We seek comment on
other mechanisms that could be more
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effective in keeping standards aligned
with operating environments. Fifth, we
propose in § 155.260(b)(2)(iv) that the
contract or agreement include a
requirement that the non-Exchange
entity, in a written contract or
agreement, must require any
downstream entities that also meet the
definition established in § 155.260(b)(1)
to comply with the same privacy and
security standards with which the nonExchange entity agrees to comply under
its contract or agreement with the
Exchange. We feel it is important that
the privacy and security standards
continue to apply to PII as it moves to
additional downstream entities.
Currently, § 155.260(b) states that an
Exchange must require the same or more
stringent privacy and security standards
as a condition of contract or agreement
with individuals or entities that gain
access to PII submitted to an Exchange.
In § 155.260(b)(3), we maintain the
specification for an Exchange to require
privacy and security standards as a
condition of contract or agreement with
non-Exchange entities and we propose
criteria for the establishment of these
standards that allow Exchanges
flexibility in setting standards for nonExchange entities that will provide
equivalent or more stringent protection
while aligning more closely to the
functions the non-Exchange entity is
performing and the operating
environment under which the nonExchange entity is performing. Because
the definition for non-Exchange entities
is broad and includes a variety of
entities, we recognize that there can be
variation between non-Exchange
entities.
Different non-Exchange entity
functions can result in variation in both
the amount and type of access to PII (as
an example, a Certified Application
Counselor’s access to consumer PII is
different than the access a consumer’s
agent or broker would have) and the
technical characteristics of the nonExchange entity’s environment (as an
example, some non-Exchange entities,
such as Medicaid agencies, may have a
connection to the Data Services Hub,
whereas others, such as Navigators, do
not). Additionally, some non-Exchange
entities already are required by law to
meet other industry-recognized security
standards for the environment in which
they will perform Exchange-related
functions. Currently there is no
mechanism within the regulation to take
environment variations or already
existing security requirements into
account, resulting in an operational
burden for non-Exchange entities that
does not result in additional protections
for applicants.
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As applied to non-Exchange entity
privacy standards, the introduction of
this flexibility is not anticipated to
result in any weakening of Exchange
privacy standards. Variation is not
anticipated in the stringency of the
particular privacy standard but in how
it is implemented. As an example, a
written policy and procedure document
as required by § 155.260(d) regarding
the collection, use, and disclosure of PII
may take a different form based on a
non-Exchange entity’s duties and
operations. A non-Exchange entity that
is a QHP issuer currently obligated to
follow the HIPAA security rule might
seek to negotiate a contract with the
Exchange under which it is permitted to
follow the HIPAA security rules in place
of the specific security standards
followed by the Exchange. It would then
be incumbent upon the Exchange to
evaluate whether this arrangement
would meet all of the criteria
established for privacy and security
standards under § 155.260(b)(3). We
intend for these standards to provide the
same level of protection and safeguards
as the current § 155.260(b) affords.
Currently § 155.280 establishes the
regulatory authority for oversight and
monitoring of Exchanges and nonExchange entities with regard to privacy
and security standards. We anticipate
additional proposed rulemaking on
oversight, monitoring and enforcement
during 2014. We invite comment on
alternative ways to address the
challenge of implementing effective
enforcement while allowing the
proposed flexibility.
These proposed requirements in
§ 155.260(b)(3) are intended to provide
a foundation that Exchanges must use to
define privacy and security standards
for non-Exchange entities that afford a
level of protection equal to that
provided by the standards the
Exchanges adopt for themselves. We
have put forth three criteria that must be
met by the privacy and security
standards to which an Exchange must
bind non-Exchange entities, and require
that these standards take into specific
consideration the environment in which
the non-Exchange entity is operating.
The first criterion is set out in
§ 155.260(b)(3)(i) and requires that any
privacy and security standards must be
as protective as the standards that the
Exchange sets for itself and must be
consistent with all of the principles and
requirements listed under § 155.260(a).
This includes the principles of (a)(3), as
well as the requirements established by
(a)(1) through (a)(6).
The second criterion proposed in
§ 155.260(b)(3)(ii) requires that any
privacy and security standards must
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also comply with the requirements for
workforce compliance, written policies
and procedures, compliance with the
IRS code, and the consequences of
improper use and disclosure of
information established by § 155.260(c),
(d), (f) and (g).
The third criterion proposed in
§ 155.260(b)(3)(iii) requires that the
privacy and security standards to which
non-Exchange entities are bound take
several factors into consideration.
Section 155.260(b)(3)(iii)(A) requires
that an Exchange take into consideration
the operational and technical
environment in which the nonExchange entity is operating. These
environments, and the standards
themselves, should be assessed in light
of the requirement established by
§ 155.260(a)(5) to monitor, periodically
assess, and update the security controls
and related system risks to ensure the
continued effectiveness of those
controls. Should the environment
change, the standards should change
accordingly as required by proposed
§ 155.260(b)(2)(iii) and
§ 155.260(b)(2)(iv). We would expect
that an Exchange’s contracts and
agreements with non-Exchange entities
provide an opportunity for such
changes.
Section 155.260(b)(3)(iii)(B) requires
standards be relevant and applicable to
the non-Exchange entity’s duties and
activities in relation to the Exchange.
The introduction of the concept of
‘relevant and applicable’ is intended to
address the various responsibilities
assumed by non-Exchange entities, and
the associated technical infrastructures.
Although the proposed approach
affords greater flexibility to Exchanges,
this flexibility carries with it an
Exchange’s responsibility to perform an
assessment of the non-Exchange entity’s
duties, activities, and environment and
the standards to which it will bind nonExchange entities to ensure that the
standards satisfy § 155.260
requirements. For example, assuming
§ 155.260 is finalized as proposed, the
FFE will incorporate privacy and
security standards into non-Exchange
entity contracts and agreements only
after determining that the standards
satisfy the criteria proposed under
§ 155.260(b)(3)(i), (ii) and (iii), and
thereby meet the requirements of
§ 155.260 and the Affordable Care Act.
We expect to publish guidance to
provide additional details regarding the
process the FFE will follow to evaluate
privacy and security standards to which
non-Exchange entities will be bound.
We seek comments on the proposed
amendments to § 155.260 and on
alternate ways to ensure protection for
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information while not imposing
irrelevant or unnecessarily burdensome
requirements on non-Exchange entities.
4. Annual Open Enrollment Period for
2015
In 45 CFR 155.410, as finalized in the
Exchange Establishment Rule, we set
forth provisions for initial and annual
open enrollment periods. We now
propose amending § 155.410(e) and (f),
which pertain to the annual open
enrollment period and effective date for
coverage after the annual open
enrollment period.
In paragraph (e), we propose adding a
paragraph that would change the annual
open enrollment period for the 2015
benefit year. We propose that for all
Exchanges, annual open enrollment
would begin on November 15, 2014 and
extend through January 15, 2015. This
proposed change would give health
insurance issuers an additional month
in 2014 before they would need to begin
accepting plan selections for the
upcoming plan year. It also staggers the
start of open enrollment for the
Exchange from that for Medicare
Advantage. It would give consumers the
ability to have coverage starting January
1, 2015, or if they need more time, until
January 15, 2015 to shop for, and select
a QHP for the 2015 plan year. If
finalized, all Exchanges would be
expected to delay their QHP
certification dates by at least one month.
This would give health insurance
issuers additional time to monitor 2014
enrollments, prior to submitting their
2015 rates. First-year challenges in
enrolling individuals may mean higher
than expected enrollment toward the
end of the initial open enrollment
period which, under the current
schedule, coincides with the first day in
which applications for 2015 can be
submitted to the FFE. This compressed
schedule would add uncertainty to
setting rates for 2015 and potentially
higher premiums without change. This
proposed change is applicable for only
the 2015 coverage year. We seek
comments on this proposed
amendment.
In paragraph (f), we propose adding a
paragraph to address coverage effective
dates for plan selections made during
the annual open enrollment period for
the 2015 benefit year. We propose that
coverage must be effective January 1,
2015, for plan selections received by the
Exchange on or before December 15,
2014. We propose that coverage must be
effective February 1, 2015, for plan
selections received by the Exchange
from December 16, 2014 through
January 15, 2015. In accordance with 45
CFR 155.335(j), qualified individuals
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already enrolled in a QHP through the
Exchange in 2014 who maintain the
same eligibility would have their
coverage continue into 2015, but they
would have the ability to change QHPs
until January 15, 2015. We seek
comments regarding whether issuers
should accept payments up until the
31st of a given month, in order to
effectuate coverage by the first of the
following month. We also seek comment
on whether there should be
retrospective coverage to January 1,
2015, for any individual who signs up
after December 15, 2014 in the open
enrollment period to ensure continuity
of coverage.
5. Functions of a SHOP
For plan years beginning before
January 1, 2015, qualified employers
participating in a Federally-facilitated
SHOP (‘‘FF–SHOP’’) are able to select a
single QHP to offer to their employees.
For plan years beginning on or after
January 1, 2015, employers participating
in the FF–SHOPs will also have the
option to select a level of coverage as
described in section 1302(d)(1) of the
Affordable Care Act, and make all QHPs
within that level available to their
qualified employees (‘‘employee
choice’’). Additionally, the FF–SHOPs
will begin performing premium
aggregation services under
§ 155.705(b)(4) for plan years beginning
on or after January 1, 2015—
corresponding with the beginning of
employee choice in the FF–SHOPs.
Several of the amendments proposed
below would take effect when employee
choice and premium aggregation
become available, including a
requirement that employers make
premium payments to the FF–SHOPs
according to a timeline and process set
by HHS, a standard premium pro-rating
methodology in the FF–SHOPs
providing that groups will be charged
for the portion of the month for which
an enrollee is enrolled, a prohibition on
composite premiums in the FF–SHOPs
when an employer utilizes employee
choice, methods for employers in the
FF–SHOPs to offer stand-alone dental
coverage, and flexibility for employers
in the FF–SHOPs to define different
premium contributions for full-time
employees and non-full-time
employees.
We propose revising § 155.705(b)(1),
which lists the rules regarding eligibility
and enrollment to which the SHOP
must adhere, to include mention of
additional provisions regarding
termination of coverage in the SHOPs
and SHOP employer and employee
eligibility appeals that were finalized in
the first final Program Integrity Rule.
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This provision would become effective
when this proposed rule is finalized and
becomes effective.
We also propose adding a new
paragraph § 155.705(b)(3) to provide
qualified employers with options to
offer dental coverage after employee
choice becomes available in the FF–
SHOPs. We propose that for plan years
beginning on or after January 1, 2015, a
qualified employer participating in an
FF–SHOP would have two methods by
which to offer stand-alone dental plans
(SADPs) to its employees and their
dependents. This proposal would
provide employers with options for
offering SADPs while preserving the
flexibility not to contribute to SADP
coverage. For example, an employer that
elects to offer a single QHP that lacks
the pediatric dental benefit may want to
ensure that its employees with child
dependents have the option to enroll in
pediatric dental coverage.
We considered several options for
methods by which a qualified employer
participating in an FF–SHOP could offer
SADPs to its employees and their
dependents: the employer could offer a
single SADP, the employer could offer
all SADPs at a given dental AV level
(under 45 CFR 156.150(b)), the
employer could offer all SADPs in an
FF–SHOP, or the employer could offer
a subset of SADPs available in an FF–
SHOP. All of these options would allow
an employer flexibility to provide its
employees and their dependents with
standalone dental coverage. The single
SADP option would enable an employer
to choose the plan offered, and may be
more administratively appealing to an
employer already used to offering a
single plan in the current market. This
option would have the benefit of
administrative ease for an FF–SHOP and
issuer, but it would limit the selection
for employees more than other options.
Allowing the option for qualified
employers to offer all SADPs at a given
dental AV level option would also
enable an employer to make decisions
about the type of plans offered to
employees while retaining some
administrative simplicity by only
requiring a choice between the two
dental AV levels (high and low) that
were established for the 2014 benefit
year. This option would also help
advance the goal of increased choice
and competition and is similar to
employee choice of QHPs where an
employer selects a metal tier and
employees may select any QHP within
that tier. However, the proposed
changes to § 156.150 in this proposed
rule would remove the AV standards for
stand-alone dental plans; thus, this
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option would not be possible if
§ 156.150 is finalized as proposed.
Allowing qualified employers to offer
all SADPs available in an FF–SHOP
would provide an employer with
maximum flexibility to offer its
employees and their dependents the
ability to choose an SADP that best fits
their needs. Additionally, it would
allow an employer to make an offer of
coverage without needing to compare
and select among plans or tiers. This
approach would most advance the goals
of increased choice and competition
within the small group market, but
might create concerns among issuers
about potential adverse selection arising
from higher risk employees electing to
enroll in certain SADPs.
Finally, we considered an option that
would allow an employer to make an
offer to its employees and their
dependents from a defined subset of
SADPs in an FF–SHOP. In this option,
an FF–SHOP would define a subset of
SADPs from which an employer could
choose. For example, an employer might
be allowed to offer any two plans from
the same issuer. This option would
allow an employer additional flexibility
in offering dental plans while
maintaining some control over the
particular plans offered to its employees
and their dependents. Although less
administratively simple, this option
could provide some increased level of
choice for employers and their
employees.
After considering the options
described above, we are proposing that
a qualified employer in an FF–SHOP
could offer its employees (and, if
desired, their dependents) either a
single SADP or a choice of all SADPs
available in an FF–SHOP after employee
choice becomes available in the FF–
SHOPs. We note that an employer could
choose either option under this proposal
regardless of whether it offers one QHP
or all QHPs available in an FF–SHOP to
its employees and their dependents
under § 155.705(b)(3)(iv). We believe
this proposal provides the best balance
of advancing the Affordable Care Act’s
goals of increased choice and
competition in the small group market,
providing employers with an
administratively simple way to offer
stand-alone dental coverage, providing
employees with increased dental
coverage options, and maintaining
consistency with employee choice. We
seek comment on these options,
including on the option of offering all
plans at a dental AV level if the
proposal to eliminate dental AV levels
is not finalized.
We also propose to re-designate
§ 155.705(b)(4)(ii) as (b)(4)(iii) and to
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add new paragraph (b)(4)(ii) to allow all
SHOPs, both FF–SHOPs and State
SHOPs, to establish one or more
standard processes for premium
calculation, payment, and collection
after the SHOP makes premium
aggregation available. Many States do
not have standardized prorating,
payment, and collection practices, and
within a given State, issuers may have
varying practices. In this environment, a
standard method of handling premiums
may be necessary for a SHOP to
successfully and efficiently implement
and operate the premium aggregation
services described in § 155.705(b)(4)(i).
We also propose provisions related to
the processes FF–SHOPs would
establish for premium calculation,
payment, and collection under proposed
new § 155.705(b)(4)(ii). Consistent with
§ 155.720(b), which establishes that all
SHOPs must establish a uniform
enrollment timeline and process,
including establishment of effective
dates of employee coverage, for all QHP
issuers and qualified employers to
follow, and consistent with
§ 155.720(d), which establishes that all
SHOPs must follow the requirements set
forth at § 155.705(b)(4), we are
proposing at § 155.705(b)(4)(ii)(A) that,
after premium aggregation becomes
available in the FF–SHOPs, employers
in the FF–SHOPs would be required to
make all premium payments—initial
and subsequent—according to a
timeline and process that HHS will
establish through guidance. We intend
for this proposed timeline and process
to include all premium payments and
considered whether to include ‘‘all’’ in
the regulation text, but we decided that
including the word ‘‘all’’ would be
unnecessary. In developing this timeline
and process, HHS will consider its
interest in operating and administering
the FF–SHOPs efficiently, as well as
issuers’ interests in ensuring timely
payment of premiums, and issuers’ and
employers’ interests in establishing a
fair and workable premium payment
process. We anticipate that this payment
timeline would require employers to
make an initial premium payment at
least two days prior to the employer’s
desired coverage effectuation date, in
order to provide a reasonable window of
time for the relevant banks to process
the payment transaction. However, we
solicit comments about whether such a
time frame would be reasonable for
employers or issuers, about alternative
time frames that might be more
appropriate, and about the payment
timeline and process for the FF–SHOPs
generally, including the considerations
HHS should factor into the development
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of the payment timeline and process.
We are also proposing a conforming
amendment to § 156.285(c)(7)(iii),
discussed in greater detail below, to
establish that an FF–SHOP issuer would
be required to effectuate coverage unless
it has received an enrollment
cancellation from the FF–SHOP, and
explain in the preamble discussion
related to that proposal that if the FF–
SHOP has not received an employer’s
initial premium payment in accordance
with the payment timeline and process
established under proposed
§ 155.705(b)(4)(ii)(A), the FF–SHOP will
send the issuer an enrollment
cancellation.
At proposed § 155.705(b)(4)(ii)(B), we
also propose a methodology for
prorating premiums in FF–SHOPs after
premium aggregation becomes available
in those SHOPs in plan years beginning
on or after January 1, 2015. Because it
would be impractical for FF–SHOPs to
accommodate the existing variation in
premium methodologies that exists
across States and issuers, we propose a
standard methodology such that groups
will be charged for the portion of the
month for which the enrollee is
enrolled. We considered several
methods for prorating partial month
payment in the FF–SHOPs, including
not charging for a partial month’s
coverage, charging a full month’s
premium if coverage is effective prior to
the 15th of the month, or not charging
any premium if coverage is effective
after the 15th of the month. We propose
that in the FF–SHOPs, premiums for
coverage of less than 1 month will be
prorated by multiplying the number of
days of coverage in the partial month by
the premium for 1 month divided by the
number of days in the month. We
believe this approach to be the fairest
for both consumers and issuers because
the issuer will charge for only the
portion of coverage provided for a
partial month. We invite comments
about this methodology, as well as
comments about whether a standardized
methodology regarding prorating
premiums for partial month enrollment
should be adopted across all individual
market Exchanges as well.
In the proposed 2014 Payment Notice,
we proposed at § 155.705(b)(11)(ii)(D) to
permit a qualified employer
participating in an FF–SHOP to
establish, to the extent allowed by
Federal and State law, different
premium contribution percentages for
different employee categories. In the
2014 Payment Notice, we did not
finalize this proposal because we
concluded that it would be inconsistent
with the uniformity provisions
established in Internal Revenue Service
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Notice 2010–82, which requires
employers to contribute a uniform
percentage to all employee premiums in
order to claim a small business tax
credit for health insurance premiums
paid.21 In this proposed rule, we
propose at paragraph (b)(11)(ii)(C) to
provide FF–SHOPs, in plan years
beginning on or after January 1, 2015,
with the option of permitting a qualified
employer to define a different
percentage contribution for full-time
employees (as defined in § 155.20 and
section 4980H(c)(4) of the Code) from
the percentage contribution it defines
for employees that are not full-time
employees under that definition, to the
extent permitted by applicable law. This
proposal would also allow a FF–SHOP
to permit an employer to define
different percentage contributions
toward premiums for dependent
coverage for full-time and non-full-time
employees. We note that, to the extent
permitted by applicable law, the
percentage contributions established for
dependent coverage under this proposal
could be different from the premium
contribution percentages established for
employee-only coverage, consistent
with current paragraph (b)(11)(ii)(C).
Thus, an FF–SHOP under this proposal
could allow an employer to define up to
four different contribution levels: fulltime employee-only, full-time employee
dependent, non-full-time employeeonly, and non-full-time employee
dependent.
We note that under this proposal, a
decision by an employer to define
different contribution levels for fulltime and non-full-time employees
offered coverage through the SHOP may
potentially have small business tax
credit implications. However, the IRS,
not HHS administers the small business
tax credit. Therefore, if the proposal is
finalized as proposed, employers
considering taking this option should
consider consulting with the IRS and/or
their tax advisors about the implications
of such a decision. Even so, we believe
that this proposal would provide
employers with additional flexibility to
choose whether offering different
contribution levels would be in the best
interest of the business and its
employees. Further, this additional
flexibility would bring the FF–SHOP
more in line with current small group
market practices and provide an
additional incentive for small employers
to participate in the FF–SHOP. Finally,
providing for different contribution
21 See 78 FR 15502. IRS recently proposed
regulations addressing the uniform premium
contribution requirement for 2014 at 78 FR 52719,
52721 (Aug. 26, 2013).
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levels based on full-time or non-fulltime status may encourage some
employers to offer coverage to
employees who do not meet the
Exchange definition of a ‘‘full-time
employee.’’
We also propose amending
§ 155.705(b)(11)(ii)(D). When an
employer offering SHOP coverage elects
to base premium contributions on a
composite premium, that premium is
calculated based on the average permember premiums for the employees
who initially enroll in coverage. Under
§ 155.705(b)(6)(ii), the average employee
premium rate is locked in for the entire
plan year, regardless of whether any
employees enter or leave the group
during the plan year. Additionally, as
described above, we are proposing in
this rulemaking to amend § 147.102(c)
to establish that if an issuer offers a
composite premium, the premium
amount would not be permitted to vary
for any participant during the plan year
with respect to a particular plan, even
if the composition of the group changes.
For example, if several older employees
joined the group or several employees
terminated their coverage, the
composite premium would remain the
same until renewal. After employee
choice becomes effective in the FF–
SHOPs, if an employer participating in
an FF–SHOP elects to offer employees
all plans at a single metal level of
coverage, that employer might have
employees enrolled in several different
plans. In that circumstance, mid-year
changes to the group’s composition
without a corresponding change to the
composite rate may adversely affect
issuers that gain a significant number of
older employees once a plan year has
started, without a resulting change in
premiums to reflect the potentially
higher risk. Because any risk related to
a change in the group’s composition is
divided among issuers in an employee
choice environment, they would be
taking on proportionately more risk than
in a single plan environment where the
issuer would be assuming the risk—
good and bad—for the entire group. We
believe this uncertainty may make
issuers more hesitant to offer QHPs in
FF–SHOPs after employee choice is
available in them—which risks
undermining the Affordable Care Act’s
goals of increased choice and
competition in the small group market.
Accordingly, we propose a limited
scope prohibition on composite rating
in the FF–SHOPs when an employer
elects to select a level of coverage and
make all QHPs within that level
available to its employees. We
acknowledge that this proposal would
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create a limited exception to
§ 147.102(c)(3) and that it would
preempt State laws requiring or
permitting composite rating in the small
group market, but we believe this
proposal to be limited in scope and
tailored to provide for administrative
efficiency and uniformity, system
compatibility among the FF–SHOPs,
and increased competition and choice
in the small group market. Therefore,
we propose amending
§ 155.705(b)(11)(ii)(D) to not allow an
employer or State to require that
employer premium contributions in an
FF–SHOP be based on a calculated
composite premium if the employer
elects to offer its employees all QHPs
within the employer’s selected level of
coverage under § 155.705(b)(3)(iv)(A),
that is, after employee choice is
available in the FF–SHOPs and when an
employer elects that option. State-based
SHOPs may set their own policies. We
are considering extending the
prohibition on composite rating to
SADPs in the FF–SHOPs, and we invite
comment on whether such a prohibition
should be adopted, how this policy
might affect current market practices on
composite rating of dental plans,
whether a prohibition on composite
rating should apply to all SADP offering
methods or just when an employer
chooses to offer more than a single
SADP, and how such a prohibition
would affect choice and competition in
the small group dental market. Finally,
we seek comment on whether the
calculation of user fees for the FF–SHOP
should be calculated based upon
composite premiums or premiums
calculated on per-member buildup.
6. Eligibility Determination Process for
SHOP
We propose to amend paragraph (c)(4)
to replace a reference to sections
1411(b)(2) and (c) of the Affordable Care
Act with a reference to Subpart D of 45
CFR part 155, and to add a reference to
eligibility verifications as well as to
eligibility determinations. The proposed
changes would prohibit a SHOP from
performing any individual market
eligibility determinations or
verifications as described in Subpart D,
which, for example, includes making
eligibility determinations for advance
payments of the premium tax credit and
cost sharing reductions in the
individual market Exchange. HHS
already interprets existing regulations at
§ 155.715(c)(3) and (4) and § 155.730 to
prohibit SHOPs from performing these
types of determinations or verifications
and from collecting through the SHOP
application process any information
other than what is required to make
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SHOP eligibility determinations or
effectuate enrollment through the
SHOP. However, we wish to make the
prohibitions explicit in regulation text.
We propose this amendment because
the SHOPs are designed to assist small
employers and employees of small
businesses in accessing health insurance
coverage, whereas the individual market
Exchanges are designed to assist
individual consumers. We believe that
this proposal would create efficiencies
for the SHOP and enable it to focus
solely on small businesses.
Additionally, we believe the
prohibitions in this proposal, in
conjunction with the proposed
amendments to § 155.730, would help to
protect SHOP consumers’ privacy. This
provision would become effective when
this proposed rule is finalized and
becomes effective.
We propose amending paragraph (d)
to address when SHOP eligibility
adjustment periods would be triggered.
Under current paragraph (d)(1), an
eligibility adjustment period for an
employer would be triggered whenever
the employer submits information on
the SHOP single employer application
that is inconsistent with the eligibility
standards described in § 155.710, which
effectively means that the inconsistency
period is triggered whenever an
employer would be determined
ineligible. Under current paragraph
(d)(2), an eligibility adjustment period
would be triggered for employees if the
SHOP receives information on the
employee’s application that is
inconsistent with the information
provided by the employer. We are
proposing to provide instead for
eligibility adjustment periods for both
employers and employees only when
there is an inconsistency between
information provided by an applicant
and information collected through
optional verification methods under
§ 155.715(c)(2).
A SHOP applicant who is determined
ineligible could always resolve the
reasons for that negative eligibility
determination and re-file the
application to obtain a favorable
eligibility determination. As written, the
current eligibility adjustment periods
could delay this process in ways that
might complicate the enrollment of all
employees being offered coverage by an
employer, because they could delay the
SHOP’s final eligibility determination
for an employer or for individual
employees, in order to give the SHOP
time to resolve issues that may be
relatively straightforward for employers
or employees to address without the
SHOP’s intervention, in a newly filed
application. However, if the SHOP has
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opted, under § 155.715(c)(2), to establish
additional verification methods, and
has, as part of that process, decided to
verify SHOP applicant eligibility by
checking applicant-provided
information against information
obtained from a trusted third-party data
source (such as quarterly wage report
data), the applicant might be denied
eligibility because of an inconsistency
between the information the SHOP
received from that applicant and
information contained in a third-party
data source. Such inconsistencies might
be difficult for applicants to identify
and resolve on their own.
Our proposed amendments to the
eligibility adjustment periods would
eliminate the potential for unnecessary
delay created under the current
regulation, while providing SHOP
applicants with an opportunity to
address inconsistencies between a
submitted application and trusted thirdparty data sources that a SHOP might
utilize to verify eligibility under the
optional verification process established
in § 155.715(c)(2). Under the proposal,
the applicability of SHOP eligibility
adjustment periods would be limited to
circumstances where such a
discrepancy occurs, and the applicant
would be provided an opportunity to
submit documentation proving the
information submitted on the
application is correct without having to
initiate a formal eligibility appeal. For
example, if an employer provided its
commonly used business name on the
application but that name varies slightly
from the registered business name listed
in an unemployment insurance data
source used by a SHOP to verify
eligibility under § 155.715(c)(2), or if an
employee provides a nickname on an
application that differs from his or her
formal name in quarterly wage report
data source used by a SHOP to verify
eligibility under § 155.715(c)(2), the
applicants would be able to use the
adjustment period to address the
inconsistencies between their
applications and the third-party data
sources. If a SHOP does not collect
information through optional
verification methods under
§ 155.715(c)(2), the employer and
employee would not have to go through
the eligibility adjustment period before
re-filing their applications, but would
still have the right to appeal an adverse
eligibility determination under
§ 155.740. Accordingly, we propose to
amend paragraphs (d)(1) and (d)(2) to
provide for eligibility adjustment
periods when information submitted on
an application is inconsistent with
information collected through an
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optional verification process under
§ 155.715(c)(2). This provision would
become effective when this proposed
rule is finalized and becomes effective.
We seek comments on this proposal,
including comments on whether the
current eligibility adjustment periods
should remain in place.
7. Application Standards for SHOP
HHS already interprets existing
regulations at § 155.715(c)(3) and (c)(4)
and § 155.730 to prohibit SHOPs from
collecting through the SHOP application
process any information other than what
is required to make SHOP eligibility
determinations or effectuate enrollment
through the SHOP. We propose
amendments to § 155.730 that would
expressly state this prohibition in
regulation text. Specifically, we propose
to re-designate paragraph (g) as
paragraph (g)(1) and add new paragraph
(g)(2) to provide that a SHOP is not
permitted to collect information on the
single employer or single employee
application that is not necessary to
determine SHOP eligibility or effectuate
enrollment through the SHOP. In
conjunction with the amendments we
are proposing to § 155.715(c)(4), which
would prohibit a SHOP from performing
any individual market eligibility
determinations or verifications as
described in Subpart D of 45 CFR part
155, this proposal seeks to ensure that
SHOPs are not collecting information on
the single employer or single employee
applications that is not pertinent to a
determination of SHOP eligibility or
effectuation of enrollment. For example,
a SHOP could not request through the
single employee application the income
information necessary for determining
eligibility for advance payments of the
premium tax credit in the individual
market Exchange. Limiting the
information required of an applicant
helps to protect privacy and promote
efficiency and streamlining of the SHOP
application process. This provision
would become effective when this
proposed rule is finalized and becomes
effective.
E. Part 156—Health Insurance Issuer
Standards Under the Affordable Care
Act, Including Standards Related to
Exchanges
1. Provisions Related to Cost Sharing
In this section, we propose several
provisions and parameters for the 2015
benefit year related to cost sharing.
a. Premium Adjustment Percentage
Section 1302(c)(4) of the Affordable
Care Act directs the Secretary to
determine an annual premium
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adjustment percentage, which is used to
set the rate of increase for four
parameters detailed in the Affordable
Care Act: The maximum annual
limitation on cost sharing (defined at
§ 156.130(a)), the maximum annual
limitation on deductibles for plans in
the small group market (defined at
§ 156.130(b)), and the assessable
payment amounts under section
4980H(a) and (b) of the Code (proposed
at 26 CFR 54.4980H in the ‘‘Shared
Responsibility for Employers Regarding
Health Coverage,’’ published in the
January 2, 2013 Federal Register (78 FR
218)). Section 156.130(e) provides that
the premium adjustment percentage is
the percentage (if any) by which the
average per capita premium for health
insurance coverage for the preceding
calendar year exceeds such average per
capita premium for health insurance for
2013, and that this percentage will be
published annually in the HHS notice of
benefit and payment parameters.
We propose to establish a
methodology for estimating average per
capita premium for purposes of
calculating the premium adjustment
percentage. In selecting this
methodology, we considered the
following four criteria:
(1) Comprehensiveness—the premium
adjustment percentage should be
calculated based on the average per
capita premium for health insurance
coverage for the entire market, including
the individual and group markets, and
both fully insured and self-insured
group health plans;
(2) Availability—the data underlying
the calculation should be available by
the summer of the year prior to the
calendar year so that the premium
adjustment percentage can be published
in the annual HHS notice of benefit and
payment parameters in time for issuers
to develop their plan designs;
(3) Transparency—the methodology
for estimating the average premium
should be easily understandable and
predictable; and
(4) Accuracy—the methodology
should have a record of accurately
estimating average premiums.
Based on these criteria, we propose
that the premium adjustment percentage
be calculated based on the projections of
average per enrollee private health
insurance premiums from the National
Health Expenditure Accounts (NHEA),
which is calculated by the CMS Office
of the Actuary. We considered several
other sources of premium data,
including the Medical Expenditure
Panel Survey (administered by the
Agency for Healthcare Research and
Quality), the Employer Health Benefits
Survey (administered by the Kaiser
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Family Foundation and the Health
Research and Educational Trust), and
the Federal Employees Health Benefits
Program. However, we believe the
NHEA projections, which are partially
based on several of the other data
sources that we considered, best meet
the selection criteria described above
and will provide the most accurate
estimate of the average per capita
premium for the entire health insurance
market. We welcome comment on the
criteria for selecting a methodology, any
additional sources of premium data that
we should consider, and the choice of
methodology. As additional data on
health insurance premiums become
available through the Exchanges and
other sources, we plan to review the
accuracy of the NHEA projections, and
if necessary, propose any changes to the
methodology for estimating the average
premium through the annual Payment
Notice.
To calculate the premium adjustment
percentage for the 2015 calendar year,
we propose to use the most recent
NHEA projections of average per
enrollee private health insurance
spending for 2013 and 2014 ($5,128 and
$5,435, respectively).22 Therefore, we
are proposing that the premium
adjustment percentage for 2015 be
(5,435–5,128)/5,128, and we propose to
round the result of this formula to the
nearest decimal point, which, in this
case, would be 6.0 percent. We are also
proposing the following cost-sharing
parameters for calendar year 2015,
based on our proposed premium
adjustment percentage for 2015.
Maximum Annual Limitation on Cost
Sharing for Calendar Year 2015. Under
§ 156.130(a)(2), for the 2015 calendar
year, cost sharing for self-only coverage
may not exceed the product of the
maximum annual limitation on cost
sharing for calendar year 2014 and the
premium adjustment percentage for
2015, and for other than self-only
coverage, the limit is twice the dollar
limit for self-only coverage. Under
§ 156.130(d), these amounts must be
rounded to the next lowest multiple of
50. Using the proposed premium
adjustment percentage of 6.0 percent
and the 2014 maximum annual
limitation on cost sharing of $6,350 for
self-only coverage, which was published
22 See https://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/Downloads/
ProjectionsMethodology2012.pdf and Table 17 in
https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/
NationalHealthExpendData/Downloads/
Proj2012.pdf for additional information.
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by the IRS on May 2, 2013,23 we
propose that the 2015 maximum annual
limitation on cost sharing be $6,750 for
self-only coverage and $13,500 for other
than self-only coverage.
Maximum Annual Limitation on
Deductibles for Plans in the Small
Group Market for Calendar Year 2015.
Under § 156.130(b)(2), for the 2015
calendar year, the annual deductible for
a health plan in the small group market
may not exceed, for self-only coverage,
the product of the maximum annual
limitation on deductibles for calendar
year 2014 and the premium adjustment
percentage for 2015, and for other than
self-only coverage, the limit is twice the
dollar limit for self-only coverage.
Under § 156.130(d), these amounts must
be rounded to the next lowest multiple
of 50. Using the proposed premium
adjustment percentage of 6.0 percent
and the 2014 maximum annual
limitation on deductibles of $2,000 for
self-only coverage, as specified in
§ 156.130(b)(1)(i), we propose that the
2015 maximum annual limitation on
deductibles be $2,150 for self-only
coverage and $4,300 for other than selfonly coverage.
b. Reduced Maximum Annual
Limitation on Cost Sharing
Sections 1402(a) through (c) of the
Affordable Care Act direct issuers to
reduce cost sharing for EHBs for eligible
individuals enrolled in a silver level
QHP. In the 2014 Payment Notice, we
set forth standards related to the
provision of these cost-sharing
reductions. Specifically, in 45 CFR part
156 subpart E, we specified that QHP
issuers must provide cost-sharing
reductions by developing plan
variations, which are separate costsharing structures for each eligibility
category that change how the cost
sharing required under the QHP is to be
shared between the enrollee and the
Federal government. At § 156.420(a), we
detailed the structure of these plan
variations and specified that QHP
issuers must ensure that each silver plan
variation has an annual limitation on
cost sharing no greater than the
applicable reduced maximum annual
limitation on cost sharing specified in
the annual HHS notice of benefit and
payment parameters. Although the
amount of the reduction in the
maximum annual limitation on cost
sharing is specified in section
1402(c)(1)(A) of the Affordable Care Act,
section 1402(c)(1)(B)(ii) of the statute
states that the Secretary may adjust the
cost-sharing limits to ensure that the
23 See https://www.irs.gov/pub/irs-drop/rp-1325.pdf.
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resulting limits do not cause the AVs of
the health plans to exceed the levels
specified in 1402(c)(1)(B)(i) (that is, 73
percent, 87 percent or 94 percent,
depending on the income of the
enrollee(s)). Accordingly, in the 2014
Payment Notice, we set forth a process
for determining the appropriate
reductions in the maximum annual
limitation on cost sharing. First, we
identified the maximum annual
limitation on cost sharing applicable to
all plans that will offer the EHB
package. As noted above, we propose
the 2015 maximum annual limitation on
cost sharing be $6,750 for self-only
coverage and $13,500 for other than selfonly coverage. Second, we analyzed the
effect on AV of the reductions in the
maximum annual limitation on cost
sharing described in the statute. Last,
we adjusted the reductions in the
maximum annual limitation on cost
sharing, if necessary, to ensure that the
AV of a silver plan variation will not
exceed the AV specified in the statute.
Below, we describe our analysis for the
2015 benefit year and our proposed
results.
Reduced Maximum Annual
Limitation on Cost Sharing for Benefit
Year 2015. Consistent with our analysis
in the 2014 Payment Notice, we
developed three model silver level
QHPs and analyzed the impact on their
AVs of the reductions described in the
Affordable Care Act to the estimated
maximum annual limitation on cost
sharing for self-only coverage ($6,750).
However, using data collected for QHP
certification for 2014, we updated the
model plan designs to ensure that they
continue to represent a range of plan
designs that we expect issuers to offer
at the silver level of coverage through an
Exchange. For 2015, the model silver
level QHPs would include a PPO with
a typical cost-sharing structure ($6,750
annual limitation on cost sharing,
$1,700 deductible, and 20 percent innetwork coinsurance rate), a PPO with
a lower annual limitation on cost
sharing ($4,500 annual limitation on
cost sharing, $2,000 deductible, and 20
percent in-network coinsurance rate),
and an HMO ($6,750 annual limitation
on cost sharing, $2,100 deductible, 20
percent in-network coinsurance rate,
and the following services with copays
that are not subject to the deductible or
coinsurance: $500 inpatient stay per
day, $350 emergency department visit,
$25 primary care office visit, and $50
specialist office visit). All three model
QHPs meet the AV requirements for
silver health plans.
We then entered these model plans
into the proposed 2015 AV calculator
developed by HHS and observed how
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the reductions in the maximum annual
limitation on cost sharing specified in
the Affordable Care Act affected the AVs
of the plans. We found that the
reduction in the maximum annual
limitation on cost sharing specified in
the Affordable Care Act for enrollees
with a household income between 100
and 150 percent of the Federal poverty
line (FPL) (2/3 reduction in the
maximum annual limitation on cost
sharing), and 150 and 200 percent of the
FPL (2/3 reduction), would not cause
the AV of any of the model QHPs to
exceed the statutorily specified AV level
(94 and 87 percent, respectively). In
contrast, the reduction in the maximum
annual limitation on cost sharing
specified in the Affordable Care Act for
enrollees with a household income
between 200 and 250 percent of FPL
(1/2 reduction), would cause the AVs of
two of the model QHPs to exceed the
specified AV level of 73 percent. As a
result, we propose that the maximum
annual limitation on cost sharing for
enrollees in the 2015 benefit year with
a household income between 200 and
250 percent of FPL be reduced by
approximately 1/5, rather than 1/2. We
further propose that the maximum
annual limitation on cost sharing for
enrollees with a household income
between 100 and 200 percent of the FPL
be reduced by 2/3, as specified in the
statute, and as shown in Table 4. These
proposed reductions in the maximum
annual limitation on cost sharing align
with the 2014 reductions and should
adequately account for unique plan
designs that may not be captured by our
three model QHPs. Applying the same
parameters as those specified for 2014
would reduce the administrative burden
for issuers related to designing new
plans, and provide greater continuity for
enrollees. Furthermore, as noted in the
preamble to the 2014 Payment Notice,
selecting a reduction for the maximum
annual limitation on cost sharing that is
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less than the reduction specified in the
statute would not reduce the benefit
afforded to enrollees in aggregate
because QHP issuers are required to
further reduce their annual limitation
on cost sharing, or reduce other types of
cost sharing, if the required reduction
does not cause the AV of the QHP to
meet the specified level. We welcome
comment on this analysis and the
proposed reductions in the maximum
annual limitation on cost sharing for
2015. We note that for 2015, as
described in § 156.135(d), States are
permitted to submit for approval by
HHS State-specific data sets for use as
the standard population to calculate AV.
If States submit such data sets, we
intend to analyze their effects on the
reductions we propose here, and we
will adjust the reductions in the
maximum annual limitation on cost
sharing if necessary in the final rule.
TABLE 4—REDUCTIONS IN MAXIMUM ANNUAL LIMITATION ON COST SHARING FOR 2015
Reduced maximum annual limitation on cost sharing for selfonly coverage for 2015
Eligibility category
Reduced maximum annual limitation on cost sharing for
other than self-only coverage
for 2015
$2,250
$4,500
$2,250
$4,500
$5,200
$10,400
Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(i) (that is,
100–150 percent of FPL) .................................................................................
Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(ii) (that is,
150–200 percent of FPL) .................................................................................
Individuals eligible for cost-sharing reductions under § 155.305(g)(2)(iii) (that
is, 200–250 percent of FPL) ............................................................................
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c. Design of Cost-sharing Reduction Plan
Variations
In the 2014 Payment Notice, we
established standards in § 156.420(c)–(e)
to ensure that each cost-sharing
reduction plan variation would always
provide the most cost savings for which
an enrollee is eligible while providing
the same benefits and provider network
as a plan without cost-sharing
reductions. In this proposed rule, we are
proposing certain modifications to
clarify how these standards would
apply to out-of-pocket spending
required of an enrollee for benefits other
than essential health benefits (EHBs).
Following our implementation of
Exchange operations for 2014, we have
learned that a number of issuers
designed QHPs with cost-sharing
parameters that apply to both EHB and
benefits that are not EHB. For example,
one issuer sought to establish a common
deductible across all benefits. For the
zero cost sharing plan variation of this
QHP, this would result in a substantial
deductible being applied entirely to
benefits that are not EHB. We are
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proposing to remove the standards in
§ 156.420(c) and (d) that require that a
QHP and each of its plan variations
have the same out-of-pocket spending
for benefits other than EHB. Instead, we
propose that the standard in
§ 156.420(e)—that cost sharing for an
essential health benefit from a provider
(including a provider outside the plan’s
network) required of an enrollee in a
silver plan variation may not exceed the
corresponding cost sharing required in
the standard silver plan or any other
silver plan variation of that plan with a
lower AV—would also apply to out-ofpocket spending required of enrollees in
silver plan variations for a benefit that
is not an EHB. Similarly, we propose in
§ 156.420(d) that the out-of-pocket
spending required of enrollees in the
zero cost sharing plan variation of a
QHP for a benefit that is not an EHB
from a provider (including a provider
outside the plan’s network) may not
exceed the corresponding out-of-pocket
spending required in the limited cost
sharing plan variation of the QHP,
which in turn may not exceed the
corresponding out-of-pocket spending
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required in the QHP with no costsharing reductions.
We believe these proposed
modifications strike the appropriate
balance between protecting consumers
and providing QHP issuers with
flexibility. Each cost-sharing reduction
plan variation would continue to
provide the most cost savings for which
an enrollee is eligible; however, QHP
issuers would be able to reduce out-ofpocket spending for benefits that are not
EHB for enrollees in plan variations. We
believe some issuers may want to
provide such reductions so as to offer a
simpler cost-sharing design that is
consistent across EHB and benefits that
are not EHBs. We note, however, that in
accordance with section 1402(d)(4) of
the Affordable Care Act, any reductions
in out-of-pocket spending for benefits
that are not EHB would not be
reimbursed by the Federal government
because payments for cost-sharing
reductions only apply to EHB.
We seek comment on this proposal,
including on whether our proposal
should offer less flexibility.
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d. Advance Payments of Cost-sharing
Reductions
Section 1402(c)(3) of the Affordable
Care Act directs a QHP issuer to notify
the Secretary of cost-sharing reductions
made under the statute, and directs the
Secretary to make periodic and timely
payments to the QHP issuer equal to the
value of those reductions. Section
1412(c)(3) of the Affordable Care Act
permits advance payments of costsharing reduction amounts to QHP
issuers based upon amounts specified
by the Secretary. Under these
authorities, we established a payment
approach in the 2014 Payment Notice
under which monthly advance
payments made to issuers to cover
projected cost-sharing reduction
amounts are reconciled after the end of
the benefit year to the actual costsharing reduction amounts.
To implement this approach, we
specified in § 156.430(a) that a QHP
issuer must provide to the Exchange, for
approval by HHS, an estimate of the
dollar value of the cost-sharing
reductions to be provided over the
benefit year, calculated in accordance
with the methodology specified by HHS
in the annual HHS notice of benefit and
payment parameters. In the 2014
Payment Notice, we specified that the
estimates of the cost-sharing reductions
must be calculated using data that
issuers submit under §§ 156.420 and
156.470, including the AV of the
standard plan and plan variation, and
the EHB portion of expected allowed
claims costs. If an issuer seeks advance
payments for the cost-sharing
reductions provided under the limited
cost sharing plan variation of a health
plan it offers, we specified that the
issuer must submit an estimate of the
dollar value of the cost-sharing
reductions to be provided. As described
in § 156.430(b)(1), HHS uses these
estimates to determine the monthly
advance payments for cost-sharing
reductions.
Based on our experience
implementing this process for the 2014
benefit year, we propose certain
modifications to §§ 155.1030, 156.430,
and 156.470. We believe these
modifications will simplify the process
and improve the accuracy of the
calculations. Specifically, we are
proposing to remove the requirement
detailed in § 156.430(a) that issuers
develop estimates of the dollar value of
the cost-sharing reductions to be
provided, and instead propose to
modify § 155.1030(b)(3) to specify that
the Exchange must use the methodology
specified in the annual HHS notice of
benefit and payment parameters to
calculate advance payment amounts for
cost-sharing reductions, and must
transmit the advance payment amounts
to HHS, in accordance with
§ 156.340(a). We anticipate that this
transmission would occur using the 834
enrollment transaction. As proposed in
§ 156.430(b)(1), HHS will provide
periodic advance payments to QHP
issuers based on the amounts
transmitted by the Exchange.
For the 2015 benefit year, we are
proposing that the Exchanges use a
methodology for calculating the advance
payment amounts that will not require
QHP issuers to submit an estimate of the
value of cost-sharing reductions to be
provided or the EHB portion of expected
allowed claims costs, as previously
required under § 156.470(a), nor will it
require Exchanges to transfer data on
advance payment amounts to HHS prior
to the start of the benefit year.
Specifically, we propose that Exchanges
calculate the monthly advance payment
amount for a specific policy as the
product of (x) the total monthly
premium for the specific policy, and (y)
a cost-sharing reduction plan variation
multiplier. The cost-sharing reduction
plan variation multiplier would convert
the monthly premium into the
appropriate monthly advance payment
amount, based on the following formula:
Cost-Sharing Reduction Plan
Variation Multiplier = Factor to Remove
Administrative Costs * Factor to
Convert to Allowed Claims Cost *
Induced Utilization Factor * (Plan
Variation AV—Standard Plan AV)
Where,
Factor to Remove Administrative Costs =
0.8 for all plan variations, because issuers in
the individual market must have a medical
loss ratio of at least 80 percent, under
§ 158.210(c);
Factor to Convert to Allowed Claims Costs
= the quotient of 1 and the AV for the
standard plan, not accounting for de minimis
variation;
Induced Utilization Factor = one of the
following factors, depending on the plan
variation:
TABLE 5—INDUCED UTILIZATION FACTORS FOR PLAN VARIATIONS
Cost-sharing reduction plan variation
Induced utilization factor
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73 percent AV silver plan variation .....................................................................................................................................
87 percent AV silver plan variation .....................................................................................................................................
94 percent AV silver plan variation .....................................................................................................................................
Limited cost sharing plan variation of bronze QHP ............................................................................................................
Limited cost sharing plan variation of silver QHP ...............................................................................................................
Limited cost sharing plan variation of gold QHP .................................................................................................................
Limited cost sharing plan variation of platinum QHP ..........................................................................................................
Zero cost sharing plan variation of bronze QHP .................................................................................................................
Zero cost sharing plan variation of silver QHP ...................................................................................................................
Zero cost sharing plan variation of gold QHP .....................................................................................................................
Zero cost sharing plan variation of platinum QHP ..............................................................................................................
Standard Plan AV = the AV specified for
each level of coverage at § 156.140(b), not
accounting for de minimis variation (that is,
60, 70, 80, or 90 percent for a bronze, silver,
gold, or platinum QHP, accordingly); and
Plan Variation AV = one of the following
actuarial values, depending on the plan
variation, not accounting for de minimis
variation:
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TABLE 6—ACTUARIAL VALUES FOR
PLAN VARIATIONS
1.00
1.12
1.12
1.15
1.12
1.07
1.00
1.15
1.12
1.07
1.00
TABLE 6—ACTUARIAL VALUES FOR
PLAN VARIATIONS—Continued
Cost-Sharing Reduction Plan
Variation
Plan Variation
AV
Cost-Sharing Reduction Plan
Variation
Plan Variation
AV
73 percent AV silver plan
variation.
87 percent AV silver plan
variation.
73 percent
94 percent AV silver plan
variation.
Limited cost sharing plan variation of bronze QHP.
94 percent
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TABLE 6—ACTUARIAL VALUES FOR
PLAN VARIATIONS—Continued
Plan Variation
AV
Limited cost sharing plan variation of silver QHP.
Limited cost sharing plan variation of gold QHP.
Limited cost sharing plan variation of platinum QHP.
Zero cost sharing plan variation of bronze QHP.
Zero cost sharing plan variation of silver QHP.
Zero cost sharing plan variation of gold QHP.
Zero cost sharing plan variation of platinum QHP.
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Cost-Sharing Reduction Plan
Variation
87 percent
94 percent
94 percent
100 percent
100 percent
100 percent
100 percent
The proposed induced utilization
factors are consistent with those factors
established in the 2014 Payment Notice.
For the limited cost sharing plan
variations, we derived the induced
utilization factors based on the actuarial
values proposed above, and the same
assumptions used to develop the
induced utilization factors for the other
plan variations. We will propose
updates to the induced utilization
factors for all plan variations in future
rulemaking as more data becomes
available, and at that time will consider
applying them to the risk adjustment
methodology that HHS will use when
operating risk adjustment on behalf of a
State. We welcome comment on these
induced utilization factors.
The proposed methodology also
utilizes the actuarial values of the
standard plans and plan variations, not
accounting for de minimis variation.
Although this may slightly reduce the
accuracy of the calculations, we believe
it would have little overall impact, and
would reduce administrative burden on
Exchanges because Exchanges will not
need to develop specific multipliers for
each QHP and associated plan
variations. However, this approach
would require us to estimate an
actuarial value for each type of limited
cost sharing plan variation. We estimate
that on average, the AV of the limited
cost sharing plan variations of bronze
and silver QHPs will be 87 percent, and
the AV of the limited cost sharing plan
variations of gold and platinum QHPs
will be 94 percent. We developed these
estimates based on the data submitted
by QHP issuers seeking advance
payments for limited cost sharing plan
variations that will be offered in benefit
year 2014. We welcome comment on
these actuarial values.
Overall, we believe this proposed
methodology would improve the
accuracy of the advance payments
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because it is based on the total premium
for each policy, which in accordance
with the rating rules described in
§§ 147.102 and 156.80, is based on
expected allowed claims costs, adjusted
for the plan design and provider
network, the number of individuals
covered by the policy, rating area, age,
and tobacco use. Although we
acknowledge that there may be some
limitations to the multiplier (for
example, the multiplier does not make
a plan-specific adjustment for the cost of
non-EHB, or account precisely for costs
for large families with children not
accounted for in the premium), we
believe that a very small number of
QHPs would be affected by these
limitations, and any inaccuracies in the
advance payments would be corrected
through the cost-sharing reduction
reconciliation process. We welcome
comment on this proposed methodology
for the 2015 benefit year, and
suggestions for alternative
methodologies, including whether the
methodology for the 2014 benefit year
would be more appropriate.
We are also proposing conforming
modifications to §§ 155.1030(b)(1) and
156.470(a), to delete the obligation for
QHP issuers to submit, and Exchanges
to review, the EHB allocation of the
expected allowed claims costs for the
plans, because this data would not be
used in the proposed 2015 methodology
for calculating cost-sharing reduction
advance payments.
Lastly, we are proposing to modify
§ 155.1030(b)(4) to clarify that in
accordance with the proposed
paragraph (b)(3), the Exchange would
not be required to submit issuers’
advance payment estimates to HHS for
approval prior to the start of the benefit
year. We believe such an approval
process would no longer be necessary
because under the proposed approach,
the advance payments will be calculated
based on the cost-sharing reduction plan
variation multiplier specified by HHS,
and the premium for the policy, which
is reviewed by the Exchange, in
accordance with § 155.1020. HHS would
simply validate that the advance
payment amounts were calculated in
accordance with the methodology
specified by HHS, prior to providing
advance payments to QHP issuers. This
process will ensure the protection of
Federal funds, while also limiting the
administrative burden on QHP issuers
and Exchanges. We welcome comment
on these proposed modifications. In
future years, as more data becomes
available, we will review the
methodology for calculating advance
payments of cost-sharing reductions,
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and will propose additional
modifications if necessary.
2. Provisions on FFE User Fees
a. FFE User fee for the 2015 Benefit Year
Section 1311(d)(5)(A) of the
Affordable Care Act contemplates an
Exchange charging assessments or user
fees to participating health insurance
issuers to generate funding to support
its operations. If a State does not elect
to operate an Exchange or does not have
an approved Exchange, section
1321(c)(1) of the Affordable Care Act
directs HHS to operate an Exchange
within the State. In addition, 31 U.S.C.
9701 permits a Federal agency to
establish a charge for a service provided
by the agency. Accordingly, at
§ 156.50(c), we specified that a
participating issuer offering a plan
through an FFE must remit a user fee to
HHS each month that is equal to the
product of the monthly user fee rate
specified in the annual HHS notice of
benefit and payment parameters for the
applicable benefit year and the monthly
premium charged by the issuer for each
policy under the plan where enrollment
is through an FFE.
OMB Circular No. A–25R establishes
Federal policy regarding user fees, and
specifies that a user charge will be
assessed against each identifiable
recipient for special benefits derived
from Federal activities beyond those
received by the general public. As in
benefit year 2014, issuers seeking to
participate in an FFE in benefit year
2015 will receive two special benefits
not available to the general public: (1)
the certification of their plans as QHPs;
and (2) the ability to sell health
insurance coverage through an FFE to
individuals determined eligible for
enrollment in a QHP. These special
benefits are provided to participating
issuers through the following Federal
activities in connection with the
operation of FFEs:
• Provision of consumer assistance
tools.
• Consumer outreach and education.
• Management of a Navigator
program.
• Regulation of agents and brokers.
• Eligibility determinations.
• Administration of advance
payments of the premium tax credit and
cost-sharing reductions.
• Enrollment processes.
• Certification processes for QHPs
(including ongoing compliance
verification, recertification and
decertification).
• Administration of a SHOP
Exchange.
Activities performed by the Federal
government that do not provide issuers
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participating in an FFE with a special
benefit will not be covered by this user
fee.
OMB Circular No. A–25R further
states that user charges should generally
be set at a level so that they are
sufficient to recover the full cost to the
Federal government of providing the
service when the government is acting
in its capacity as sovereign (as is the
case when HHS operates an FFE).
Accordingly, we propose to set the 2015
user fee rate for all participating issuers
at 3.5 percent. This rate is the same as
the 2014 user fee rate.24 Because we
expect enrollment to increase in 2015 as
awareness of the Exchanges grows, and
costs to decrease as operations become
more efficient, we believe this user fee
rate may allow HHS to recover the full
cost to the Federal government of
providing the special benefits to issuers
participating in an FFE in 2015.
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b. Adjustment of FFE User Fee
Section 2713(a)(4) of the PHS Act, as
added by the Affordable Care Act and
incorporated into the Employee
Retirement Income Security Act (ERISA)
and the Code, requires that nongrandfathered group health plans and
health insurance issuers offering nongrandfathered group or individual
health insurance coverage provide
benefits for certain women’s preventive
health services without cost sharing.25
The Preventive Services Rule (78 FR
39870, July 2, 2013) established
accommodations with respect to the
contraceptive coverage requirement for
health coverage established or
maintained or arranged by eligible
organizations.26
Each organization seeking to be
treated as an eligible organization under
the Preventive Services Rule is required
24 OMB granted HHS an exception to the policy
in Circular No. A–25R, allowing HHS to set the user
fee rate for 2014 at 3.5 percent, rather than a higher
rate which would have allowed HHS to recover full
costs. This rate was chosen because we wished to
encourage issuers to offer plans on FFEs and to
align with the administrative cost structure of Statebased Exchanges.
25 The women’s preventive health services
referenced by PHS Act section 2713(a)(4) are
provided for in comprehensive guidelines
supported by the Health Resources and Services
Administration (HRSA). On August 1, 2011, HRSA
adopted and released guidelines for women’s
preventive health services based on
recommendations of the independent Institute of
Medicine.
26 Under the Preventive Services Rule, an eligible
organization is an organization that: (1) Opposes
providing coverage for some or all of the
contraceptive services required to be covered under
section 2713 of the PHS Act and the companion
provisions of ERISA and the Code on account of
religious objections; (2) is organized and operates as
a nonprofit entity; (3) holds itself out as a religious
organization; and (4) self-certifies that it satisfies
the first three criteria.
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to self-certify that it meets the definition
of an eligible organization. In the case
of an eligible organization with a selfinsured plan, the self-certification must
be provided to the plan’s third party
administrator. A third party
administrator that receives a copy of the
self-certification must provide or
arrange for separate payments for
certain contraceptive services for
participants and beneficiaries in the
plan without cost sharing, premium, fee,
or other charge to plan participants or
beneficiaries, or to the eligible
organization or its plan. The third party
administrator can provide such
payments on its own, or it can arrange
for an issuer or other entity to provide
such payments. In either case, the third
party administrator can make
arrangements with an issuer offering
coverage through an FFE to obtain
reimbursement for its costs (including
an allowance for administrative costs
and margin) through an adjustment to
the FFE user fee paid by the issuer.
At § 156.50(d), we established
standards related to the administration
of the user fee adjustment. Specifically,
in § 156.50(d)(3)(ii), we stated that the
user fee adjustment will include an
allowance for administrative costs and
margin that is no less than 10 percent
of the total dollar amount of the
payments for contraceptive services,
and that HHS would specify the
allowance for a particular calendar year
in the annual HHS notice of benefit and
payment parameters.
For user fee adjustments sought in
2015 for the cost of payments for
contraceptive services provided in 2014,
we propose an allowance for
administrative costs and margin that is
equal to 15 percent of the total dollar
amount of the payments for
contraceptive services defined in
§ 156.50(d)(3)(i).27 We propose this
allowance based on our analysis of the
administrative costs that we expect each
entity involved in the arrangement to
incur. For example, the third party
administrator will likely incur certain
variable administrative costs, including
the cost of provider and medical
management, and the cost of processing
payments to providers of the
contraceptive services. However,
because payments for contraceptive
services are not a separate insurance
product and because the third party
administrator will have an existing
arrangement with the self-insured group
health plan of the eligible organization,
27 We note that the submission of the dollar
amount of the payments for contraceptive services
is subject to the oversight standards detailed at 45
CFR 156.50(d)(7), as well as the False Claims Act,
31 U.S.C. 3729–3733.
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we do not expect any additional costs
related to marketing, broker fees,
enrollment, or billing. We accounted for
the cost of submitting data to HHS
under § 156.50(d)(2), and the cost of
exchanging data between entities
involved in the arrangement. We also
added an allowance for margin in
proportion to the total costs that we
expect each entity to incur. We seek
comment on the allowance for
administrative costs and margin,
including the appropriate percentage
and alternative methods for future
determinations of the allowance.
3. AV Calculation for Determining Level
of Coverage
Section 2707(a) of the PHS Act and
Section 1302 of the Affordable Care Act
direct non-grandfathered health
insurance coverage in the individual
and small group markets, including
QHPs, to ensure that plans meet a level
of coverage specified in section
1302(d)(1) of the Affordable Care Act
and codified at § 156.140(b). On
February 25, 2013, HHS published the
EHB Rule implementing section 1302(d)
of the Affordable Care Act, which sets
forth the requirement that, to determine
the level of coverage for a given metal
tier level, the calculation of AV be based
upon the provision of EHB to a standard
population. Section 156.135(a)
establishes that AV is to be calculated
using the AV Calculator developed and
made available by HHS.
The AV Calculator uses national
claims data to reflect plans of various
levels of generosity as the underlying
standard population. This standard
population is represented in the
calculator as tables of aggregated data
called continuance tables. The AV
methodology document that was
incorporated by reference in the EHB
Rule provides an overview of the
development of these continuance
tables and the AV Calculator logic.
As stated in the EHB Rule, HHS does
not anticipate making annual changes to
the AV Calculator logic or the
underlying standard population
reflected in the continuance tables.
However, HHS recognizes that certain
routine changes will on occasion need
to be made to facilitate the AV
Calculator’s ongoing operation by
ensuring that it can accommodate
changes in the marketplace or product
design over time and due to the
changing cost of providing health care
services. Here, we propose to provide
for authority to update certain aspects of
the AV Calculator on a regular basis, but
no more frequently than annually, based
on changes to applicable standards or
the availability of new data that could
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make the AV Calculator more accurate.
These types of changes include:
(1) Updating the annual limit on cost
sharing and related functions in the
calculator: Section 1302(c) of the
Affordable Care Act, codified at
§ 156.130, imposes an annual limit on
cost sharing on non-grandfathered plans
in the individual and small group
markets. We note that, in accordance
with section 1302(c)(4) of the Affordable
Care Act and § 156.130(e), starting in
2015, HHS will publish the premium
adjustment percentage in the annual
HHS notice of benefit and payment
parameters for purposes of calculating
the required indexing of the annual
limit on cost sharing. Because this limit
is included in the AV Calculator and
impacts the range of the AV Calculator,
we propose to update the AV Calculator
to include an estimated annual limit on
cost sharing. In order to allow issuers
the most time possible to develop plans,
HHS may make available prior to the
annual HHS notice of benefit and
payment parameters the AV Calculator
that would project an estimated annual
limit on cost sharing for the given plan
year. Issuers would still be required to
adhere to the annual limit on cost
sharing that is published in the
applicable HHS notice of benefit and
payment parameters. The intention in
using an estimated annual limit on cost
sharing in the AV Calculator is to ensure
flexibility of the AV Calculator for
issuers. Since we may make the AV
Calculator available prior to the
finalization of the annual limit on cost
sharing for a given plan year, we are
proposing to use an estimated annual
limit on cost sharing in the AV
Calculator, to ensure that the final AV
Calculator does not contain an annual
limit on cost sharing that is lower than
the finalized one. Accordingly, in the
proposed 2015 AV Calculator, we
propose an estimated annual limit on
cost sharing of $6,850, compared to the
proposed annual limit for cost sharing
for 2015, which is $6,750.
(2) Updating the continuance tables to
reflect more current enrollment data:
Starting in 2016, HHS expects to have
sets of actual enrollment data from 2014
and to receive the subsequent year’s
data on an annual basis thereafter.
These data could be used to reweight
the standard population in the
continuance tables that run the AV
Calculator to more accurately reflect
true enrollment trends and as a result
project claims spending. We anticipate
that during the first several years of
operation, the demographic mix of the
enrolled population will likely change
and may need to be reweighted in the
AV Calculator annually. After a few
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years, the population may stabilize and
begin matching the claims data to the
point where reweighing the AV
Calculator may not be necessary on an
annual basis.
We propose to analyze the most
recently available data on the enrolled
population every year, starting in 2016,
and in cases where we determine that
the enrolled population has materially
changed, we propose to reweight the
continuance tables in the AV Calculator
to continue to accurately reflect
enrollment data. We are proposing to
consider a material change in gender or
age in the enrolled population as more
than a 5 percent change. We propose to
determine this change based on a
combined measurement of the effects of
shifts in gender or age statistics. We
solicit comment on this 5 percent
standard and whether it should be a
higher or lower percentage, as well as
how this change should be determined.
For the proposed 2015 AV Calculator,
we did not have actual enrollment data
to analyze and therefore, we are not
proposing to reweight the calculator
based on enrollment data at this time.
(3) Updating the algorithms behind
the AV Calculator to adapt to new
industry practices and plan designs: As
discussed in the EHB Rule, because the
AV Calculator is intended to account for
the vast majority of plan designs in the
market, in order to ensure that the AV
Calculator will be available to plans and
issuers, it will likely need to be
periodically adapted. To do this, we are
proposing to make technical, nonsubstantive updates to the AV
Calculator algorithms as industry
practices change and as technology
advances, including adding features to
the AV Calculator. For example, for the
proposed 2015 AV Calculator, we are
able to make improvements to the
algorithms to allow for additional
functionality to apply the deductible
first and then copayments. Adding this
feature would allow the calculator to be
applicable for more types of plans and
would not substantively affect other
plan designs using the AV calculator.
Such an adaptation of the AV Calculator
to allow more types of plan designs to
use the calculator without adjustment
and to accommodate new types of plan
designs in the market would be the basis
for making these non-substantive
changes. The standard that we propose
to apply in making such adaptations
would be to have the minimum impact
possible on the outcomes produced by
the AV Calculator generally while still
allowing it to be adaptable to the new
types of plan designs and allowing more
types of plan designs to use the AV
Calculator. We propose to make such
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adaptations under the provisions of this
proposed rule if the adaptations can be
based on actuarially sound principles
and these adaptions would only involve
minor modifications to the AV
Calculator that would result in only a
limited or no impact on the majority of
plan designs that use the AV Calculator.
We invite public comment on
suggestions for ways in which this
standard could best be achieved.
To identify new industry practices
and technical advances, we propose to
consult annually with the American
Academy of Actuaries to determine
what new adaptations are needed in the
AV Calculator as the basis for those
changes. Under § 156.135(b), the
American Academy of Actuaries’
members play a critical role in
determining the AV of plan designs that
are not compatible with the AV
Calculator and would have insight into
adjustments that are needed in the AV
Calculator to meet the needs of the
involving market and to allow more
plan designs to use the AV Calculator.
We also propose taking into
consideration stakeholder feedback on
adjustments to the AV Calculator that
are submitted to the CMS Actuarial
Value email address at actuarialvalue@
cms.hhs.gov. To accomplish this goal,
we propose aggregating this information
annually and assessing which
modifications would benefit the most
issuers, are feasible in the AV
Calculator, and will not substantively
impact other functions of the calculator.
If an algorithm change meets these
criteria, and standards set forth above,
we would consider incorporating it into
the AV Calculator’s algorithms. Changes
that are made to the algorithms would
be described in the AV Calculator
Methodology that would be released
with any updated AV Calculator.
(4) Updating the continuance tables to
reflect more current claims data: HHS is
proposing to update the claims data
underlying the continuance tables,
including refreshing the national claims
database data with new data, as well as
trending the AV Calculator to account
for changes in the unit prices,
utilization and intensity of services
used. A trending factor could be a
historical trend factor making use of
actual premiums that reflect utilization
and unit price increases, a factor based
on emerging trends changing the
demographic, or be based on the
premiums of the new product designs
with unique features. Data on these
changes in insurance could be used to
develop a trending factor that could be
applied to the claims data to make
adjustments in the continuance tables of
the AV Calculator. For future plan years,
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we propose to use two sources of data,
one to reflect the individual market and
one to reflect the small group market, to
develop a single trend factor that could
be applied to the AV Calculator. For the
individual market, we propose to use
the premium rate data and/or the
standard population data compared
from year to year, and for the small
group market, we proposed to use
similar premium rate data and/or the
standard population data compared
from year to year to develop a trending
factor that we could apply to the claims
data in the AV Calculator, adjusted for
key changes, such as the reduction in
transitional reinsurance that will occur
from 2014 through 2016. In years when
we are planning to update the claims
data from the national claims database
system in the AV Calculator, we are
proposing to trend the AV Calculator
based on the new claims data with the
dataset currently being used in the
calculator to ensure that the trend factor
and claims data are reconciled.
In considering the factors in adjusting
the claims data and trending the
calculator, we recognize the importance
of market stability for both issuers and
consumers from year-to-year. At the
same time, we recognize the importance
of the AV Calculator reflecting the
current market. By pursuing the
approach of not updating the claims
data every year, we would be providing
greater stability in an emerging market.
For these reasons, we are proposing to
update the baseline claims data no more
than every 3 and no less than every 5
years. This proposal of no more than
every 3 years reflects the duration of the
transitional reinsurance program and
the temporary risk corridors program.
We are also proposing to consider
trending the AV calculator every year
and in cases, where the trend factor is
cumulatively more than 5 percent
different from the previous time the AV
Calculator was updated, we would
implement the trend factor. By
considering whether to trend the AV
Calculator every year, we would be
helping to ensure that the AV Calculator
more accurately reflects the current
market and to avoid having any steep
‘‘cliff’’ changes in the AV Calculator
every few years. Under the methodology
proposed above, we are proposing to
trend the AV Calculator on premium
data and/or the standard population
data in years when the underlying
claims data are not being updated in the
AV Calculator, and in years where the
claims data are being updated, we are
proposing to trend the calculator based
on the updated claims data. We seek
comments on this proposed approach,
including our proposed approach to
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updating the claims data. We are
proposing to provide details of our
consideration of the trending factor each
year in the AV Methodology. For 2015,
we do not propose to trend the AV
Calculator since the necessary 2 years of
data were not available to make the
adjustment per our proposed policy.
(5) Updating the AV Calculator user
interface: HHS is proposing to update
the AV Calculator user interface as
needed to improve the user’s
experience. An example of this type of
change, which we included in the
proposed 2015 AV Calculator, is adding
the ability for the user to save AV
calculations. The 2014 AV Calculator
did not incorporate this function, but
based on comments received, we
recognized the importance for users to
have this feature. In the future, we
anticipate that there will be other ways
in which we could continue to make
improvements to the AV Calculator’s
user interface to assist users and we
anticipate that we will continue to
receive feedback from various
stakeholders to inform future proposed
improvements to the AV Calculator user
experience. HHS may consider making
changes when an improvement would
be useful to a broad group of users of the
AV Calculator, would not affect the
function of the AV Calculator, and
would be technically feasible. These
changes would simplify the process for
providing users with features that could
help save time and improve processes.
When making updates to the AV
Calculator in accordance with this
proposed rule, we propose to update the
AV Calculator through guidance that
will be posted on our CCIIO Web site.
This guidance will include an updated
AV Calculator Methodology to explain
the changes that were made to the AV
Calculator, along with the updated AV
Calculator. We also expect that we
would make any updates that will affect
the AV Calculator in advance of the
benefit year for which issuers are using
the AV Calculator, with the intention of
making the AV Calculator available no
later than the end of the first quarter of
the preceding the benefit year.
We are soliciting comments on all of
the above types of updates and the
accompanying criteria that would be
used to identify the need for and to
implement these updates. Outside of the
above types of updates, we are also
soliciting comments on whether other
types of updates should be considered
routinely for the AV calculator. To
clarify, we are proposing that, to comply
with § 156.135(a), issuers would be
required to use the AV Calculator
published by HHS for a given benefit
year or, in cases where a State has
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obtained HHS approval to use State
specific data in the AV Calculator,
issuers would be required to use that
AV Calculator HHS has published for
the given benefit year, adjusted to use
the State’s data (State AV Calculator).
The purpose of requiring that the issuers
use the AV Calculator of the given
benefit year or the State AV Calculator
is to ensure that the AV calculation is
being more accurately calculated on the
most recent data each year and that
there is only one AV Calculator (or State
AV Calculator) applicable for each
benefit year. We are also soliciting
comments on the proposed 2015 AV
Calculator and AV Calculator
methodology that would supersede the
2014 versions of these documents. In
accordance with our proposed policy,
we provide an explanation of the
changes that were made in the proposed
2015 AV Calculator in the proposed
2015 AV Methodology. For the 2015 AV
Calculator, HHS is only proposing to
make minor changes to the design and
inputs into the AV Calculator. While
plans’ AV calculations may be impacted
by the updated AV Calculator, our
testing has shown that this impact will
be limited for the vast majority of plans
and that only in certain cases will plans
see a significant change in AV. We
encourage stakeholders to test the
proposed 2015 AV Calculator and
submit technical comments on it during
the comment period.
In the preamble to the EHB Rule, we
discussed the calculation of AV for
health plans with family cost-sharing
features. In addition we provided
guidance in the ‘‘2014 Letter to Issuers
on Federally-facilitated and State
Partnership Exchanges’’ 28 on
accounting for family plans for 2014.
Since the AV Calculator claims data are
based on individual claims data that did
not include family cost-sharing
information, HHS is seeking the
necessary empirical data to develop the
code that can incorporate family plans
into future versions of the AV
Calculator. We are now seeking
comment on how to account for these
family plan designs and we are
particularly interested in information
regarding potential data source options.
4. National Annual Limit on Cost
Sharing for Stand-Alone Dental Plans in
an Exchange
The EHB Rule established an annual
limit on cost sharing for the pediatric
dental essential health benefit offered by
28 ‘‘Letter to Issuers on Federally-facilitated and
State Partnership Exchanges,’’ April 5, 2013,
available at: https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/2014_letter_
to_issuers_04052013.pdf.
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stand-alone dental plans (SADPs) in the
Exchanges that is separate from the
annual limit on cost sharing that applies
to QHPs that offer comprehensive
medical benefits. The EHB Rule
established that Exchanges should set a
‘‘reasonable’’ annual limit on cost
sharing for SADPs. The CMS Letter to
Issuers on Federally-facilitated and
State Partnership Exchanges, published
on April 5, 2013, established that CMS’s
interpretation of a reasonable SADP
annual limit on cost sharing for the
FFEs is $700 for an SADP with one
child enrollee and $1,400 for an SADP
with two or more children enrollees.
We propose a revised policy for the
2015 benefit year and beyond in
response to significant public interest in
establishing a policy that is consistent
across Exchanges and that minimizes a
consumer’s total annual limit on cost
sharing. HHS also seeks to minimize the
differences between a consumer’s total
annual limit on cost sharing when
purchasing essential health benefits
through a QHP that includes coverage of
the pediatric dental essential health
benefits or through a combination of a
QHP and an SADP. Thus, we are
proposing in this rule an amendment to
§ 156.150 that would establish an
annual limit on cost sharing for SADPs
that would be applicable in all
Exchanges. For the 2015 benefit year,
the new proposed paragraph (a)(1)
would impose an annual limit on cost
sharing for the pediatric dental EHB
when offered through an SADP of $300
for one covered child and $400 for two
or more covered children. We request
comment on the proposed annual limits
on cost sharing, and specifically
whether a higher or lower limit would
be appropriate for the pediatric dental
EHB. Further, due to the limited
variation in cost sharing with a
decreased annual limit on cost sharing,
we propose removing the actuarial value
requirement SADPs offered through the
Exchanges by deleting paragraph (b) of
§ 156.150. We request comment on the
removal of the AV standard as well.
We understand that under the current
rules, some State Exchanges have
interpreted a reasonable annual limit on
cost sharing to be higher than what is
proposed in this proposed rule. For
example, at least two State Exchanges
have established an annual limit on cost
sharing for SADPs of $1,000 for one
covered child and $2,000 for two or
more covered children. We therefore
request comment on whether the annual
limit on cost sharing should be
consistent nationally, which would be
more straightforward for consumers and
issuers, or set by each Exchange, which
allows for State flexibility to adjust to
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specific market standards and whether
the limits proposed here are
appropriate. As stated above, we
propose to establish the $300/$400
annual limit on cost-sharing as a
national maximum annual limit on cost
sharing applicable in all Exchanges. For
those States that currently have annual
limits on cost sharing of $1,000/$2,000,
we request comment on whether there
should be a more gradual decrease in
the annual limit in cost sharing that
would ultimately reach the national
level, but would result in a less
significant one-time decrease.
HHS considered several other
alternatives to minimize a consumer’s
total annual limit on cost sharing when
purchasing the pediatric dental EHB
through a SADP, including: Requiring
issuers of SADPs to consider the annual
limit on cost sharing to be met once the
consumer reaches the annual limit on
cost sharing for the QHP; requiring
issuers of QHPs without the pediatric
dental EHB to reduce the annual limit
on cost sharing by the amount of annual
limit on cost sharing permitted for
SADPs; and, requiring issuers of QHPs
and SADPs to track out of pocket costs
for a shared consumer and jointly
consider a consumer’s out of pocket
commitments to be met once a total
number has been reached. We note that
HHS is generally concerned with the
administrative costs of implementing a
policy that requires coordination of
claims to a single annual limit on cost
sharing. We seek comments on these
alternatives.
5. Additional Standards Specific to
SHOP
We propose to add new paragraph
(a)(4)(i) to § 156.285 to provide that a
qualified employer in the SHOP that
becomes a large employer would
continue to be rated as a small
employer. Under section 1304(b)(4)(D)
of the Affordable Care Act, a small
employer that ceases to be a small
employer by reason of an increase in the
number of employees continues to be
treated as a small employer for purposes
of Subtitle D of Title I of the statute.
Included within Subtitle D are the
provisions governing the SHOP and the
premium stabilization rules. However,
the fair health insurance premium
provisions at section 2701 are not
contained in Title D. To assure
consistency of pricing within the
SHOP,29 we propose to require a QHP
29 In the 2014 Payment Notice (78 FR 15418), we
provided that risk adjustment would not apply to
a plan unless it was subject to certain market reform
rules, including the rating rules. Elsewhere in this
proposed rule, at § 153.510(f), we propose a similar
approach with respect to risk corridors. Our
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offered through the SHOP to comply
with the rating rules described in
§ 147.102. We note that nothing in this
proposal prevents such an employer
from choosing to buy a guaranteed issue
new policy (without small group rating
rules) in the large group market outside
of the SHOP.
We believe that, when employee
choice becomes available in FF–SHOPs
for plan years beginning on or after
January 1, 2015, allowing composite
rating when an employer chooses to
offer all plans within a metal tier under
§ 155.705(b)(3)(iv)(A) could result in
issuers becoming more hesitant to offer
QHPs in an employee choice
environment—undermining the ACA’s
goals of increased choice and
competition. As discussed in more
detail above with regard to proposed
§ 155.705(b)(11)(ii)(D), composite rating
when an employer takes advantage of
employee choice could result in an
issuer taking on proportionately more
risk from mid-year changes to the
employer’s roster than in a single plan
environment and, therefore, deny an
issuer the premiums that would
otherwise be due in a per-member
premium calculation for the group. We
proposed in § 155.705(b)(11)(ii)(D) to
prohibit composite rating in the FF–
SHOPs when an employer chooses a
level of coverage and make all QHPs
within that level available to its
employees, and we propose in
§ 156.285(a)(4)(ii) to subject issuers to
the same prohibition, to assure that
issuers understand that composite
billing is not allowed in the FF–SHOPs
when employee choice becomes
available and an employer selects a
level of coverage and not a single plan.
As with proposed
§ 155.705(b)(11)(ii)(D), we are
considering extending the prohibition
on composite rating to SADPs in the
FF–SHOPs, and we invite comment on
whether such a prohibition should be
adopted, how this policy might affect
current market practices on composite
rating of dental plans, whether a
prohibition on composite rating should
apply to all SADP offering methods or
just when an employer chooses to offer
more than a single SADP, and how such
a prohibition would affect choice and
competition in the small group dental
market. We acknowledge that this
proposal provides a limited exception to
§ 147.102(c)(3) and note that this
proposal would preempt State law in
proposed approach here for the SHOP would
provide that a SHOP QHP that grows into a large
group plan would continue to receive the
protections of the risk adjustment and risk corridors
programs.
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this context, but we believe this
proposal to be limited in scope and
tailored to provide for administrative
efficiency and uniformity, system
compatibility among the FF–SHOPs,
and increased competition and choice
in the small group market.
If the proposed amendments to
§ 155.705(b)(4) summarized above are
finalized as proposed, all SHOPs would
be permitted to establish standard
methods for premium payment under
§ 155.705(b)(4), as part of carrying out
the premium aggregation function, and
HHS would establish through guidance
a process and timeline for employers to
follow when remitting premium
payments to the FF–SHOPs once
premium aggregation becomes available
in the FF–SHOPs. We anticipate that
after premium aggregation becomes
available in the FF–SHOPs, an FF–
SHOP would transmit premium
payments—both initial and
subsequent—to issuers on a regular
schedule and anticipate that this would
be no more frequently than once a week.
We recognize that under this approach,
an issuer might not receive an
employer’s initial premium payment
from the FF–SHOP prior to the coverage
effective date even though the employer
has remitted payment to the FF–SHOP
consistent with the HHS-established
timeline. We understand that issuers
may be concerned about effectuating
coverage prior to receiving payment
from a FF–SHOP. To address this
concern, if the FF–SHOP has not
received the initial premium payment in
accordance with the payment timeline
and process established in accordance
with proposed § 155.705(b)(4)(ii)(A), the
FF–SHOP will send an enrollment
cancellation transaction to the issuer to
ensure that coverage is not effectuated.
Accordingly, we propose that if the
issuer does not receive an enrollment
cancellation transaction, it should
effectuate coverage. We considered
whether an FF–SHOP could,
alternatively, send an issuer a notice
confirming that it should effectuate
coverage when the FF–SHOP received
an employer’s initial premium payment
but the issuer would not receive that
payment prior to the coverage effective
date. However, it would be simpler
administratively and operationally for
issuers to assume they should effectuate
coverage and proceed to effectuate
coverage unless an FF–SHOP cancels
the enrollment. Therefore, we propose
adding § 156.285(c)(7)(iii) to establish
that a QHP issuer offering a QHP
through an FF–SHOP would be required
to enroll a qualified employee unless it
receives a cancellation notice from the
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FF–SHOP. We note that this operational
scenario would arise only in the case of
an employer’s initial premium payment.
For regular monthly payments from a
participating SHOP employer, the
requirements of the payment timeline
and process established in accordance
with proposed § 155.705(b)(4)(ii)(A) and
the termination provisions of § 155.735
would apply. We seek through this
proposal to balance issuers’ concerns
about receiving payment with the need
for timely FF–SHOP enrollment and
operational efficiency. We welcome
comment on the proposed approach, as
well as on the alternative approach
discussed above which we considered
but rejected, and encourage commenters
to suggest additional alternatives.
6. Meaningful Difference Standard for
QHPs in the FFEs
Section 1311(e)(1)(B) of the
Affordable Care Act, codified at
§ 155.1000(c)(2), sets forth the standard
that the Exchange may certify a health
plan as a QHP if it determines that
making the plan available through the
Exchange is in the interests of qualified
individuals and qualified employers in
the State or States in which such
Exchange operates. Therefore, as a
means of ensuring that all QHPs offered
through an FFE are in the interest of
qualified individuals and qualified
employers, we propose that, to be
certified as a QHP in an FFE, a plan
must be considered ‘‘meaningfully
different’’ from all other plans offered
by the same issuer through the same
Exchange, and we propose a standard
for what is meant by the term
‘‘meaningfully different.’’
Based on feedback from stakeholders
and HHS’ experience from
administering the Medicare program,
HHS believes that it is in the interests
of consumers to have an Exchange with
meaningfully different plan choices, as
meaningful difference has important
benefits to consumers, such as ensuring
the ability to readily differentiate and
compare plan choices, leading to
informed decisions.30 A single issuer
offering a number of plans that lack
meaningful difference could take virtual
‘‘shelf space’’ from other competitors
and stifle competition. Therefore,
conducting a review for meaningful
difference will ensure that consumers
are able to make informed selections
among an ample—but manageable—
number of QHPs, while allowing for
plan innovation. The approach outlined
30 Research suggests that consumers may prefer
more limited arrays of choices. See Iyengar, S.;
Lepper, M. Journal of Personality and Social
Psychology, Vol. 79(6), Dec 2000, 995–1006.
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below for a meaningful difference
requirement would allow time for HHS
to see how the market develops, assess
the consumer need for a more specific
meaningful difference standard, and
consider options to meet this potential
need. HHS does not intend to set
numerical limits on the number of QHPs
that may be offered; rather, the proposed
approach would serve to avoid having
an issuer offering multiple QHPs that
appear the same through an Exchange.
In § 156.298(a), we propose that the
FFEs and FF–SHOPs will impose a
meaningful difference requirement
when approving a QHP application for
certification of multiple QHPs within a
service area and level of coverage in the
Exchange from a single issuer. Due to
the special characteristics of the standalone dental plan market, HHS proposes
not to require meaningful difference as
a condition for certification among
stand-alone dental plans at this time.
HHS seeks comment on this approach.
We propose, in § 156.298(b), that a plan
within a service area and metal tier
(bronze, silver, gold, or platinum, and
catastrophic coverage) is considered
meaningfully different from other plans
if a reasonable consumer (the typical
consumer buying health insurance
coverage) would be able to identify at
least two material differences among
eight key characteristics between the
plan and other plans to be offered by the
same issuer. The key characteristics are
proposed in paragraphs (b)(1)–(b)(7),
and would include (1) Cost sharing; (2)
provider networks; (3) covered benefits
(including prescription drugs); (4) plan
type (for example, HMO or PPO); (5)
premiums; (6) health savings account
eligibility; and (7) self-only, non-selfonly, or child-only coverage offerings.
At a minimum, two or more of the
characteristics proposed at § 156.298(b)
must be different in order to pass the
meaningful difference test. Therefore,
within a service area and level of
coverage in an Exchange, if two plans
submitted by a single issuer seeking
QHP certification vary among their cost
sharing and covered benefits features
but have the same premiums, the plans
may be deemed as having met the
meaningful difference test.
Furthermore, to ensure that
consumers have an adequate number of
plan options across all metal levels of
coverage, we propose at § 156.298(c),
that if HHS determines that the plan
offerings at a particular metal level
(including catastrophic plans) within a
county are limited, plans submitted for
certification at that level within that
county will not be subject to the
meaningful difference requirement.
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To provide flexibility for issuers that
merge with or acquire another issuer
that is a separate legal entity, HHS
proposes in § 156.298(d), a 2-year
meaningful difference transition period
starting from the date on which a QHP
issuer (acquiring entity) obtains or
merges with another issuer. We propose
in paragraph (d) that during the first 2
plan years after a merger or acquisition,
the acquiring entity can offer plans that
were recently obtained or merged from
another issuer that do not meet the
meaningful difference standard. After
the 2-year transition period, HHS may
approve a QHP application for
certification that is being offered by the
acquiring entity only if HHS finds that
the plan’s benefit package or costs are
meaningfully different from other QHPs
offered by the acquiring entity and the
plan meets all other certification
requirements. We believe that this
transition timeframe provides ample
time for issuers to ensure that benefit
packages being offered are meaningfully
different without stifling market
transactions.
We seek comment on the proposed
approach to reviewing meaningful
difference for QHP certification and
whether this standard should be
expanded to all Exchanges, including
State Exchanges. We also seek comment
on whether this authority granted to the
Exchange by section 1311(e)(1) of the
Affordable Care Act, to act in the
interests of qualified individuals and
qualified employers, should be used by
the Secretary, in conjunction with the
authority granted by section 1311(e)(2)
of the Affordable Care Act, to limit an
issuer’s participation in the FFEs should
there be significantly different rate
increases for its QHPs and non-QHPs.
While the transitional policy regarding
renewals of certain coverage announced
in November 2013 and described earlier
in this preamble was intended to allow
for continuity of coverage, it was not
intended to promote adverse selection
through significantly higher rates for
QHPs.
7. Quality Standards: Establishment of
Patient Safety Standards for QHP Issuers
Section 1311(h)(1)(A) of the
Affordable Care Act specifies that,
beginning on January 1, 2015, a QHP
may contract with hospitals with greater
than 50 beds only if the hospitals meet
certain patient safety standards,
including use of a patient safety
evaluation system (PSES) as described
in part C of Title IX of the PHS Act, and
a comprehensive hospital discharge
program. A PSES means the collection,
management, or analysis of information
for reporting to or by a patient safety
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organization (PSO).31 Section
1311(h)(1)(B) of the Affordable Care Act
specifies that a QHP may contract with
health care providers that implement
health care quality mechanisms, if any
are required by the Secretary in
regulations. Section 1311(h)(2) of the
Affordable Care Act provides the
Secretary with the authority and
flexibility to establish reasonable
exceptions to these requirements and
section 1311(h)(3) of the Affordable Care
Act allows the Secretary to issue
regulations to modify the number of
beds described in section 1311(h)(1)(A).
As discussed in the National Strategy
for Quality Improvement in Health Care
(National Quality Strategy), HHS seeks
to improve the overall quality of health
care by making health care more
patient-centered, reliable, accessible,
and safe.32 One of the main priorities of
the National Quality Strategy is making
care safer by reducing harm caused in
the delivery of care. In addition, section
1311(h) of the Affordable Care Act aims
to strengthen quality improvement and
patient safety for consumers in
Exchanges. To effectively balance the
priorities for making quality health care
accessible and safe in the Exchanges, we
propose to implement these patient
safety standards for QHP issuers over
time, under the Secretary’s authority in
section 1311(h)(2) of the Affordable Care
Act. We believe that implementing all of
the requirements described in section
1311(h) by January 1, 2015 could result
in a shortage of qualified hospitals and
providers available for contracting with
QHPs.
Currently, there are 79 listed PSOs
nationwide operating in 29 States and
the District of Columbia.33 PSOs carry
out a variety of patient safety activities
with the goal to improve patient safety
and the quality of health care delivery.
PSOs are able to collect, aggregate, and
analyze patient safety events and
information that is protected under
privilege and confidentiality standards.
However, it is not entirely clear that
there is sufficient capacity to enable all
hospitals subject to this provision to
contract with a PSO at this time. HHS
recognizes the continuously-growing
capacity of the PSO program and the
potential to accommodate U.S. hospitals
subject to § 156.1110 within the
proposed phase-in period. HHS
recognizes the significant burden and
31 See https://www.pso.ahrq.gov/regulations/
fnlrule01.pdf.
32 See Report to Congress: National Strategy for
Quality Improvement in Health Care available at
https://www.healthcare.gov/law/resources/reports/
quality03212011a.html.
33 See https://www.pso.ahrq.gov/listing/
geolist.htm.
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time constraints for hospitals to enter
into agreements with PSOs for
appropriate services to improve patient
safety, especially for particular hospital
settings and populations. HHS also
recognizes the significant resources that
QHP issuers would need to invest to
track such initiatives, such as ensuring
that the hospitals and health care
providers the QHP issuer contracts with
have appropriate agreements with PSOs
and adequate hospital discharge
planning activities. Consequently, we
believe that this proposed rule would
provide an opportunity for QHP issuers
to meaningfully comply with section
1311(h) of the Affordable Care Act and
consider how PSOs will work with their
network hospitals and health care
providers. This proposal would also
provide time for hospitals and
healthcare providers to demonstrate to a
QHP issuer that they meet the patient
safety standards in accordance with
section 1311(h). Moreover, we believe
that this proposed approach to
implementation of section 1311(h)
would ensure that QHP issuers have
sufficient hospitals and health care
providers to contract with, while
providing consumers with access to
health care that meets adequate safety
and quality standards.
In phase one, which would become
effective for QHP issuer plan years
beginning on or after January 1, 2015,
the patient safety standards proposed in
§ 156.1110 would apply to hospitals, as
defined in section 1861(e) of the Social
Security Act,34 that are Medicarecertified, and to Medicaid-only
hospitals which have been issued a
Medicaid-only CMS Certification
Number (CCN). These standards would
apply to such hospitals that have been
certified for greater than 50 beds. For
the reasons described above, HHS is not
proposing requirements regarding the
patient safety standards described in
section 1311(h)(1)(B) at this time. HHS
is currently in the process of researching
the establishment of appropriate quality
and patient safety standards for QHP
issuers contracting with health care
providers as described in section
1311(h)(1)(B).
In § 156.1110(a), we propose that a
QHP issuer may contract with hospitals
that have more than 50 beds, only if
they are Medicare-certified or have been
issued a Medicaid-only CCN, both of
which are subject to Medicare Hospital
Conditions of Participation (CoPs)
34 Section 1861(e) of the Social Security Act:
https://www.ssa.gov/OP_Home/ssact/title18/
1861.htm.
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standards found in 42 CFR part 482.35
Specifically, such hospitals must
develop, implement, and maintain an
effective, ongoing, hospital-wide, datadriven quality assessment and
performance improvement (QAPI)
program, as described in 42 CFR 482.21.
In addition, a hospital that is Medicarecertified or participates in the Medicaid
program must have in effect a discharge
planning process that applies to all
patients, as described in 42 CFR 482.43.
HHS believes that the standards of QAPI
and discharge planning in the Medicare
hospital CoPs represent the most
efficient way to balance the need to
have a sufficient number of hospitals
available for QHP issuers to contract
with, and the statutory intent of section
1311(h) to provide for adequate patient
safety standards. In addition, based on
our preliminary research, the vast
majority of hospitals with greater than
50 beds are Medicare-certified or are
Medicaid-only hospitals and must
comply with the health and patient
safety standards in the Medicare
hospital CoPs. Hospitals may be deemed
to meet the CoP standards if accredited
per section 1865 of the Social Security
Act. Therefore, the proposed approach
would not significantly limit hospital
participation in QHP networks and
would provide consumers access to
health care services from an adequate
number of hospitals through QHPs in
the Exchanges.
In § 156.1110(b), we propose to direct
QHP issuers to maintain documentation,
including but not limited to the CCN for
each hospital. Since both Medicarecertified hospitals and Medicaid-only
hospitals are issued CCNs, such
documentation would demonstrate that
a QHP issuer’s contracted hospital is
Medicare-certified or has a Medicaidonly CCN and are subject to the
Medicare hospital CoP standards as
required in paragraph (a). We believe
that collecting and maintaining data
such as the CCN would not be
burdensome for QHP issuers. In
§ 156.1110(c), we propose that a QHP
issuer must make this documentation
available to the Exchange, upon request
by the Exchange, and in a time and
manner specified by the Exchange. We
intend to include all Exchange types
when referring to the Exchange in
§ 156.1110, including a State-based
Exchange. We anticipate using the data
collected as part of information used to
evaluate and oversee QHP issuers in
FFEs. We note that multi-State plans, as
defined in § 155.1000(a), are subject to
35 Hospital Conditions of Participation: https://
www.cms.gov/Regulations-and-Guidance/
Legislation/CFCsAndCoPs/Hospitals.html.
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these provisions. OPM would determine
the time and manner for multi-State
plans to submit the documentation.
In § 156.1110(d), we propose that a
QHP issuer must ensure that each of its
QHPs meets the patient safety standards
in accordance with paragraph (a) of this
section for plan or policy years
beginning on or after January 1, 2015.
We anticipate that this first phase of
implementation of QHP-related quality
standards would be for 2 years
beginning January 1, 2015 or until we
issue further regulations based on a
reassessment of the Exchange market,
whichever is later.
We seek comment regarding our
proposal to apply Medicare hospital
CoP standards for implementation of
section 1311(h) of the Affordable Care
Act. We also request comment on the
proposed 2-year time period for the first
phase of implementation. Additionally,
we propose to maintain the statutory
distinction between hospitals with 50 or
fewer beds and hospitals with more
than 50 beds, but we request comment
for phase one implementation on
whether HHS should adjust the number
of hospital beds to be greater or less
than the standard under section
1311(h)(3) of the Affordable Care Act.
We also seek comment regarding
whether the proposed standards in
§ 156.1110 should be applicable to
hospitals other than Medicare-certified
and Medicaid-only hospitals. We further
request comment on whether any other
documentation would be reasonable to
require QHP issuers to collect and
maintain to meet the proposed
standards described in § 156.1110(c).
For the next phase of implementation,
we are considering requiring QHP
issuers to ensure that their contracted
hospitals have agreements with PSOs
and comprehensive hospital discharge
programs, and that their health care
providers implement health care quality
activities. We recognize the various
important patient safety initiatives,
including discharge planning activities,
with which hospitals, health care
providers, and issuers are already
involved. In future rulemaking, we
intend to consider whether and which
reasonable exceptions under section
1311(h)(2) of the Affordable Care Act
should be made. We seek comment on:
• What core aspects should be
included in hospital patient safety
programs.
• What a comprehensive hospital
discharge planning program should
require for each patient.
• What health care quality
improvement activities should be
implemented by health care providers.
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Specifically, we request comment on
how QHP issuers could effectively track
patient safety information, such as
hospital agreements with a PSO, related
to their contracted hospitals and
provider networks. We also seek
comment regarding specific, comparable
activities that may be included as
reasonable exceptions to the patient
safety standards, in accordance with
section 1311(h)(2) of the Affordable Care
Act.
8. Financial Programs
a. Netting of Payments and Charges
In the 2014 Payment Notice, HHS
established a monthly payment and
collections cycle for the advance
payments of the premium tax credit,
cost-sharing reductions, and FFE user
fees, and an annual payment and
collections cycle for the premium
stabilization programs and
reconciliation of cost-sharing
reductions. For 2014, to streamline our
payments and collections process, we
propose in § 156.1215(a) that each
month we would determine amounts
owed to or by a QHP issuer by netting
amounts owed by the QHP issuer to the
Federal government against payments
due to the QHP issuer for advance
payments of the premium tax credit,
advance payments of cost-sharing
reductions, and payment of FFE user
fees. In addition to this netting across
these programs, as further described
below, the monthly calculation of
amounts due would also reflect current
information related to enrollment for
past months, including information
related to excess payments previously
made. Finally, we propose that amounts
owed to or by a QHP issuer would be
netted across all entities operating
under the same taxpayer identification
number (TIN). This process would
permit HHS to calculate amounts owed
each month, and pay or collect those
amounts from issuers more efficiently.
When netting occurs, HHS would
demand amounts due only when there
is a balance due to the Federal
government.
In addition to the monthly payment
flows under the programs described
above, a number of annual payment
flows will begin in 2015 for the risk
adjustment program, the reinsurance
program, the risk corridors program, and
cost-sharing reduction reconciliation.
To streamline payment and charge flows
from all of these programs—advance
payments of the premium tax credit,
advance payments and reconciliation of
cost-sharing reductions, FFE user fees,
and the premium stabilization
programs—we propose in § 156.1215(b)
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that HHS may net amounts owed to the
Federal government against payments
due to an issuer (or an affiliated issuer
under the same TIN) under these
programs in 2015 and later years. We
believe that this process will enable
HHS to operate a monthly payment
cycle that will be efficient for both
issuers and HHS.
In § 156.1215(c), we propose that any
amount owed to the Federal government
by an issuer and its affiliates for
advance payments of the premium tax
credit, advance payments of and
reconciliation of cost-sharing reductions
after netting be the basis for calculating
a debt owed to the Federal government.
We propose that payments and
collections under all of these programs
would occur under an integrated
monthly payment and collection cycle.
We seek comment on these proposals,
including on the appropriate payment
timeframes for these charges so that
amounts may be netted and invoiced as
part of an orderly, monthly payment
cycle.
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b. Confirmation of HHS Payment and
Collections Reports
As discussed in the preamble to
§ 156.1210 of the second final Program
Integrity Rule, HHS anticipates sending
a monthly payment and collections
report—the HIX 820—to issuers
describing the advance payments of the
premium tax credit and advance
payments of cost-sharing reductions that
an issuer is to receive on behalf of
eligible enrollees, and the FFE user fee
charges that the issuer must pay. These
amounts are based on enrollments
previously confirmed by the issuer as
part of the enrollment transaction
process and the resultant HIX 820
discrepancy reporting process described
in § 156.1210. Under § 156.1210 (a), an
issuer must respond to the payment and
collections report within 15 calendar
days of receipt of the report by either
confirming the report or notifying HHS
if there is a discrepancy between the
data provided in the payment and
collections report and the data that the
issuer has. Under § 156.1210(b), if an
issuer reports a discrepancy in a
payment and collections report later
than 15 calendar days after receipt of
the report, HHS will work with the
issuer to resolve the discrepancy as long
as the late reporting was not due to
misconduct on the part of the issuer. As
described below, any resolution to such
an identified discrepancy would be
reflected in a later payment and
collections report and the invoice
generated under that later report would
not affect the debt established by the
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invoice generated in connection with
the earlier report.
We propose that an issuer that notifies
HHS of a discrepancy under § 156.1210
will trigger an administrative
discrepancy resolution process.
Following the end of the benefit year, if
the issuer remains dissatisfied with the
results of that process, the issuer may
make a request for reconsideration as
proposed below in § 156.1220(a).
We intend that this discrepancy
resolution process would permit HHS to
work with issuers to resolve outstanding
discrepancies in a cooperative manner.
Because of the number and timing of the
daily flows of enrollment and premiumrelated data and confirmations between
HHS, the Exchange, and the issuer, we
anticipate that there would be frequent
adjustments to the enrollment counts
and therefore the amounts of the
advance payments of the premium tax
credit, advance payments of costsharing reductions, and FFE user fees.
To decrease the administrative burden
on issuers, HHS, and the Exchanges,
and in recognition of the number and
timing of the data flows involved, we
propose not to retroactively adjust
previous months’ payment and
collections reports and amounts
previously due. Consistent with our
approach in the Medicare Advantage
program, the invoice for a particular
month would be calculated on the
monthly payment cycle. We propose
that the amount thus invoiced for a
particular month, which would reflect
netted amounts as described above,
constitute an amount owed to the
Federal government. As more accurate
data become available to HHS, the
Exchange, and the issuer, we propose
that this later information not reduce or
increase the previous determination of
an amount owed. Rather, the
information would be captured in
subsequent months and reflected in
subsequent payment cycles, and
reflected in later invoices.
Thus, an issuer would be required to
pay the full amount of any invoice
issued in connection with a payment
and collection report for a month even
if the issuer notes a discrepancy that
may later be resolved as a credit in a
later invoice.
Therefore, we propose to add
paragraph (c) to § 156.1210 to provide
that discrepancies in payment and
collections reports identified to HHS
under that section would be addressed
in subsequent payment and collections
reports, and would not be used to
change debts determined pursuant to
invoices generated under previous
payment and collections reports.
We seek comment on this approach.
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c. Administrative Appeals
We propose an administrative appeals
process designed to address any
unresolved discrepancies for advance
payments of the premium tax credit,
advance payments of cost-sharing
reductions, FFE user fee payments,
payments and charges for the premium
stabilization programs, cost-sharing
reduction reconciliation payments and
charges, and any assessments under
§ 153.740(b) of a default risk adjustment
charge. This administrative appeals
process is similar to that utilized to
address payment disputes in the
Medicare Part D program, in which an
appeal to a CMS hearing officer, and
then the Administrator of CMS, if
desired, may be filed after a request for
reconsideration.
In § 156.1220(a), we propose that an
issuer may file a request for
reconsideration of what the issuer
believes is a processing error by HHS,36
HHS’s incorrect application of the
relevant methodology, or HHS’s
mathematical error only with respect to:
(1) Advance payments of the premium
tax credit, advance payment of costsharing reductions and FFE user fee
charges; (2) risk adjustment payments or
charges for a benefit year, including an
assessment of risk adjustment user fees;
(3) reinsurance payments for a benefit
year; (4) a risk adjustment default charge
for a benefit year; (5) a reconciliation
payment or charge for cost-sharing
reductions for a benefit year; or (6) risk
corridors payments or charges for a
benefit year. For a dispute regarding
advance payments of the premium tax
credit, advance payments of costsharing reductions, or FFE user fee
amounts for a benefit year, we propose
that a request for reconsideration must
be filed within 30 calendar days after
the issuer receives a final
reconsideration notification specifying
the aggregate amount of advance
payments of the premium tax credit,
advance payments of cost-sharing
reductions, and FFE user fees for the
applicable benefit year. We anticipate
that this final reconsideration
notification would be provided in the
summer of the year following the benefit
year. We believe that the constant flow
of enrollment data for payments under
these programs will lead to difficulty in
finalizing a precise, final calculation for
a benefit year, and propose to finalize
payments under these programs
36 We note that under proposed
§ 156.1220(a)(3)(i)–(ii), an issuer may not submit
data for consideration in the appeal if the data was
not submitted prior to the applicable data
submission deadline, but may submit documentary
evidence that certain data was timely submitted.
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including for purposes of appeal by the
late summer of the following year. We
are considering permitting
reconsideration only for material errors.
We seek comment on this proposal,
including on the minimum materiality
threshold that should be required to
seek reconsideration. For example, we
are considering a minimum materiality
threshold of 1 percent or 5 percent of
total payments made to the issuer for
the year for advance payments of the
premium tax credit, advance payments
of cost-sharing reductions, and FFE user
fees, or a minimum dollar amount such
as $10,000.
For a dispute regarding a risk
adjustment payment or charge,
including an assessment of risk
adjustment user fees, a reinsurance
payment, a default risk adjustment
charge, a cost-sharing reduction
reconciliation payment or charge, or a
risk corridors payment or charge, we
propose that a request for
reconsideration must be filed within 30
calendar days of receipt of the
applicable notification of payments and
charges provided by HHS. We believe
that because the interim and final
dedicated distributed data environment
reporting process proposed at
§ 153.710(d) and (e) would permit an
issuer an extended period of time in
which to review risk adjustment and
reinsurance data and because the costsharing reduction reconciliation and
risk corridors payments or charges are
based on data provided by the issuer, 30
calendar days should be sufficient for an
issuer to review the notification and
make a request for reconsideration. We
seek comment on this timeline.
In § 156.1220(a)(3)(i), we propose that
the request for reconsideration specify
the findings or issues that the issuer
challenges and the reasons for the
challenge. In § 156.1220(a)(3)(ii), we
propose that a reconsideration with
respect to a processing error by HHS,
HHS’s incorrect application of the
relevant methodology, or HHS’s
mathematical error may be requested
only if, to the extent the issue could
have been previously identified by the
issuer to HHS under § 153.710(d)(2) or
(e)(2), it was so identified and remains
unresolved. Similarly, in
§ 156.1220(a)(3)(iii), we propose that a
reconsideration with respect to advance
payments of the premium tax credit,
advance payments of cost-sharing
reductions, and FFE user fees may be
requested only if, to the extent the issue
could have been previously identified
by the issuer to HHS under § 156.1210,
it was so identified and remains
unresolved. We propose to clarify that
an issuer may request reconsideration if
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it previously identified an issue under
§ 156.1210 after the 15-calendar-day
deadline, but late discovery of the issue
was not due to misconduct on the part
of the issuer.
In § 156.1220(a)(3)(iv), we propose
that the issuer may include in the
request for reconsideration additional
documentary evidence that HHS should
consider. Such documents may not
include data that was to have been filed
by the applicable data submission
deadline, but may include evidence of
the timely submission of such
documents.
In § 156.1220(a)(4), we propose that in
conducting the reconsideration, HHS
would review the payment
determination, the evidence and
findings upon which it was based, and
any additional documentary evidence
submitted by the issuer. HHS would
also have the discretion to review any
other evidence it believes is relevant in
deciding the reconsideration (and
would provide the issuer a reasonable
opportunity to review and rebut the
evidence), and would then inform the
issuer of the final decision in writing.
We propose that an issuer would be
required to prove its case by a
preponderance of the evidence with
respect to issues of fact.
In § 156.1220(a)(5), we propose that a
reconsideration decision would be final
and binding for decisions regarding the
advance payments of the premium tax
credit, advance payments of costsharing reductions, and FFE user fees. A
reconsideration with respect to other
matters would be subject to the outcome
of a request for informal hearing filed in
accordance with proposed
§ 156.1220(b). Because the monthly
iterative discrepancy report process is
available until the reconsideration
notice is sent and because of the
simplicity of the calculation of advance
payments of the premium tax credit,
advance payments of cost-sharing
reductions, or FFE user fees, we believe
that providing one level of
administrative appeal for advance
payments of the premium tax credit,
advance payments of cost-sharing
reductions, and FFE user fees is
sufficient. We propose in § 156.1220(b)
that an issuer that elects to challenge the
reconsideration decision for the final
risk adjustment payment or charge,
including an assessment of risk
adjustment user fees; reinsurance
payment; default risk adjustment
charge; cost-sharing reduction
reconciliation payment or charge; or risk
corridors payment or charge for a
benefit year provided under paragraph
(a) of proposed § 156.1220 would be
entitled to an informal hearing before a
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CMS hearing officer. In § 156.1220(b)(1),
we propose that a request for an
informal hearing be made in writing and
filed with HHS within 15 calendar days
of the date the issuer receives the
reconsideration decision. In
§ 156.1220(b)(2), we propose that the
request for an informal hearing must
include a copy of the reconsideration
decision and must specify the findings
or issues in the decision that the issuer
is challenging and its reasons for the
challenge. We also propose that HHS
may submit for review by the CMS
hearing officer a statement of the
reasons supporting the reconsideration
decision.
In § 156.1220(b)(3)(i), we propose that
the issuer receive a written notice of the
time and place of the informal hearing
at least 15 calendar days before the
scheduled date. In § 156.1220(b)(3)(ii),
we propose that the CMS hearing officer
would neither receive testimony nor
accept any new evidence that was not
presented with the reconsideration
request or in any statement provided by
HHS. We propose that the scope of the
CMS hearing officer’s review would be
limited to the statements provided by
the issuer and HHS and the record that
was before HHS in making the
reconsideration determination. We
would require that the issuer prove its
case by clear and convincing evidence
with respect to issues of fact and would
permit the issuer to be represented by
counsel in the informal hearing.
In § 156.1220(b)(4), we propose that,
following the informal hearing, the CMS
hearing officer would send the decision
and the reasons for the decision to the
issuer. We propose that this decision
would be final and binding, but subject
to any Administrator’s review initiated
in accordance with proposed
§ 156.1220(c).
We propose in § 156.1220(c)(1) that if
the CMS hearing officer upholds the
reconsideration decision, the issuer may
request a review by the Administrator of
CMS within 15 calendar days of receipt
of the CMS hearing officer’s decision.
The request for a review by the
Administrator of CMS must specify the
findings or issues in the decision that
the issuer is challenging, and the
reasons for the challenge. We propose
that HHS may submit for review by the
Administrator of CMS a statement
supporting the decision of the CMS
hearing officer.
In § 156.1220(c)(2), we propose that
the Administrator of CMS or a delegate
would review the hearing officer’s
decision, any written documents
submitted by HHS or the issuer, as well
as any other information included in the
record of the CMS hearing officer’s
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decision, and would determine whether
to uphold, reverse, or modify the CMS
hearing officer’s decision. We propose
that the issuer would be required to
prove its case by clear and convincing
evidence with respect to issues of fact.
We propose that the Administrator’s
determination would be considered
final and binding.
We believe that the administrative
appeals process outlined above would
give issuers reasonable opportunity for
reconsideration and review of their
payments and charges. Furthermore,
building on established procedures
utilized by HHS in Medicare Part D will
provide a structure for administrative
appeals with which issuers are already
familiar. We seek comment on the
proposed reconsideration and
administrative appeals process.
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. This proposed rule contains
information collection requirements
(ICRs) that are subject to review by
OMB. A description of these provisions
is given in the following paragraphs
with an estimate of the annual burden,
summarized in Table 6. 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 proposed rule that
contain ICRs. We generally used data
from the Bureau of Labor Statistics to
derive average labor costs (including
capital costs, overhead, and fringe
benefits) for estimating the burden
associated with the ICRs.
A. ICRs Related to HHS Audits of Stateoperated Reinsurance Programs
(§ 153.270)
In § 153.270, we propose that HHS or
its designee may conduct a financial
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and programmatic audit of a Stateoperated reinsurance program to assess
compliance with reinsurance program
requirements. We also propose that, if
an audit results in a finding of material
weakness or significant deficiency, a
State must ensure that the applicable
reinsurance entity provides a written
corrective action plan to HHS for
approval within 60 calendar days of the
issuance of the final audit report. The
burden associated with meeting this
third party disclosure requirement
includes the burden for a State that
establishes a reinsurance program to
ensure that its applicable reinsurance
entity and any relevant contractors,
subcontractors, or agents cooperate with
and take appropriate actions in
connection with any audit, and the
burden associated with preparing and
submitting a corrective action plan to
HHS for approval. Because only two
States will operate reinsurance in the
2014 benefit year, this collection is
exempt from the PRA under 44 U.S.C.
3502(3)(A)(i), and we are not seeking
approval from OMB for this information
collection requirement. We discuss the
impact associated with HHS audits of
State-operated reinsurance programs in
the Regulatory Impact Analysis section
of this proposed rule.
B. ICRs Regarding Issuer and Entity
Administrative Burden Related to
Audits for the Premium Stabilization
Programs (§ 153.405(i); § 153.540(a);
§ 153.410(d); § 153.620(c))
We propose that HHS or its designee
would have the authority to audit QHP
issuers, contributing entities, and
issuers of risk adjustment covered plans
or reinsurance-eligible plans to assess
compliance with the requirements of
subparts E, F, G and H of part 153, as
applicable. As mentioned earlier in this
proposed rule, where possible, we
intend to align the risk corridors audit
process with the audits conducted for
the MLR program. Therefore, we believe
that the issuer burden associated with
the risk corridors audit is already
accounted for as part of the Supporting
Statement for the MLR program
approved under OMB control number
0938–1164.
For issuers of risk adjustment covered
plans and issuers of reinsurance-eligible
plans, these provisions would result in
a third party disclosure requirement for
issuers to prepare and compile the
financial and programmatic information
necessary to comply with the audit. For
each onsite review, we estimate that it
will take an average of 40 hours for
administrative work to assemble the
requested information, 19.5 hours to
review the information for
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completeness, and 30 minutes to submit
the information to HHS in preparation
for an onsite review. We estimate that
an onsite review would require an
additional 2 hours to schedule the
onsite activities with the compliance
reviewer (at an hourly wage rate of
$53.75), 4 hours for introductory
meeting, 8 hours to tour reviewers
onsite, 10 hours of interview time, 2
hours to walk through processes with
the reviewer, and 4 hours for
concluding meetings, resulting in a total
of approximately 60 hours of
preparation time and an additional 30
hours of onsite time for each issuer. We
estimate that it will take 90 hours at a
cost of approximately $4,838 for each
issuer to make information available to
HHS for an onsite review. Because we
have not finalized our audit protocols,
it is difficult to accurately estimate an
audit rate. However, we believe that it
would be reasonable to assume that
approximately 120 issuers, representing
roughly 5 percent of issuers of risk
adjustment covered plans or
reinsurance-eligible plans would be
audited. Therefore, we estimate an
aggregate burden of 10,800 hours and
$580,500 for issuers as a result of this
requirement.
For contributing entities, we estimate
that the disclosure burden would be
substantially less because the audit
would be simpler. We estimate the
burden to be approximately one-quarter
of that of an issuer of a risk adjustment
covered plan or a reinsurance-eligible
plan, or approximately 22.5 hours at a
cost of approximately $1,209 for each
contributing entity. Similarly, because
we have not finalized the audit
protocols, it is difficult to accurately
estimate an audit rate. However, we
estimate that approximately 1 percent of
contributing entities would be audited,
representing 226 contributing entities.
Therefore, we estimate an aggregate
burden of 5,085 hours, or $273,319, as
a result of this proposed requirement.
We will revise the information
collection currently approved under
OMB Control Number 0938–1155 with
an October 31, 2015 expiration date to
account for this additional burden.
C. ICRs Regarding Potential
Adjustments for Transitional Plans
(§ 153.500–§ 153.540)
For the 2014 benefit year, we are
considering adjustments to the premium
stabilization programs that would help
to further mitigate any unexpected
losses for QHP issuers with plans that
are affected by the transitional policy.
To effectuate potential adjustments, we
must estimate the State-specific effect
on average claims costs. We therefore
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propose to require all issuers
participating in the individual and
small group markets in a State to submit
to HHS a member-month enrollment
count for transitional plans and nontransitional plans in the individual and
small group markets. This submission
would occur in 2015 prior to the risk
corridors July 31, 2015 data submission
deadline. HHS would analyze that
enrollment data, and publish the Statespecific adjustments that issuers would
use in the risk corridors calculations for
the 2014 benefit year. To reduce the
burden on issuers, we are considering
coordinating this data collection with
other data collections for the premium
stabilization programs. We request
comment on data collection methods
and the potential effect on issuers’
administrative costs.
We estimate that there will be
approximately 2,400 issuers in the
individual and small group market in
the 2014 benefit year, and that it would
take an insurance analyst approximately
30 minutes (at an hourly wage rate of
$38.49) to estimate enrollment in
transitional plans and non-transitional
plans and submit this information to
HHS. Therefore, we estimate a cost of
approximately $19.25 for each issuer,
and an aggregate cost of $46,200 for all
individual and small group market
issuers (though this cost may be lower
depending upon the data collection
method we adopt). Because we
anticipate collecting this information in
2015, and because we expect to issue
additional clarifying guidance on this
proposed policy, will seek OMB
approval and solicit public comment on
this information collection requirement
at a future date.
D. ICRs Regarding Risk Corridors Data
Validation (§ 153.530 and § 153.540)
For the 2014 benefit year, we propose
to collect risk corridors data by using
the same form as is used for MLR data
collection, at the same time (July 31st of
the year following the applicable benefit
year). We intend to modify the MLR
collection form for benefit year 2015,
approved under OMB control number
0938–1164, to add reporting elements
(for example, QHP-specific premium
amounts) that are required under the
risk corridors data submission
requirements under § 153.530. We
intend to include these data elements in
an amendment to the information
collection approved under OMB control
number 0938–1164 for MLR data
submission that we will publish for
public comment and advance for OMB
approval in the future.
Because the MLR program and the
risk corridors program will require
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similar data, we estimate that
submitting the data elements required
for the risk corridors program will
impose limited additional burden on
issuers. We estimate that it will take
each QHP issuer approximately 1.5
hours, representing 1 hour for an
insurance analyst (at an hourly wage
rate of $38.49) and 30 minutes for a
senior manager (at an hourly wage rate
of $77), to input and review data that is
specific to the risk corridors program in
the MLR and risk corridors reporting
form for benefit year 2015. We estimate
that 1,200 QHP issuers will submit risk
corridors data for the 2014 benefit year
in the 2015 risk corridors and MLR
reporting cycle. Therefore, we estimate
an aggregate burden of 1,800 hours (at
a total cost of approximately $92,394)
for QHP issuers as a result of this
requirement. We will revise the
information collection currently
approved OMB Control Number 0938–
1155 with an October 31, 2015
expiration date to account for this
additional burden.
In § 153.540(b), we propose that HHS
may impose CMPs on QHP issuers on a
State Exchange that do not comply with
the risk corridors requirements in
Subpart F. We note that we would
impose any CMP in accordance with the
procedures set forth in 45 CFR156.805.
Although the processes set forth in
§ 156.805 would result in information
collection requirements that are subject
to PRA, we expect to impose CMPs on
fewer than 10 entities in a year.
Therefore, we believe that this
collection is exempt from the PRA
under 44 U.S.C. 3502(3)(A)(i).
E. ICRs Regarding Data Validation
Requirements When HHS Operates Risk
Adjustment (§ 153.630)
In § 153.630(b)(1), we propose that an
issuer of a risk adjustment covered plan
must engage one or more independent
auditors to perform an initial validation
audit of a sample of its risk adjustment
data selected by HHS. This provision
also proposes that the issuer provide
HHS with the identity of the initial
validation auditor, and attest to the
absence of conflicts of interest between
the initial validation auditor (or the
members of its audit team, owners,
directors, officers, or employees) and
the issuer (or its owners, directors,
officers, or employees), in a timeframe
and manner to be specified by HHS. We
previously estimated the cost to issuers
to conduct an initial validation audit in
the 2014 Payment Notice and the
associated information collection
request approved under OMB Control
Number 0938–1155 with an October 1,
2015 expiration date. Therefore, the
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burden associated with this reporting
requirement is the time and effort
necessary to report the auditor’s identity
to HHS. We estimate it will take an
insurance operations analyst (at an
hourly wage rate of $38.49) and a senior
manager (at an hourly wage rate of $77)
each approximately 15 minutes to
prepare and send an electronic report to
HHS. Therefore, for 2,400 risk
adjustment covered issuers, the
aggregate burden associated with this
requirement is 1,200 hours, at an
approximate cost of $69,300.
In § 153.630(b)(8), we propose that the
initial validation auditor measure and
report to the issuer and HHS, in a
manner and timeframe specified by
HHS, the inter-rater reliability rates
among its reviewers. Also in this
provision, we propose that the initial
validation auditor to achieve a
minimum consistency measure of 95
percent for demographic, enrollment,
and health status review outcomes. We
believe establishing standards for interrater reliability among reviewers is
standard practice in the industry and
will not result in extra cost for the
initial validation auditor. Therefore, the
burden associated with this reporting
requirement is the time and effort for
the initial validation auditor to report
the inter-rater reliability rate to the
issuer and to HHS. We estimate it will
take an insurance operations analyst (at
an hourly wage rate of $38.49) and a
senior manager (at an hourly wage rate
of $77) each approximately 15 minutes
to report the inter-rater reliability rate to
the issuer and to HHS. Therefore,
assuming that 2,400 issuers of risk
adjustment covered plans each engage
one independent auditor to perform the
initial validation audit, the aggregate
burden associated with this requirement
is 1,200 hours, at an approximate cost
of $69,300. We will revise the
information collection currently
approved under OMB Control Number
0938–1155 with an October 31, 2015
expiration date to account for this
additional burden.
F. ICRs Regarding Quarterly Data
Submissions (§ 153.700(a))
Section 153.700 provides that issuers
of a risk adjustment covered plan or a
reinsurance-eligible plan must establish
a dedicated distributed data
environment and provide data access to
HHS, in a manner and timeframe
specified by HHS, for any HHS-operated
risk adjustment and reinsurance
program. In this proposed rule, we
clarify this timeframe, proposing that an
issuer must make good faith efforts to
make complete, current enrollment and
claims files accessible through its
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dedicated distributed data environments
no less frequently than quarterly, once
the issuer’s dedicated distributed data
environment is established.
Based on HHS’s most recent estimate
of fully insured issuers in the individual
and small group markets, we estimate
that 2,400 issuers will be subject to the
requirement to establish a dedicated
data environment to either receive
reinsurance payments or make risk
adjustment transfers. Although we are
clarifying in this proposed rule that
issuers must make this data available to
HHS on a quarterly basis, the aggregate
burden associated with this requirement
is already accounted for under the
Premium Stabilization Rule Supporting
Statement that is approved under OMB
control number 0938–1155 with an
October 31, 2015 expiration date. We
will revise that supporting statement to
specify that issuers must comply with
this information collection requirement
on a quarterly basis.
G. ICRs Related to Confirmation of
Dedicated Distributed Data
Environment Reports (§ 153.700(d) and
(e))
We propose in § 153.710(d) that
within 30 calendar days of the date of
an interim dedicated distributed data
environment report from HHS, an issuer
of a reinsurance-eligible or risk
adjustment covered plan must either
confirm to HHS that the information in
the interim reports for the risk
adjustment and reinsurance programs
accurately reflect the data to which the
issuer has provided access to HHS
through its dedicated distributed data
environment in accordance with
§ 153.700(a) for the timeframe specified
in the report, or describe to HHS any
inaccuracy it identifies in the interim
report. Similar to the interim report
process, we propose in § 153.710(e) that
the issuer either confirm to HHS that the
information in the final dedicated
distributed data environment report
accurately reflects the data to which the
issuer has provided access to HHS
through its dedicated distributed data
environment in accordance with
§ 153.700(a) for the benefit year
specified in the report, or describe to
HHS any inaccuracy it identifies in the
final dedicated distributed data
environment report within 15 calendar
days of the date of the report.
We estimate that 2,400 issuers of risk
adjustment covered plans and
reinsurance-eligible plans will be
subject to this requirement, and that
issuers will compare enrollee condition
codes with risk scores and analyze
claims costs to confirm information in
the interim and final dedicated
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distributed data environment reports.
On average, we estimate that it will take
an insurance operations analyst (at an
hourly wage rate of $38.49)
approximately 2 hours to respond to an
interim report and 6 hours to respond to
the final dedicated distributed data
environment report. Therefore, we
estimate an aggregate burden of 19,200
hours and $739,008 for 2,400 issuers as
a result of this requirement. We will
revise the information collection
currently approved under OMB Control
Number 0938–1155 with an October 31,
2015 expiration date to account for this
additional burden.
H. ICRs Regarding Privacy and Security
of Personally Identifiable Information
(§ 155.260(a))
In § 155.260(a), we propose that an
Exchange may submit to the Secretary a
proposed use or disclosure of eligibility
and enrollment PII. The Exchange
submitting such a request must provide
a detailed description of the use or
disclosure and how the proposed use or
disclosure will ensure the efficient
operation of the Exchanges consistent
with section 1411(g)(2)(A) of the
Affordable Care Act. The requesting
Exchange must also describe how the
information to be used or disclosed will
be protected in compliance with the
privacy and security standards
established by the Exchange. We
estimate fewer than 10 states will
submit such proposals on a yearly basis.
While this reporting requirement is
subject to the PRA, we believe the
associated burden is exempt under 5
CFR 1320.3(c)(4) and 44 U.S.C.
3502(3)(A)(i), since fewer than 10
entities would be affected. Therefore,
we are not seeking approval from OMB
for these information collection
requirements. We seek comment on this
estimate from states that are
contemplating any uses of eligibility
and enrollment PII for which they
would submit such a proposal.
I. ICRs Regarding Quality Standards:
Establishment of Patient Safety
Standards for QHP Issuers (§ 156.1110)
In § 156.1110, we describe the
information collection, recordkeeping,
and disclosure requirements that a QHP
issuer must meet to demonstrate
compliance with these proposed patient
safety standards. The burden estimate
associated with these standards
includes the time and effort required for
QHPs to maintain and submit hospital
CMS Certification Numbers and any
other information to the Exchange that
demonstrates that each of its contracted
hospitals with greater than 50 beds
meets the patient safety standards
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required in § 156.1110(a). In the near
future, HHS intends to publish a rule
proposing more specific quality
standards for Exchanges and QHPs and
will solicit public comment. At that
time and per requirements outlined in
the PRA, we intend to estimate the
burden on QHPs to comply with the
patient safety provisions of § 156.1110.
Until that time, we are soliciting
comments on the burden for QHPs to
maintain and submit such
documentation to demonstrate meeting
the patient safety standards proposed
here.
J. ICRs Regarding Administrative
Appeals (§ 156.1220)
In § 156.1220, we propose an
administrative appeals process to
address unresolved discrepancies for
advance payment of the premium tax
credit, advance payment and
reconciliation of cost-sharing
reductions, FFE user fees, and the
premium stabilization programs, as well
as any assessment of a default risk
adjustment charge under § 153.740(b).
In § 156.1220(a), we propose that an
issuer may file a request for
reconsideration to contest a processing
error by HHS, HHS’s incorrect
application of the relevant methodology,
or HHS’s mathematical error for the
amount of: (1) Advance payment of the
premium tax credit, advance payment of
cost-sharing reductions or Federallyfacilitated user fees charge for a
particular month; (2) risk adjustment
payments or charges for a benefit year,
including an assessment of risk
adjustment user fees; (3) reinsurance
payments for a benefit year; (4) a risk
adjustment default charge for a benefit
year; (5) a reconciliation payment or
charge for cost-sharing reductions for a
benefit year; or (6) risk corridors
payments or charges for a benefit year.
While the hours involved in a request
for reconsideration may vary, for the
purpose of this burden estimate we
estimate that it will take an insurance
operations analyst 1 hour (at an hourly
wage rate of $38.49) to make the
comparison and submit a request for
reconsideration to HHS. We estimate
that 24 issuers, representing
approximately 1 percent of all issuers
that may be eligible for reinsurance
payments, risk adjustment payments or
charges (including any assessment of
risk adjustment user fees or a default
risk adjustment charge), advance
payment and reconciliation of costsharing reductions, advance payment of
the premium tax credit, and FFE user
fees, will submit a request for
reconsideration, resulting in a total
aggregate burden of approximately $924.
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We will revise the information
collection currently approved OMB
Control Number 0938–1155 with an
October 31, 2015 expiration date to
account for this additional burden.
In § 156.1220(b), we propose that an
issuer that is dissatisfied with the
reconsideration decision regarding: (1)
Risk adjustment payments and charges,
including an assessment of risk
adjustment user fees; (2) reinsurance
payments; (3) default risk adjustment
charge; (4) reconciled cost-sharing
reduction amounts; or (5) risk corridors
payments or charges, provided under
paragraph (a) of § 156.1220, is entitled
to an informal hearing before a CMS
hearing officer, if a request is made in
writing within 15 calendar days of the
date the issuer receives the
reconsideration decision. Further
review is available from the
Administrator of CMS. However, we
believe these processes will occur
extremely infrequently. Since
collections from fewer than 10 entities
are exempt from the PRA under 44
U.S.C. 3502(3)(A)(i), we are not seeking
PRA approval for this information
collection requirement.
TABLE 7—ANNUAL REPORTING, RECORDKEEPING AND DISCLOSURE BURDEN
Regulation
Section(s)
Number of
respondents
§ 153.405 ........
§ 153.410;
§ 153.620 ....
§ 153.500–
§ 153.540– ..
§ 153.540 ........
§ 153.630(b)(1)
§ 153.630(b)(8)
(§ 153.700(d)
and (e)) .......
§ 156.1220 ......
Total ........
Total annual
burden
(hours)
Burden per
response
(hours)
Responses
Hourly labor
cost of
reporting
($)
Total labor
cost of
reporting
($)
Total
capital/
maintenance
costs
($)
Total cost
($)
226
226
22.50
5,085
53.75
273,319
0
273,319
120
120
90.00
10,800
53.75
580,500
0
580,500
2,400
1,200
2,400
2,400
2,400
1,200
2,400
2,400
0.50
1.50
0.50
0.50
1,200
1,200
1,200
1,200
38.49
51.33
57.75
57.75
46,200
92,394
69,300
69,300
......................
0
0
0
46,200
92,394
69,300
69,300
2,400
24
2,400
24
8.00
1.00
19,200
24
38.49
38.49
739,008
924
0
0
739,008
924
a 3,970
......................
......................
......................
......................
1,870,945
0
1,870,945
a ICRs
sroberts on DSK5SPTVN1PROD with PROPOSALS
associated with § 153.500, § 153.630(b)(1), § 153.630(b)(8) and § 153.700(d) and (e) apply to the same respondents, so the total number of unique respondents is 3,970.
We have submitted an information
collection request to OMB for review
and approval of the ICRs contained in
this proposed rule. The requirements
are not effective until approved by OMB
and assigned a valid OMB control
number.
To obtain copies of the supporting
statement and any related forms for the
paperwork collections referenced above,
access CMS’s Web site at https://
www.cms.gov/Regulations-andGuidance/Legislation/
PaperworkReductionActof1995/PRAListing.html or email your request,
including your address, phone number,
OMB number, and CMS document
identifier, to Paperwork@cms.hhs.gov,
or call the Reports Clearance Office at
410–786–1326.
If you comment on these information
collection 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, Attention: CMS Desk Officer,
CMS–9972–F. Fax: (202) 395–5806; or
Email: OIRA_submission@omb.eop.gov.
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V. 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.
VI. Regulatory Impact Statement (or
Analysis)
A. Statement of Need
This proposed rule proposes
standards related to the premium
stabilization programs (risk adjustment,
reinsurance, and risk corridors) that will
protect issuers from the potential effects
of adverse selection and protect
consumers from increases in premiums
due to issuer uncertainty. The Premium
Stabilization Rule and 2014 Payment
Notice provided detail on the
implementation of these programs,
including the specific parameters
applicable to these programs. This
proposed rule also proposes additional
standards with respect to composite
rating, privacy and security of
personally identifiable information, the
open enrollment period for 2015, the
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actuarial value calculator, the annual
limitation on cost sharing for standalone dental plans, the meaningful
difference standard for qualified health
plans offered through a Federallyfacilitated Exchange, patient safety
standards for issuers of qualified health
plans, the Small Business Health
Options Program, cost sharing
parameters, cost-sharing reductions, and
FFE user fees.
B. Overall Impact
We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), Executive
Order 13563 on Improving Regulation
and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96–
354), section 202 of the Unfunded
Mandates Reform Act of 1995 (March
22, 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 Orders 12866 and 13563
direct 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
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effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. A
regulatory impact analysis (RIA) must
be prepared for rules with economically
significant effects ($100 million or more
in any 1 year).
OMB has determined that this
proposed rule is ‘‘economically
significant’’ within the meaning of
section 3(f)(1) of Executive Order 12866,
because it is likely to have an annual
effect of $100 million in any 1 year.
Accordingly, we have prepared a RIA
that presents the costs and benefits of
this proposed rule.
Although it is difficult to discuss the
wide-ranging effects of these provisions
in isolation, the overarching goal of the
premium stabilization and Exchangerelated provisions and policies in the
Affordable Care Act is to make
affordable health insurance available to
individuals who do not have access to
affordable employer-sponsored
coverage. The provisions within this
proposed rule are integral to the goal of
expanding coverage. For example, the
premium stabilization programs
decrease the risk of financial loss that
health insurance issuers might
otherwise expect in 2015 and the
advance payments of the premium tax
credit and cost-sharing reduction
programs assist low- and moderateincome consumers and Indians in
purchasing health insurance. The
combined impacts of these provisions
affect the private sector, issuers, and
consumers, through increased access to
health care services including
preventive services, decreased
uncompensated care, lower premiums,
establishment of patient safety
standards, and increased plan
transparency. Through the reduction in
financial uncertainty for issuers and
increased affordability for consumers,
these provisions are expected to
increase access to health coverage.
In this RIA, we discuss the
requirements in this proposed rule
related to cost sharing and FFE user
fees, as well as new oversight provisions
for the premium stabilization programs.
C. Impact Estimates of the Payment
Notice Provisions and Accounting Table
In accordance with OMB Circular A–
4, Table 8 below depicts an accounting
statement summarizing HHS’s
assessment of the benefits, costs, and
transfers associated with this regulatory
action.
This proposed rule implements
standards for programs that will have
numerous effects, including providing
consumers with affordable health
insurance coverage, reducing the impact
of adverse selection, and stabilizing
premiums in the individual and small
group health insurance markets and in
an Exchange. We are unable to quantify
certain benefits of this proposed rule—
such as increased patient safety and
improved health and longevity due to
increased insurance enrollment—and
certain costs—such as the cost of
providing additional medical services to
newly-enrolled individuals. The effects
in Table 8 reflect qualitative impacts
and estimated direct monetary costs and
transfers resulting from the provisions
of this proposed rule for contributing
entities, States, Exchanges, and health
insurance issuers. The annualized
monetized costs described in Table 8
reflect direct administrative costs
(including costs associated with labor,
capital, overhead, and fringe benefits) to
States and health insurance issuers as a
result of the proposed provisions, and
include administrative costs estimated
in the Collection of Information section
of this proposed rule. We note estimated
transfers in Table 8 do not reflect any
user fees paid by insurance issuers for
FFEs because we cannot estimate those
fee totals. We also note that, while we
are proposing a 2015 reinsurance
contribution rate that is lower than the
2014 reinsurance contribution rate, total
reinsurance administrative expenses,
including the reinsurance contribution
rate, will increase from 2014 to 2015.
TABLE 8—ACCOUNTING TABLE
Benefits:
Qualitative:
*Increased enrollment in the individual market leading to improved access to health care for the previously uninsured, especially individuals
with medical conditions, which will result in improved health and protection from the risk of catastrophic medical expenditures.
*A common marketing standard covering the entire insurance market, reducing adverse selection and increasing competition.
*Robust oversight of programs that use Federal funds to ensure proper use of taxpayer dollars.
*Access to higher quality health care through the establishment of patient safety standards
*Increasing coverage options for small employers and part-time employees while mitigating the effect of adverse selection.
Costs:
Estimate
(in millions)
Annualized Monetized ($/year)
Year
dollar
Discount
rate
(percent)
Period
covered
1.75
2013
7
2014–2017
1.82
2013
3
2014–2017
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Qualitative:
*Costs incurred by issuers and contributing entities to comply with provisions in the proposed rule.
*Costs incurred by States for complying with audits of State-operated reinsurance programs.
Transfers:
Estimate
(in millions)
Annualized Monetized ($/year)
Year
dollar
Discount
rate
(percent)
Period
covered
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2013
7
2014–2017
12.04
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2013
3
2014–2017
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TABLE 8—ACCOUNTING TABLE—Continued
*Transfers reflect incremental cost increases from 2014–2015 for reinsurance administrative expenses and the risk adjustment user fee,
which are transfers from contributing entities and health insurance issuers to the Federal government.
*Unquantified: Lower premium rates in the individual market due to the improved risk profile of the insured, competition, and pooling.
This RIA expands upon the impact
analyses of previous rules and utilizes
the Congressional Budget Office’s (CBO)
analysis of the Affordable Care Act’s
impact on Federal spending, revenue
collection, and insurance enrollment.
The CBO’s estimates remain the most
comprehensive for provisions pertaining
to the Affordable Care Act, and include
Federal budget impact estimates for
provisions that HHS has not
independently estimated. The CBO’s
May 2013 baseline projections estimated
that 22 million enrollees will enroll in
Exchange coverage by 2016, including
approximately 18 million Exchange
enrollees who will be receiving
subsidies.37 Participation rates among
potential enrollees are expected to be
lower in the first few years of Exchange
availability as employers and
individuals adjust to the features of the
Exchanges. Table 9 summarizes the
effects of the risk adjustment and
reinsurance programs on the Federal
budget from fiscal years 2014 through
2017, with the additional, societal
effects of this proposed rule discussed
in this RIA. We do not expect the
provisions of this proposed rule to
significantly alter CBO’s estimates of the
budget impact of the risk adjustment
and reinsurance programs that are
described in Table 9. For this RIA, we
are shifting the estimates for the risk
adjustment and reinsurance programs to
reflect the 4-year period from fiscal
years 2014 through 2017, because CBO’s
scoring of the risk adjustment and
reinsurance programs assumed that
payments and charges would begin in
2014, when in fact these payments and
charges will begin in 2015. CBO did not
separately estimate the program costs of
risk corridors, but assumed aggregate
collections from some issuers would
offset payments made to other issuers.
We note that transfers associated with
the risk adjustment and reinsurance
programs were previously estimated in
the Premium Stabilization Rule;
therefore, to avoid double-counting, we
do not include them in the accounting
statement for this proposed rule (Table
8).
In addition to utilizing CBO
projections, HHS conducted an internal
analysis of the effects of its regulations
on enrollment and premiums. Based on
these internal analyses, we anticipate
that the quantitative effects of the
provisions proposed in this rule are
consistent with our previous estimates
in the 2014 Payment Notice for the
impacts associated with the cost-sharing
reduction program, the advance
payments of the premium tax credit
program, the premium stabilization
programs, and FFE user fee
requirements for health insurance
issuers.
TABLE 9—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT AND REINSURANCE
PROGRAMS FROM FY 2013–2017, IN BILLIONS OF DOLLARS
Year
2013
Risk Adjustment and Reinsurance Program Payments ..........................
Risk Adjustment and Reinsurance Program Collections * .......................
2014
—
—
2015
6
13
2016
17
16
2013–
2017
2017
18
18
20
18
61
65
* Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time. Source: Congressional
Budget Office. 2012. Letter to Hon. John Boehner. July 24, 2012.
sroberts on DSK5SPTVN1PROD with PROPOSALS
Risk Adjustment
The risk adjustment program is a
permanent program created by the
Affordable Care Act that transfers funds
from lower risk, non-grandfathered
plans to higher risk, non-grandfathered
plans in the individual and small group
markets, inside and outside the
Exchanges. In subparts D and G of the
Premium Stabilization Rule and the
2014 Payment Notice, we established
standards for the administration of the
risk adjustment program.
A State approved or conditionally
approved by the Secretary to operate an
Exchange may establish a risk
adjustment program, or have HHS do so
on its behalf. As described in the 2014
Payment Notice, if HHS operates risk
adjustment on behalf of a State, it will
fund its risk adjustment program
operations by assessing a risk
adjustment user fee on issuers of risk
adjustment covered plans. For the 2015
benefit year, we estimate that the total
cost for HHS to operate the risk
adjustment program on behalf of States
for 2015 will be approximately $27.3
million, and that the per capita risk
adjustment user fee would be less than
$1.00 per year for HHS to operate the
risk adjustment program on behalf of
States for 2015.
In this proposed rule, we propose in
§ 153.620(c) that HHS or its designee
may audit an issuer of a risk adjustment
covered plan, when HHS operates risk
adjustment on behalf of a State, to assess
the issuer’s compliance with the
requirements of subparts G and H of 45
CFR part 153. As discussed above, HHS
intends to fund risk adjustment
operations (not including Federal
personnel costs), including risk
adjustment program integrity and audit
functions, by collecting a per capita user
fee from issuers of risk adjustment
covered plans. Therefore, we believe
that the costs to the Federal government
associated with the risk adjustment
audit activities in this proposed rule
would be covered through the risk
adjustment user fee, and that there
would be no impact for the Federal
government as a result of the proposed
audit provisions. The proposed audit
provision would result in additional
costs for issuers of risk adjustment
covered plans related to gathering
information and preparing for an audit.
We discuss the administrative costs
associated with this proposed
requirement for issuers in the Collection
of Information section of this proposed
rule.
37 ‘‘Updated Estimates for the Insurance Coverage
Provisions of the Affordable Care Act,’’
Congressional Budget Office, May 2013.
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Although this proposed rule would
result in some additional administrative
burden for issuers of risk adjustment
covered plans as a result of the
proposed requirements for risk
adjustment data validation and
submission of discrepancy reports in
response to interim and final dedicated
distributed data environment reports,
we note that much of the impact
associated with establishing a dedicated
distributed data environment and a risk
adjustment data validation process has
previously been estimated in the
Premium Stabilization Rule and the
2014 Payment Notice. We do not believe
that provisions contained within this
proposed rule substantially alter the
previous estimates. We describe these
administrative costs in the Collection of
Information Requirements section of
this proposed rule.
Reinsurance
The Affordable Care Act directs that
a transitional reinsurance program be
established in each State to help
stabilize premiums for coverage in the
individual market from 2014 through
2016. In the 2014 Payment Notice, we
expanded upon the standards set forth
in subparts C and E of the Premium
Stabilization Rule and established the
2014 uniform reinsurance payment
parameters and national contribution
rate. In this proposed rule, we set forth
the 2015 uniform reinsurance payment
parameters and contribution rate, and
oversight provisions related to the
operation of the reinsurance program.
Section 153.220(c) provides that HHS
will publish the uniform per capita
reinsurance contribution rate for the
upcoming benefit year in the annual
HHS notice of benefit and payment
parameters. Section 1341(b)(3)(B)(iii) of
the Affordable Care Act specifies that
$10 billion for reinsurance contributions
is to be collected from contributing
entities in 2014 (the reinsurance
payment pool), $6 billion in 2015, and
$4 billion in 2016. Additionally,
sections 1341(b)(3)(B)(iv) and 1341(b)(4)
of the Affordable Care Act direct that $2
billion in funds is to be collected for
contribution to the U.S. Treasury in
2014, $2 billion in 2015, and $1 billion
in 2016. Finally, section
1341(b)(3)(B)(ii) of the Affordable Care
Act allows for the collection of
additional amounts for administrative
expenses. Taken together, these three
components make up the total dollar
amount to be collected from
contributing entities for each of the 3
years of the reinsurance program under
the uniform per capita contribution rate.
If HHS operates the reinsurance
program on behalf of a State, HHS
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would retain $0.14 as an annual per
capita fee to fund HHS’s performance of
all reinsurance functions. If a State
establishes its own reinsurance
program, HHS would transfer $0.07 of
the per capita administrative fee to the
State for purposes of administrative
expenses incurred in making
reinsurance payments, and retain the
remaining $0.07 to offset the costs of
contribution collection.
To safeguard the use of Federal funds
in the transitional reinsurance program,
we propose in § 153.270(a) that HHS or
its designee may conduct a financial
and programmatic audit of a Stateoperated reinsurance program to assess
compliance with the requirements of
subparts B and C of 45 CFR part 153. As
discussed above, HHS intends to fund
reinsurance operations (not including
Federal personnel costs), including
program integrity and audit functions,
by collecting as part of the uniform
contribution rate, administrative
expenses associated with operating the
reinsurance program from all
reinsurance contributing entities.
Therefore, we believe that the costs to
the Federal government associated with
the reinsurance audit activities in this
proposed rule would be covered
through the reinsurance contribution
rate, and that there would be no net
budget impact for the Federal
government as a result of the proposed
audit provisions. Because this proposed
audit requirement would direct a State
that establishes a reinsurance program
to ensure that its applicable reinsurance
entity and any relevant contractors,
subcontractors, or agents cooperate with
an audit, and would direct the State to
provide to HHS for approval a written
corrective action plan; implement the
plan; and provide to HHS written
documentation of the corrective actions
once taken, if the audit resulted in a
finding of material weakness or
significant deficiency, the proposed
requirement would impose a cost on
States operating reinsurance. We believe
that State-operated reinsurance
programs would already electronically
maintain the information necessary for
an audit as part of their normal business
practices and as a result of the
maintenance of records requirement set
forth in § 153.240(c), no additional time
or effort will be necessary to develop
and maintain audit information. We
estimate that it will take a compliance
analyst (at an hourly wage rate of
$53.75) 40 hours to gather the necessary
information required for an audit, 5
hours to prepare a corrective action plan
based on the audit findings and 64
hours to implement and document the
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72379
corrective actions taken if necessary. We
also estimate a senior manager (at an
hourly wage rate of $77) will take 5
hours to oversee the transmission of
audit information to HHS and to review
the corrective action plan prior to
submission to HHS, and 16 hours to
oversee implementation of any
corrective actions taken. Therefore, we
estimate a total administrative cost of
approximately $7,476 for each Stateoperated reinsurance program as a result
of this proposed audit requirement. For
the two States that will operate
reinsurance for the 2014 benefit year,
we estimate an aggregate burden of
approximately $14,952 as a result of this
requirement. Although we have
estimated the cost of a potential audit in
this RIA, we note that we will not audit
all State-operated reinsurance programs,
and may not audit any of these
programs.
In § 153.405(i) and § 153.410(d), we
propose that HHS may audit
contributing entities and issuers of
reinsurance-eligible plans to assess
compliance with reinsurance program
requirements. We discuss the costs to
contributing entities and issuers of
reinsurance-eligible plans as a result of
this proposed requirement in the
Collection of Information section of this
proposed rule. We intend to combine
issuer audits for the premium
stabilization programs whenever
practicable to reduce the financial
burden of these audits on issuers.
Consequently, we anticipate that,
because issuers of reinsurance-eligible
plans may also be subject to risk
adjustment requirements, we would
conduct these audits in a manner that
avoids overlapping review of
information that is required for both
programs.
Risk Corridors
The Affordable Care Act creates a
temporary risk corridors program for the
years 2014, 2015, and 2016 that applies
to QHPs, as defined in § 153.500. The
risk corridors program creates a
mechanism for sharing risk for
allowable costs between the Federal
government and QHP issuers. The
Affordable Care Act establishes the risk
corridors program as a Federal program;
consequently, HHS will operate the risk
corridors program under Federal rules
with no State variation. The risk
corridors program will help protect
against inaccurate rate setting in the
early years of the Exchanges by limiting
the extent of issuer losses and gains.
As mentioned elsewhere in this
proposed rule, for the 2014 benefit year,
we are proposing an adjustment to the
risk corridors formula that would help
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to further mitigate potential QHP
issuers’ unexpected losses that are
attributable to the effects of the
transition policy. This proposed
adjustment may increase the total
amount of risk corridors payments that
the Federal government will make to
QHP issuers, and reduce the amount of
risk corridors receipts; however, we are
considering a number of approaches
that would limit the impact of the
policy on the Federal budget. Because of
the difficulty associated with predicting
State enforcement of 2014 market rules
and estimating the enrollment in
transitional plans and in QHPs, we
cannot estimate the magnitude of this
impact on aggregate risk corridors
payments and charges at this time. We
also estimate that this proposed
adjustment would result in direct
administrative costs for individual and
small group market issuers that are
discussed in the Collection of
Information section of this proposed
rule.
To ensure the integrity of risk
corridors data reporting, we propose in
§ 153.540(a) to establish HHS authority
to conduct post-payment audits of QHP
issuers. We are contemplating several
ways to reduce issuer burden, such as
conducting the risk corridors audits
using the existing MLR audit process or
conducting risk corridors audits under
an overall issuer audit program.
Therefore, as described in the Collection
of Information section of this proposed
rule, we believe that the cost for issuers
that would result from this proposed
audit requirement is already accounted
for as part of the MLR audit process.
We also propose in § 153.540(c) to
extend our CMP authority under
sections 1321(a)(1) and (c)(2) of the
Affordable Care Act to all QHP issuers
that fail to provide timely, accurate, and
complete data necessary for risk
corridors calculations, or that otherwise
do not comply with the standards in
subpart F of 45 CFR part 153. We
propose to assess CMPs on QHP issuers
in State Exchanges in accordance with
the same enforcement and sanction
procedures that apply to QHP issuers on
an FFE under § 156.805.
As set forth in § 156.805(c), HHS will
impose a maximum penalty amount of
$100 per day on a QHP issuer for each
violation, for each individual adversely
affected by the non-compliance. As
noted in the preamble to § 153.540 in
this proposed rule, for violations of
subpart F where the number of
individuals adversely affected by the
non-compliance cannot be determined,
we propose giving HHS the authority to
estimate the number of individuals
likely to be adversely affected by the
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non-compliance. We note that CMPs
will be imposed only for serious issues
of non-compliance. We expect to
provide technical assistance to issuers,
as appropriate, to assist them in
maintaining compliance with the
applicable standards. We also plan to
coordinate with States and the MLR
program in our oversight and
enforcement activities to avoid
inappropriately duplicating
enforcement efforts. Consequently, we
anticipate that CMPs will be rare, and
that the impact of this proposed
requirement on QHP issuers will be
negligible.
Provisions Related to Cost Sharing
The Affordable Care Act provides for
the reduction or elimination of cost
sharing for certain eligible individuals
enrolled in QHPs offered through the
Exchanges. This assistance will help
many low- and moderate-income
individuals and families obtain health
insurance—for many people, cost
sharing is a barrier to obtaining needed
health care.38
To support the administration of the
cost-sharing reduction program, we set
forth in this proposed rule the
reductions in the maximum annual
limitation on cost sharing for silver plan
variations and a modified methodology
for calculating advance payments for
cost-sharing reductions. For benefit year
2015, we propose to require the same
reductions in the maximum annual
limitation on cost sharing as were
finalized for benefit year 2014. We note
that we are proposing certain
modifications to the methodology for
calculating advance payments for costsharing reductions, but we do not
believe these changes will result in a
significant economic impact. Therefore,
we do not believe the provisions related
to cost-sharing reductions in this
proposed rule will have an impact on
the program established by and
described in the 2014 Payment Notice.
We also proposed a methodology for
estimating average per capita premium,
and proposed the premium adjustment
percentage for the 2015 benefit year.
Section 156.130(e) provides that the
premium adjustment percentage is the
percentage (if any) by which the average
per capita premium for health insurance
coverage for the preceding calendar year
38 Brook, Robert H., John E. Ware, William H.
Rogers, Emmett B. Keeler, Allyson Ross Davies,
Cathy D. Sherbourne, George A. Goldberg, Kathleen
N. Lohr, Patricia Camp and Joseph P. Newhouse.
The Effect of Coinsurance on the Health of Adults:
Results from the RAND Health Insurance
Experiment. Santa Monica, CA: RAND Corporation,
1984. Available at: https://www.rand.org/pubs/
reports/R3055.
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exceeds such average per capita
premium for health insurance for 2013,
and that this percentage will be
published annually in the HHS notice of
benefit and payment parameters. The
annual premium adjustment percentage
that is issued sets the rate of increase for
four parameters detailed in the
Affordable Care Act: the annual
limitation on cost sharing (defined at
§ 156.130(a)), the annual limitation on
deductibles for plans in the small group
(defined at § 156.130(b)), and the section
4980H(a) and section 4980H(b)
assessable payment amounts (proposed
at 26 CFR 54.4980H in the ‘‘Shared
Responsibility for Employers Regarding
Health Coverage,’’ published in the
Federal Register January 2, 2013 (78 FR
218)). We believe that the proposed
premium adjustment percentage is well
within the parameters used in the
modeling of the Affordable Care Act,
and do not expect that these proposed
provisions will alter CBO’s May 2013
baseline estimates of the budget impact.
Annual Open Enrollment Period
We propose amendments to
§ 155.410(e) and (f) to amend the dates
for the annual open enrollment period
and related coverage effective dates.
These proposed amendments would
benefit issuers at no additional cost, as
Exchanges would delay their QHP
certification dates by at least one month,
giving issuers additional time. Because
open enrollment dates would be moved
forward, Exchanges would still have the
same amount of time for the QHP
certification process, and we do not
anticipate that this would come at an
additional cost to Exchanges.
Consumers would have the benefit of a
more beneficial open enrollment period,
without any additional demand placed
on them.
Calculation of Plan Actuarial Value
Issuers may incur minor
administrative costs associated with
altering cost-sharing parameters of their
plan designs to ensure compliance with
AV requirements when utilizing the AV
calculator from year-to-year. These
requirements are established in the EHB
Rule and are in accordance with the
proposed provisions in this proposed
rule. Since issuers have extensive
experience in offering products with
various levels of cost sharing and since
these modifications are expected to be
relatively minor for most issuers, HHS
expects that the process for computing
AV with the AV Calculator will not
demand many additional resources.
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User Fees
To support the operation of FFEs, we
require in § 156.50(c) that a
participating issuer offering a plan
through an FFE must remit a user fee to
HHS each month equal to the product
of the monthly user fee rate specified in
the annual HHS notice of benefit and
payment parameters for the applicable
benefit year and the monthly premium
charged by the issuer for each policy
under the plan where enrollment is
through an FFE. For the 2015 benefit
year, we propose a monthly user fee rate
equal to 3.5 percent of the monthly
premium. We do not have an aggregate
estimate of the collections from the user
fee at this time because we do not yet
have a count of the number of States in
which HHS will run an FFE or FF–
SHOP in 2015.
SHOP
The SHOPs facilitate the enrollment
of eligible employees of small
employers into small group health
insurance plans. A qualitative analysis
of the costs and benefits of establishing
a SHOP was included in the RIA
published in conjunction with the
Exchange Establishment Rule.39 This
RIA addresses the additional costs and
benefits of the proposed modifications
in this proposed rule to the SHOP
sections of the Exchange Establishment
Rule.
In this proposed rule, we propose
revising paragraph § 155.705(b)(1),
which lists the rules regarding eligibility
and enrollment to which the SHOPs
must adhere, to include mention of
additional provisions regarding
termination of coverage in SHOPs and
SHOP employer and employee
eligibility appeals that were finalized in
the first final Program Integrity Rule. We
propose that an employer in the FF–
SHOPs would have the option to offer
its employees either a single SADP or a
choice of all SADPs available in an FF–
SHOP for plan years beginning on or
after January 1, 2015. In
§ 155.705(b)(11)(ii)(D) we propose
prohibiting an employer in an FF–SHOP
from basing its contribution on
composite rates when employee choice
becomes available and the employer
elects to offer its employees all plans in
a metal tier selected by the employer.
We also propose amendments to
§ 155.705(b)(4) that would allow SHOPs
performing premium aggregation to
establish a standard method for
premium calculation, payment, and
collection. We propose that in the FF–
SHOPs, after premium aggregation
39 Available at: https://cciio.cms.gov/resources/
files/Files2/03162012/hie3r-ria-032012.pdf
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becomes available in plan years
beginning on or after January 1, 2015,
employers would be required to remit
premiums to the FF–SHOP in
accordance with a payment timeline
and process established by HHS through
guidance, and that premiums for
coverage of less than 1 month would be
prorated by multiplying the number of
days of coverage in the partial month by
the premium for 1 month divided by the
number of days in the month. In
developing the premium payment
timeline and process, HHS will consider
its interest in operating and
administering the FF–SHOPs efficiently,
as well as issuers’ interests in ensuring
timely payment of premiums, and
issuers’ and employers’ interests in
establishing a fair and workable
premium payment process. We believe
the proposed approach to prorating to
be the fairest for both consumers and
issuers because an enrollee will pay for
the portion of coverage provided for a
partial month.
We also propose amendments to
§ 155.705(b)(11) that would provide
additional flexibility to an employer’s
ability to define a percentage
contribution toward premiums under
the employer selected reference plan in
the FF–SHOPs. Although we proposed
and rejected a similar approach in the
2014 Payment Notice because we
concluded it was inconsistent with the
uniformity provisions established in
Internal Revenue Service Notice 2010–
82, which require employers to
contribute a uniform percentage to
employee premiums in order to claim a
small business tax credit, we believe
small employers are best able to
determine whether offering different
contribution levels would be in the best
interest of the business and its
employees. We believe that this
additional flexibility would bring the
FF–SHOPs more in line with current
small group market practices and
provide an additional incentive for
small employers to participate in the
FF–SHOPs. Additionally, we believe
that providing a mechanism that would
allow different contribution levels based
on full-time or non-full-time status may
encourage some employers to offer
coverage to non-full-time employees.
In § 155.715, we propose amendments
that would provide for SHOP eligibility
adjustment periods for both employers
and employees only when there is an
inconsistency between information
provided by an applicant and
information collected through optional
verification methods under
§ 155.715(c)(2) rather than when an
employer submits information on the
SHOP single employer application that
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is inconsistent with the eligibility
standards described in § 155.710 or
when the SHOP receives information on
the employee’s application that is
inconsistent with the information
provided by the employer, as current
paragraph § 155.715(d) provides. We
also propose to amend paragraph (c)(4)
to replace a reference to sections
1411(b)(2) and (c) of the Affordable Care
Act with a reference to Subpart D of 45
CFR part 155, and to add a reference to
eligibility verifications as well as to
eligibility determinations. The proposed
changes would prohibit a SHOP from
performing any individual market
Exchange eligibility determinations or
verifications as described in Subpart D,
which, for example, includes making
eligibility determinations for advance
payments of the premium tax credit and
cost sharing reductions in the
individual market Exchange.
In § 155.730 we propose to provide
that SHOPs are not permitted to collect
information from applicants, employers,
or employees in the SHOP if that
information is not necessary to
determine SHOP eligibility or effectuate
enrollment through a SHOP. Limiting
the information required of an applicant
helps to protect consumer privacy and
promote efficiency and streamlining of
the SHOP application process.
In § 155.220, we propose for plan
years beginning on or after January 1,
2015 to allow SHOPs, in States that
permit this activity under State law, to
permit enrollment in a SHOP QHP
through the Internet Web site of an
agent or broker under the standards set
forth in § 155.220(c)(3). Permitting an
employer to complete QHP selection
through the Internet Web site of an
agent or broker is an additional
potential enrollment channel that would
provide small employers with another
avenue to the SHOPs.
In § 156.285, we propose that when
premium aggregation becomes available
in FF–SHOPs for plan years beginning
on or after January 1, 2015, if an issuer
does not receive an enrollment
cancellation transaction from the FF–
SHOP, it should effectuate coverage
even if the issuer would not receive an
employer’s initial premium payment
from the FF–SHOP prior to the coverage
effective date. We also propose that a
qualified employer in the SHOP that
becomes a large employer would
continue to be rated as a small employer
and propose to prohibit issuers from
composite billing in the FF–SHOPs
when employee choice becomes
available and an employer selects a
level of coverage and not a single plan.
We do not expect the proposed
policies related to the SHOP to create
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any new significant costs for small
businesses, employees, or the FF–
SHOPs.
Patient Safety
The proposed patient safety
requirements would be implemented in
phases, to ensure that QHP issuers
contract with hospitals that meet
adequate safety and quality standards in
their networks. The proposed rule
would require QHP issuers to collect
and maintain CCNs for each of its
contracted hospitals that are certified for
more than 50 beds. It also would require
that this documentation, if requested by
the Exchange, be submitted in a form
and manner specified by the Exchange.
QHP issuers would already have
established procedures and
relationships to contract with hospitals
including obtaining hospital
identification information. Therefore,
HHS believes that there would not be a
significant additional cost for a QHP
issuer to collect and maintain CCNs.
QHP issuers would incur costs to
submit this information, if requested, to
the Exchange. We discuss the burden
associated with submitting this
information in the Collection of
Information section of this proposed
rule.
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D. Regulatory Alternatives Considered
We considered a number of
alternatives to our proposed approach to
program integrity for the premium
stabilization programs. For example,
although we finalized in previous
rulemaking our framework for the risk
adjustment data validation program to
be used when we operate risk
adjustment on behalf of a State, the
preamble to this proposed rule
discusses and seeks comment on a
number of alternative approaches to the
detailed methodology proposed here.
For example, we have suggested a
number of options for confidence
intervals and whether to use tests of
statistical significance in determining
plan average risk score adjustments. We
have also suggested an expedited
second validation audit approach to
permit more time for inter-auditor
discussions and appeals. We have
suggested a number of ways to calculate
a default risk adjustment charge for an
issuer that fails to provide initial
validation audits.
In the preamble discussion of our
proposed modifications to the risk
adjustment methodology, we considered
not providing for an induced demand
adjustment for Medicaid expansion plan
variations, but we believe that not doing
so would underestimate the risk in
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those plans, potentially leading to
higher premiums in those plans.
In § 153.270, we propose that HHS
may audit State-operated reinsurance
programs to ensure appropriate use of
Federal funds. We also considered not
proposing that HHS have such
authority. However, we believe that
because HHS will collect reinsurance
contributions and because a State’s
issuers’ reinsurance requests affect the
availability of reinsurance funds for
issuers in other States, we think it is
critical for HHS to have the authority to
perform these audits, so that issuers and
States are confident that they will
receive the correct allocation of the
reinsurance payments. We also
considered proposing that HHS have the
authority to audit a State-operated risk
adjustment program. However, we
decided not to do so because those
programs do not take in Federal funds
and those programs have little impact
on the health insurance markets in other
States.
We considered not proposing that
HHS have the authority to assess CMPs
on QHP issuers for non-compliance
with the risk corridors standards. This
would reduce the burden on QHP
issuers on State Exchanges and would
have reduced Federal oversight costs.
However, we determined that similar
standards and oversight were
appropriate for all issuers of QHPs,
regardless of whether the QHPs were
offered through FFEs or State
Exchanges, in order to ensure
compliance with the risk corridors
program and the proper use of Federal
funds.
In the preamble discussion of the
2015 reinsurance payment parameters,
we also considered, when setting forth
the proposed 2015 reinsurance payment
parameters, a set of uniform reinsurance
payment parameters that would have
substantially raised the attachment
point or lowered the reinsurance cap,
but believe those uniform reinsurance
payment parameters would have raised
the complexity of estimating the effects
of reinsurance for issuers.
As detailed in the preamble
discussion regarding our proposed
approach to estimating cost-sharing
reduction amounts in connection with
reinsurance calculations, we considered
a number of alternative approaches to
this estimation. Finally, we considered
a number of different approaches to the
discrepancy and administrative appeals
process proposed in § 153.710 and
§ 156.1220. Some of these approaches
would have provided for lengthier and
more formal administrative appeals
processes, including for advance
payments of the premium tax credit,
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advance payment for cost-sharing
reductions, and FFE user fees in 2014.
We did not adopt that approach for
these 2014 programs, and instead rely
on operational discrepancy reports and
one-level of administrative appeals—a
request for reconsideration, because we
believe that this approach will be
simpler and less expensive, and will
permit operations specialists, issuers
and HHS to resolve most problems more
quickly. We considered relying solely
on a simpler operational discrepancy
report process for the premium
stabilization programs and cost-sharing
reductions reconciliation in 2015—but
decided that due to the complexity of
the calculations involved in these
programs and the potential magnitude
of the payment flows, issuers would
prefer that these calculations be subject
to more formal administrative processes.
Multiple alternatives were considered
to the proposed SHOP approaches and
are discussed in detail above.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) requires
agencies to prepare an initial regulatory
flexibility analysis to describe the
impact of the proposed rule on small
entities, unless the head of the agency
can certify that the rule will not have a
significant economic impact on a
substantial number of small entities.
The RFA generally defines a ‘‘small
entity’’ as (1) A proprietary firm meeting
the size standards of the Small Business
Administration (SBA), (2) a not-forprofit organization that is not dominant
in its field, or (3) a small government
jurisdiction with a population of less
than 50,000. States and individuals are
not included in the definition of ‘‘small
entity.’’ HHS uses a change in revenues
of more than 3 to 5 percent as its
measure of significant economic impact
on a substantial number of small
entities.
In this proposed rule, we propose
provisions for the risk adjustment,
reinsurance, and risk corridors
programs, which are intended to
stabilize premiums as insurance market
reforms are implemented and Exchanges
facilitate increased enrollment. Because
we believe that insurance firms offering
comprehensive health insurance
policies generally exceed the size
thresholds for ‘‘small entities’’
established by the SBA, we do not
believe that an initial regulatory
flexibility analysis is required for such
firms.
For purposes of the RFA, we expect
the following types of entities to be
affected by this proposed rule:
• Health insurance issuers.
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• Group health plans.
• Reinsurance entities.
We believe that health insurance
issuers and group health plans would be
classified under the North American
Industry Classification System (NAICS)
code 524114 (Direct Health and Medical
Insurance Carriers). According to SBA
size standards, entities with average
annual receipts of $35.5 million or less
would be considered small entities for
these NAICS codes. Issuers could
possibly be classified in 621491 (HMO
Medical Centers) and, if this is the case,
the SBA size standard would be $30
million or less.
In this proposed rule, we proposed
requirements on employers that choose
to participate in a SHOP Exchange. The
SHOPs are limited by statute to
employers with at least one but not
more than 100 employees. For this
reason, we expect that many employers
who would be affected by the proposals
would meet the SBA standard for small
entities. We do not believe that the
proposals impose requirements on
employers offering health insurance
through the SHOP that are more
restrictive than the current requirements
on small employers offering employer
sponsored insurance. Additionally, as
discussed in the RIA, we believe the
proposed policy will provide greater
choice for both employees and
employers. We believe the processes
that we have established constitute the
minimum amount of requirements
necessary to implement the SHOP
program and accomplish our policy
goals, and that no appropriate regulatory
alternatives could be developed to
further lessen the compliance burden.
We believe that a substantial number
of sponsors of self-insured group health
plans could qualify as ‘‘small entities.’’
This proposed rule provides HHS with
the authority to audit these entities.
However, we do not believe that the
burden of these audits is likely to reflect
more than 3 to 5 percent of such an
entity’s revenues.
F. Unfunded Mandates
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated
costs and benefits and take certain other
actions before issuing a proposed rule
that includes any Federal mandate that
may result in expenditures in any 1 year
by a State, local, or Tribal governments,
in the aggregate, or by the private sector,
of $100 million in 1995 dollars, updated
annually for inflation. In 2013, that
threshold is approximately $141
million. Although we have not been
able to quantify the user fees that will
be associated with this proposed rule,
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the combined administrative cost and
user fee impact on State, local, or Tribal
governments and the private sector may
be above the threshold. Earlier portions
of this RIA constitute our UMRA
analysis.
G. Federalism
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule that imposes substantial
direct costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
Because States have flexibility in
designing their Exchange and Exchangerelated programs, State decisions will
ultimately influence both administrative
expenses and overall premiums. States
are not required to establish an
Exchange or risk adjustment or
reinsurance program. For States electing
to operate an Exchange, risk adjustment
or reinsurance program, much of the
initial cost of creating these programs
will be funded by Exchange Planning
and Establishment Grants. After
establishment, Exchanges will be
financially self-sustaining, with revenue
sources at the discretion of the State.
Current State Exchanges charge user
fees to issuers.
In HHS’s view, while this proposed
rule did not impose substantial direct
requirement costs on State and local
governments, this regulation has
Federalism implications due to direct
effects on the distribution of power and
responsibilities among the State and
Federal governments relating to
determining standards relating to health
insurance that is offered in the
individual and small group markets.
Each State electing to establish an
Exchange must adopt the Federal
standards contained in the Affordable
Care Act and in this proposed rule, or
have in effect a State law or regulation
that implements these Federal
standards. However, HHS anticipates
that the Federalism implications (if any)
are substantially mitigated because
under the statute, States have choices
regarding the structure and governance
of their Exchanges and risk adjustment
and reinsurance programs. Additionally,
the Affordable Care Act does not require
States to establish these programs; if a
State elects not to establish any of these
programs or is not approved to do so,
HHS must establish and operate the
programs in that State.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have Federalism implications or limit
the policy making discretion of the
States, HHS has engaged in efforts to
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consult with and work cooperatively
with affected States, including
participating in conference calls with
and attending conferences of the
National Association of Insurance
Commissioners, and consulting with
State insurance officials on an
individual basis.
Throughout the process of developing
this proposed rule, HHS has attempted
to balance the States’ interests in
regulating health insurance issuers, and
Congress’ intent to provide access to
Affordable Insurance Exchanges for
consumers in every State. By doing so,
it is HHS’s view that we have complied
with the requirements of Executive
Order 13132.
H. Congressional Review Act
This proposed rule is subject to the
Congressional Review Act provisions of
the Small Business Regulatory
Enforcement Fairness Act of 1996 (5
U.S.C. 801 et seq.), which specifies that
before a rule can take effect, the Federal
agency promulgating the rule shall
submit to each House of the Congress
and to the Comptroller General a report
containing a copy of the rule along with
other specified information, and has
been transmitted to Congress and the
Comptroller General for review.
List of Subjects
45 CFR Part 144
Health care, Health insurance,
Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance,
Reporting and recordkeeping
requirements, and State regulation of
health insurance.
45 CFR Part 153
Administrative practice and
procedure, Adverse selection, Health
care, Health insurance, Health records,
Organization and functions
(Government agencies), Premium
stabilization, Reporting and
recordkeeping requirements,
Reinsurance, Risk adjustment, Risk
corridors, Risk mitigation, State and
local governments.
45 CFR Part 155
Administrative practice and
procedure, Health care access, Health
insurance, Reporting and recordkeeping
requirements, State and local
governments, Cost-sharing reductions,
Advance payments of premium tax
credit, Administration and calculation
of advance payments of the premium
tax credit, Plan variations, Actuarial
value.
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45 CFR Part 156
Administrative appeals,
Administrative practice and procedure,
Administration and calculation of
advance payments of premium tax
credit, Advertising, Advisory
Committees, Brokers, Conflict of
interest, Consumer protection, Costsharing reductions, Grant programshealth, Grants administration, Health
care, Health insurance, Health
maintenance organization (HMO),
Health records, Hospitals, American
Indian/Alaska Natives, Individuals with
disabilities, Loan programs-health,
Organization and functions
(Government agencies), Medicaid,
Payment and collections reports, Public
assistance programs, Reporting and
recordkeeping requirements, State and
local governments, Sunshine Act,
Technical assistance, Women, and
Youth.
For the reasons set forth in the
preamble, the Department of Health and
Human Services proposes to amend 45
CFR parts 147, 153, 155, and 156, and
proposes to further amend 45 CFR parts
144, 153, and 156, as amended October
30, 2013, at 78 FR 65091, effective
December 30, 2013, as set forth below:
PART 144—REQUIREMENTS
RELATING TO HEALTH INSURANCE
COVERAGE
1. The authority citation for part 144
continues to read as follows:
■
Authority: Secs. 2701 through 2763, 2791,
and 2792 of the Public Health Service Act 42
U.S.C. 300gg through 300gg–63, 300gg–91,
and 300gg–92.
2. Section 144.103 is amended by
revising the first sentence in paragraph
(1) of the definition of ‘‘Policy year’’ to
read as follows:
■
§ 144.103
Definitions.
*
*
*
*
Policy year * * *
(1) A grandfathered health plan
offered in the individual health
insurance market and student health
insurance coverage, the 12-month
period that is designated as the policy
year in the policy documents of the
individual health insurance coverage.
* * *
*
*
*
*
*
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*
Fair health insurance premiums.
*
*
*
*
*
(c) * * *
(3) Application to small group market.
In the case of the small group market,
the total premium charged to the group
is determined by summing the
premiums of covered participants and
beneficiaries in accordance with
paragraph (c)(1) or (2) of this section, as
applicable. Nothing in this section
precludes a State from requiring issuers
to offer, or an issuer from voluntarily
offering, to a group premiums that are
based on average enrollee premium
amounts, provided that the total group
premium is the same total amount
derived in accordance with paragraph
(c)(1) or (2) of this section, as applicable.
In such case, effective for plan years
beginning on or after January 1, 2015, an
issuer must ensure that average enrollee
premium amounts calculated based on
applicable employee enrollment at the
beginning of the plan year do not vary
for any participant or beneficiary during
the plan year.
*
*
*
*
*
■ 5. Section 147.145 is amended by
revising paragraph (b)(1)(ii) to read as
follows:
§ 147.145 Student health insurance
coverage.
*
*
*
*
*
(b) * * *
(1) * * *
(ii) For purposes of section 2702 of
the Public Health Service Act, a health
insurance issuer that offers student
health insurance coverage is not
required to accept individuals who are
not students or dependents of students
in such coverage, and, notwithstanding
the requirements of § 147.104(b), is not
required to establish open enrollment
periods or coverage effective dates that
are based on a calendar policy year or
to offer policies on a calendar year basis.
*
*
*
*
*
6. The authority citation for part 153
continues to read as follows:
Authority: Secs. 1311, 1321, 1341–1343,
Pub. L. 111–148, 24 Stat. 119.
3. The authority citation for part 147
continues to read as follows:
7. Section 153.20 is amended by
revising the definition of ‘‘contributing
entity’’ and adding a definition of
■
Authority: Secs. 2701 through 2763, 2791,
and 2792 of the Public Health Service Act (42
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§ 147.102
■
■
21:29 Nov 29, 2013
4. Section 147.102 is amended by
revising paragraph (c)(3) to read as
follows:
■
PART 153—STANDARDS RELATED TO
REINSURANCE, RISK CORRIDORS,
AND RISK ADJUSTMENT UNDER THE
AFFORDABLE CARE ACT
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP AND INDIVIDUAL HEALTH
INSURANCE MARKETS
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U.S.C. 300gg through 300gg–63, 300gg–91,
and 300gg–92), as amended.
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‘‘major medical coverage’’ to read as
follows:
§ 153.20
Definitions.
*
*
*
*
*
Contributing entity means—
(1) A health insurance issuer; or
(2) For the 2014 benefit year, a selfinsured group health plan (including a
group health plan that is partially selfinsured and partially insured, where the
health insurance coverage does not
constitute major medical coverage),
whether or not it uses a third party
administrator; and for the 2015 and
2016 benefit years, a self-insured group
health plan (including a group health
plan that is partially self-insured and
partially insured, where the health
insurance coverage does not constitute
major medical coverage) that uses a
third party administrator in connection
with claims processing or adjudication
(including the management of appeals)
or plan enrollment. A self-insured group
health plan that is a contributing entity
is responsible for the reinsurance
contributions, although it may elect to
use a third party administrator or
administrative services-only contractor
for transfer of the reinsurance
contributions.
*
*
*
*
*
Major medical coverage means, for
purposes only of the requirements
related to reinsurance contributions
under section 1341 of the Affordable
Care Act, health coverage for a broad
range of services and treatments
provided in various settings that
provides minimum value in accordance
with § 156.145 of this subchapter.
*
*
*
*
*
■ 8. Section 153.230 is amended by
revising paragraph (d) to read as
follows:
§ 153.230 Calculation of reinsurance
payments made under the national
contribution rate.
*
*
*
*
*
(d) Uniform adjustment to national
reinsurance payments. If HHS
determines that all reinsurance
payments requested under the national
payment parameters from all
reinsurance-eligible plans in all States
for a benefit year will not be equal to the
amount of all reinsurance contributions
collected for reinsurance payments
under the national contribution rate in
all States for an applicable benefit year,
HHS will determine a uniform pro rata
adjustment to be applied to all such
requests for reinsurance payments for
all States. Each applicable reinsurance
entity, or HHS on behalf of a State, must
reduce or increase the reinsurance
payment amounts for the applicable
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benefit year by any adjustment required
under this paragraph (d).
■ 9. Section 153.235 is amended by
removing and reserving paragraph (b).
§ 153.235 Allocation and distribution of
reinsurance contributions.
*
*
*
*
*
(b) [Reserved]
■ 10. Section 153.270 is added to
subpart C to read as follows:
§ 153.405 Calculation of reinsurance
contributions.
§ 153.270 HHS audits of State-operated
reinsurance programs.
(a) Audits. HHS or its designee may
conduct a financial and programmatic
audit of a State-operated reinsurance
program to assess compliance with the
requirements of this subpart or subpart
B of this part. A State that establishes a
reinsurance program must ensure that
its applicable reinsurance entity and
any relevant contractors, subcontractors,
or agents cooperate with any audit
under this section.
(b) Action on audit findings. If an
audit results in a finding of material
weakness or significant deficiency with
respect to compliance with any
requirement of this subpart or subpart B,
the State must ensure that the
applicable reinsurance entity:
(1) Within 60 calendar days of the
issuance of the final audit report,
provides a written corrective action plan
to HHS for approval;
(2) Implements that plan; and
(3) Provides to HHS written
documentation of the corrective actions
once taken.
■ 11. Section 153.400 is amended by
revising paragraph (a)(1) introductory
text and adding paragraphs (a)(1)(v) and
(vi) to read as follows:
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§ 153.400
Reinsurance contribution funds.
(a) * * *
(1) In general, reinsurance
contributions are required for major
medical coverage that is considered to
be part of a commercial book of
business, but are not required to be paid
more than once with respect to the same
covered life. In order to effectuate that
principle, a contributing entity must
make reinsurance contributions for lives
covered by its self-insured group health
plans and health insurance coverage
except to the extent that:
*
*
*
*
*
(v) Such plan or coverage applies to
individuals with primary residence in a
territory that does not operate a
reinsurance program.
(vi) In the case of employer-provided
group health coverage:
(A) Such coverage applies to
individuals with individual market
health insurance coverage for which
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reinsurance contributions are required;
or
(B) Such coverage is supplemental or
secondary to group health coverage for
which reinsurance contributions must
be made for the same covered lives.
*
*
*
*
*
■ 12. Section 153.405 is amended by
revising paragraphs (c) and (e)(3) and
adding paragraph (i) to read as follows:
*
*
*
*
*
(c) Notification and payment. (1)
Following submission of the annual
enrollment count described in
paragraph (b) of this section, HHS will
notify the contributing entity of the
reinsurance contribution amount
allocated to reinsurance payments and
administrative expenses to be paid for
the applicable benefit year.
(2) In the fourth quarter of the
calendar year following the applicable
benefit year, HHS will notify the
contributing entity of the portion of the
reinsurance contribution amount
allocated for payments to the U.S.
Treasury for the applicable benefit year.
(3) A contributing entity must remit
reinsurance contributions to HHS
within 30 days after the date of a
notification.
*
*
*
*
*
(e) * * *
(3) Using the number of lives covered
for the most current plan year calculated
based upon the ‘‘Annual Return/Report
of Employee Benefit Plan’’ filed with the
Department of Labor (Form 5500) for the
last applicable time period. For
purposes of this paragraph (e)(3), the
number of lives covered for the plan
year for a plan offering only self-only
coverage equals the sum of the total
participants covered at the beginning
and end of the plan year, as reported on
the Form 5500, divided by 2, and the
number of lives covered for the plan
year for a plan offering self-only
coverage and coverage other than selfonly coverage equals the sum of the
total participants covered at the
beginning and the end of the plan year,
as reported on the Form 5500.
*
*
*
*
*
(i) Audits. HHS or its designee may
audit a contributing entity to assess its
compliance with the requirements of
this subpart.
■ 13. Section 153.410 is amended by
adding paragraph (d) to read as follows:
§ 153.410 Requests for reinsurance
payment.
*
*
*
*
*
(d) Audits. HHS or its designee may
audit an issuer of a reinsurance-eligible
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plan to assess its compliance with the
requirements of this subpart and subpart
H. The issuer must ensure that its
relevant contractors, subcontractors, or
agents cooperate with any audit under
this section. If an audit results in a
finding of material weakness or
significant deficiency with respect to
compliance with any requirement of
this subpart or subpart H, the issuer
must complete all of the following:
(1) Within 30 calendar days of the
issuance of the final audit report,
provide a written corrective action plan
to HHS for approval.
(2) Implement that plan.
(3) Provide to HHS written
documentation of the corrective actions
once taken.
■ 14. Section 153.510 is amended by
adding paragraph (f) to read as follows:
§ 153.510 Risk corridors establishment
and payment methodology.
*
*
*
*
*
(f) Eligibility under health insurance
market rules. The provisions of this
subpart apply only for plans offered by
a QHP issuer in the SHOP or the
individual or small group market, as
determined according to the employee
counting method applicable under State
law, that are subject to the following
provisions: §§ 147.102, 147.104,
147.106, 147.150, 156.80, and subpart B
of part 156 of this subchapter.
■ 15. Section 153.540 is added to
subpart F to read as follows:
§ 153.540 Compliance with risk corridors
standards.
(a) Audits. HHS or its designee may
audit a QHP issuer to assess its
compliance with the requirements of
this subpart. HHS will conduct an audit
in accordance with the procedures set
forth in § 158.402(a) through (e) of this
subchapter.
(b) Enforcement actions. If an issuer of
a QHP on a State-based Exchange fails
to comply with the requirements of this
subpart, HHS may impose civil money
penalties in accordance with the
procedures set forth in § 156.805 of this
subchapter.
■ 16. Section 153.620 is amended by
adding paragraph (c) to read as follows:
§ 153.620 Compliance with risk adjustment
standards.
*
*
*
*
*
(c) Audits. HHS or its designee may
audit an issuer of a risk adjustment
covered plan to assess its compliance
with the requirements of this subpart
and subpart H of this part. The issuer
must ensure that its relevant
contractors, subcontractors, or agents
cooperate with any audit under this
section. If an audit results in a finding
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of material weakness or significant
deficiency with respect to compliance
with any requirement of this subpart or
subpart H of this part, the issuer must
complete all of the following:
(1) Within 30 calendar days of the
issuance of the final audit report,
provide a written corrective action plan
to HHS for approval.
(2) Implement that plan.
(3) Provide to HHS written
documentation of the corrective actions
once taken.
■ 17. Section 153.630 is amended by
revising paragraph (b)(1) and adding
paragraphs (b)(5) through (10) to read as
follows:
§ 153.630 Data validation requirements
when HHS operates risk adjustment.
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*
*
*
*
(b) * * *
(1) An issuer of a risk adjustment
covered plan must engage one or more
independent auditors to perform an
initial validation audit of a sample of its
risk adjustment data selected by HHS.
The issuer must provide HHS with the
identity of the initial validation auditor,
and must attest to the absence of
conflicts of interest between the initial
validation auditor (or the members of its
audit team, owners, directors, officers,
or employees) and the issuer (or its
owners, directors, officers, or
employees), in a timeframe and manner
to be specified by HHS.
*
*
*
*
*
(5) An initial validation audit must be
conducted by medical coders certified
as such and in good standing by a
nationally recognized accrediting
agency.
(6) An issuer must provide the initial
validation auditor and the second
validator auditor with all relevant
source enrollment documentation, all
claims and encounter data, and medical
record documentation from providers of
services to each enrollee in the
applicable sample without unreasonable
delay and in a manner that reasonably
assures confidentiality and security in
transmission.
(7) The risk score of each enrollee in
the sample must be validated by—
(i) Validating the enrollee’s
enrollment data and demographic data
through review of source enrollment
documentation;
(ii) Validating enrollee health status
through review of all relevant medical
record documentation. Medical record
documentation must originate from the
provider of the services and align with
dates of service for the medical
diagnoses, and reflect permitted
providers and services. For purposes of
this section, ‘‘medical record
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documentation’’ means clinical
documentation of hospital inpatient or
outpatient treatment or professional
medical treatment from which enrollee
health status is documented and related
to accepted risk adjustment services that
occurred during a specified period of
time. Medical record documentation
must be generated under a face-to-face
or telehealth visit documented and
authenticated by a permitted provider of
services;
(iii) Validating medical records
according to industry standards for
coding and reporting; and
(iv) Having a senior reviewer confirm
any enrollee risk adjustment error
discovered during the initial validation
audit. For purposes of this section, a
‘‘senior reviewer’’ is a reviewer certified
as a medical coder by a nationally
recognized accrediting agency who
possesses at least 5 years of experience
in medical coding.
(8) The initial validation auditor must
measure and report to the issuer and
HHS, in a manner and timeframe
specified by HHS, its inter-rater
reliability rates among its reviewers.
The initial validation auditor must
achieve a consistency measure of at
least 95 percent for demographic,
enrollment, and health status review
outcomes.
(9) Enforcement actions: If an issuer of
a risk adjustment covered plan fails to
engage an initial validation auditor or to
submit the results of an initial
validation audit to HHS, HHS may
impose civil money penalties in
accordance with the procedures set
forth in § 156.805 of this subchapter.
(10) Default data validation charge: If
an issuer of a risk adjustment covered
plan fails to engage an initial validation
auditor or to submit the results of an
initial validation audit to HHS, HHS
will impose a default risk adjustment
charge.
*
*
*
*
*
■ 18. Section 153.710 is amended by
adding paragraphs (d), (e), (f), and (g) to
read as follows:
§ 153.710
Data requirements.
*
*
*
*
*
(d) Interim dedicated distributed data
environment reports. Within 30
calendar days of the date of an interim
dedicated distributed data environment
report from HHS, the issuer must, in a
format specified by HHS, either:
(1) Confirm to HHS that the
information in the interim report
accurately reflects the data to which the
issuer has provided access to HHS
through its dedicated distributed data
environment in accordance with
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§ 153.700(a) for the timeframe specified
in the report; or
(2) Describe to HHS any discrepancy
it identifies in the interim dedicated
distributed data environment report.
(e) Final dedicated distributed data
environment report. Within 15 calendar
days of the date of the final dedicated
distributed data environment report
from HHS, the issuer must, in a format
specified by HHS, either:
(1) Confirm to HHS that the
information in the final report
accurately reflects the data to which the
issuer has provided access to HHS
through its dedicated distributed data
environment in accordance with
§ 153.700(a) for the benefit year
specified in the report; or
(2) Describe to HHS any discrepancy
it identifies in the final dedicated
distributed data environment report.
(f) Unresolved discrepancies. If a
discrepancy first identified in an
interim or final dedicated distributed
data environment report in accordance
with paragraphs (d)(2) or (e)(2) of this
section remains unresolved after the
issuance of the notification of risk
adjustment payments and charges or
reinsurance payments under
§ 153.310(e) or § 153.240(b)(1)(ii),
respectively, an issuer of a risk
adjustment covered plan or reinsuranceeligible plan may make a request for
reconsideration regarding such
discrepancy under the process set forth
in § 156.1220(a).
(g) Risk corridors and medical loss
ratio reporting. (1) Notwithstanding any
discrepancy report made under
paragraph (d)(2) or (e)(2) of this section,
or any request for reconsideration under
§ 156.1220(a) with respect to any risk
adjustment payment or charge,
including an assessment of risk
adjustment user fees; reinsurance
payment; cost-sharing reconciliation
payment or charge; or risk corridors
payment or charge, unless the dispute
has been resolved, an issuer must
report, for purposes of the risk corridors
and medical loss ratio programs:
(i) The risk adjustment payment to be
made or charge assessed, including an
assessment of risk adjustment user fees,
by HHS in the notification provided
under § 153.310(e);
(ii) The reinsurance payment to be
made by HHS in the notification
provided under § 153.240(b)(1)(ii);
(iii) A cost-sharing reduction amount
equal to the amount of the advance
payments of cost-sharing reductions
paid to the issuer by HHS for the benefit
year; and
(iv) For medical loss ratio report only,
the risk corridors payment to be made
or charge assessed by HHS as reflected
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in the notification provided under
§ 153.510(d).
(2) An issuer must report any
adjustment made following any
discrepancy report made under
paragraph (d)(2) or (e)(2) of this section,
or any request for reconsideration under
§ 156.1220(a) with respect to any risk
adjustment payment or charge,
including an assessment of risk
adjustment user fees; reinsurance
payment; cost-sharing reconciliation
payment or charge; or risk corridors
payment or charge; or following any
audit, where such adjustment has not be
accounted for in a prior risk corridors or
medical loss ratio report, in the next
following risk corridors or medical loss
ratio report.
PART 155—EXCHANGE
ESTABLISHMENT STANDARDS AND
OTHER RELATED STANDARDS
UNDER THE AFFORDABLE CARE ACT
19. Authority citation for part 155 is
revised to read as follows:
■
Authority: Title I of the Affordable Care
Act, sections 1301, 1302, 1303, 1304, 1311,
1312, 1313, 1321, 1322, 1331, 1332, 1334,
1402, 1411, 1412, 1413, Pub. L. 111–148, 124
Stat. 119 (42 U.S.C. 18021–18024, 18031–
18033, 18041–18042, 18051, 18054, 18071,
and 18081–18083).
20. Section 155.106 is amended by
revising paragraph (a)(2) to read as
follows:
■
§ 155.106 Election to operate an Exchange
after 2014.
(a) * * *
(2) Have in effect an approved, or
conditionally approved, Exchange
Blueprint and operational readiness
assessment at least 6.5 months prior to
the Exchange’s first effective date of
coverage; and
*
*
*
*
*
■ 21. Section 155.220 is amended by
adding paragraph (i) as follows:
§ 155.220 Ability of States to permit agents
and brokers to assist qualified individuals,
qualified employers, or qualified employees
enrolling in QHPs.
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(i) For plan years beginning on or after
January 1, 2015, in States that permit
this activity under state law, a SHOP
may permit agents and brokers to use an
Internet Web site to assist qualified
employers and facilitate enrollment of
qualified employees in a QHP through
the Exchange, under paragraph (c)(3) of
this section.
■ 22. Section 155.260 is amended by
revising paragraphs (a)(1), (a)(2) and (b)
to read as follows:
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§ 155.260 Privacy and security of
personally identifiable information.
(a) * * *
(1) Where the Exchange creates or
collects personally identifiable
information for the purposes of
determining eligibility for enrollment in
a qualified health plan; determining
eligibility for other insurance
affordability programs, as defined in
§ 155.20; or determining eligibility for
exemptions from the individual
responsibility provisions in section
5000A of the Code, the Exchange may
only use or disclose such personally
identifiable information to the extent
such information is necessary:
(i) For the Exchange to carry out the
functions described in § 155.200;
(ii) For the Exchange to carry out
other functions not described in
paragraph (a)(1)(i) of this section, which
the Secretary determines to be in
compliance with section 1411(g)(2)(A)
of the Affordable Care Act and for
which an individual provides consent
for his or her information to be used or
disclosed; or
(iii) For the Exchange to carry out
other functions not described in
paragraphs (a)(1)(i) and (ii) of this
section, for which an individual
provides consent for his or her
information to be used or disclosed, and
which the Secretary determines are in
compliance with section 1411(g)(2)(A)
of the Affordable Care Act under the
following substantive and procedural
requirements:
(A) Substantive requirements. The
Secretary may approve other uses and
disclosures of personally identifiable
information created or collected as
described in paragraph (a)(1) of this
section that are not described in
paragraphs (a)(1)(i) or (a)(1)(ii) of this
section, provided that HHS determines
that the information will be used only
for the purposes of and to the extent
necessary in ensuring the efficient
operation of the Exchange consistent
with section 1411(g)(2)(A) of the
Affordable Care Act, and that the uses
and disclosures are also permissible
under relevant law and policy.
(B) Procedural requirements for
approval of a use or disclosure of
personally identifiable information. To
seek approval for a use or disclosure of
personally identifiable information
created or collected as described in
paragraph (a)(1) of this section that is
not described in paragraphs (a)(1)(i) or
(a)(1)(ii), the Exchange must submit the
following information to HHS:
(1) Identity of the Exchange and
appropriate contact persons;
(2) Detailed description of the
proposed use or disclosure, which must
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72387
include, but not necessarily be limited
to, a listing or description of the specific
information to be used or disclosed and
an identification of the persons or
entities that may access or receive the
information;
(3) Description of how the use or
disclosure will ensure the efficient
operation of the Exchange consistent
with section 1411(g)(2)(A) of the
Affordable Care Act; and
(4) Description of how the
information to be used or disclosed will
be protected in compliance with privacy
and security standards that meet the
requirements of this section or other
relevant law, as applicable.
(2) The Exchange may not create,
collect, use, or disclose personally
identifiable information unless the
creation, collection, use, or disclosure is
consistent with this section.
*
*
*
*
*
(b) Application to non-Exchange
entities. (1) Non-Exchange entities. A
non-Exchange entity is any individual
or entity that:
(i) Gains access to personally
identifiable information submitted to an
Exchange; or
(ii) Collects, uses, or discloses
personally identifiable information
gathered directly from applicants,
qualified individuals, or enrollees while
that individual or entity is performing
functions agreed to with the Exchange.
(2) Prior to any person or entity
becoming a non-Exchange entity,
Exchanges must execute with the person
or entity a contract or agreement that
includes:
(i) A description of the functions to be
performed by the non-Exchange entity;
(ii) A provision(s) binding the nonExchange entity to comply with the
privacy and security standards and
obligations adopted in accordance with
paragraph (b)(3) of this section, and
specifically listing or incorporating
those privacy and security standards
and obligations;
(iii) A provision requiring the nonExchange entity to monitor, periodically
assess, and update its security controls
and related system risks to ensure the
continued effectiveness of those
controls in accordance with paragraph
(a)(5) of this section;
(iv) A provision requiring the nonExchange entity to inform the Exchange
of any change in its administrative,
technical, or operational environments
defined as material within the contract;
and
(v) A provision that requires the nonExchange entity to bind any
downstream entities to the same privacy
and security standards and obligations
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to which the non-Exchange entity has
agreed in its contract or agreement with
the Exchange.
(3) When collection, use or disclosure
is not otherwise required by law, the
privacy and security standards to which
an Exchange binds non-Exchange
entities must:
(i) Be consistent with the principles
and requirements listed in paragraphs
(a)(1) through (a)(6) of this section,
including being at least as protective as
the standards the Exchange has
established and implemented for itself
in compliance with paragraph (a)(3) of
this section;
(ii) Comply with the requirements of
paragraphs (c), (d), (f) and (g) of this
section; and
(iii) Take into specific consideration:
(A) The environment in which the
non-Exchange entity is operating;
(B) Whether the standards are relevant
and applicable to the non-Exchange
entity’s duties and activities in
connection with the Exchange; and
(C) Any existing legal requirements to
which the non-Exchange entity is bound
in relation to its administrative,
technical, and operational controls and
practices, including but not limited to,
its existing data handling and
information technology processes and
protocols.
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■ 23. Section 155.410 is amended by
revising paragraphs (e) and (f) to read as
follows:
§ 155.410 Initial and annual open
enrollment periods.
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(e) Annual open enrollment period.
For benefit years beginning—
(1) On January 1, 2015, the annual
open enrollment period begins
November 15 of 2014, and extends
through January 15 of 2015.
(2) On or after January 1, 2016, the
annual open enrollment period begins
October 15 of the preceding calendar
year, and extends through December 7
of the preceding calendar year.
(f) Effective date for coverage after the
annual open enrollment period. For the
benefit years beginning—
(1) On January 1, 2015, the Exchange
must ensure coverage is effective—
(i) January 1, 2015, for plan selections
received by the Exchange on or before
December 15, 2014.
(ii) February 1, 2015, for plan
selections received by the Exchange
from December 16, 2015 through
January 15, 2015.
(2) On or after January 1, 2016, the
Exchange must ensure coverage is
effective as of the first day of the
following benefit year for a qualified
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individual who has made a QHP
selection during the annual open
enrollment period.
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■ 24. Section 155.705 is amended by:
■ a. Revising paragraph (b)(1);
■ b. Adding paragraph (b)(3)(v);
■ c. Redesignating paragraph (b)(4)(ii) as
(b)(4)(iii);
■ d. Adding new paragraph (b)(4)(ii);
and
■ e. Revising paragraphs (b)(11)(ii)(C)
and (D).
The additions and revisions read as
follows:
§ 155.705
Functions of a SHOP.
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(b) * * *
(1) Enrollment and eligibility
functions. The SHOP must adhere to the
requirements outlined in §§ 155.710,
155.715, 155.720, 155.725, 155.730,
155.735, and 155.740.
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*
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(3) * * *
(v) For plan years beginning on or
after January 1, 2015, a Federallyfacilitated SHOP will provide a
qualified employer a choice of two
methods to make stand-alone dental
plans available to qualified employees
and their dependents:
(A) The employer may choose to make
available a single stand-alone dental
plan.
(B) The employer may choose to make
available all stand-alone dental plans
offered through the Federally-facilitated
SHOP.
(4) * * *
(ii) The SHOP may establish one or
more standard processes for premium
calculation, premium payment, and
premium collection.
(A) Qualified employers in a
Federally-facilitated SHOP must make
premium payments according to a
timeline and process established by
HHS;
(B) For a Federally-facilitated SHOP,
the premium for coverage lasting less
than 1 month must equal the product of:
(1) The premium for 1 month of
coverage divided by the number of days
in the month; and
(2) The number of days for which
coverage is being provided in the month
described in paragraph (b)(4)(ii)(B)(1) of
this section.
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(11) * * *
(ii) * * *
(C) The employer will define a
percentage contribution toward
premiums for employee-only coverage
under the reference plan and, if
dependent coverage is offered, a
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percentage contribution toward
premiums for dependent coverage under
the reference plan. To the extent
permitted by other applicable law, for
plan years beginning on or after January
1, 2015, the Federally-facilitated SHOP
may permit an employer to define a
different percentage contribution for
full-time employees from the percentage
contribution it defines for non-full-time
employees, and it may permit an
employer to define a different
percentage contribution for dependent
coverage for full-time employees from
the percentage contribution it defines
for dependent coverage for non-full-time
employees.
(D) In a Federally-facilitated SHOP,
for plan years beginning on or after
January 1, 2015, if the employer elects
to offer coverage to its employees under
§ 155.705(b)(3)(iv)(A), neither State law
nor the employer may require that
employer contributions be based on a
calculated composite premium for the
reference plan for employees, for adult
dependents of employees, and for
dependents of employees under age 21.
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■ 25. Section 155.715 is amended by
revising paragraphs (c)(4), (d)(1)
introductory text, and (d)(2)
introductory text to read as follows:
§ 155.715 Eligibility determination process
for SHOP.
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*
(c) * * *
(4) May not perform individual
market Exchange eligibility
determinations or verifications
described in subpart D of this part.
(d) * * *
(1) When the information submitted
on the SHOP single employer
application is inconsistent with
information collected from third-party
data sources through the verification
process described in § 155.715(c)(2), the
SHOP must—
*
*
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*
(2) When the information submitted
on the SHOP single employee
application is inconsistent with
information collected from third-party
data sources through the verification
process described in § 155.715(c)(2), the
SHOP must—
*
*
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■ 26. Section 155.730 is amended by
redesignating paragraph (g) as paragraph
(g)(1) and by adding paragraph (g)(2) to
read as follows:
§ 155.730
*
Application standards for SHOP.
*
*
(g) * * *
(1) * * *
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(2) The SHOP is not permitted to
collect information on the single
employer or single employee
application unless that information is
necessary to determine SHOP eligibility
or effectuate enrollment through the
SHOP.
■ 27. Section 155.1030 is amended by
revising paragraphs (b)(1), (3), and (4) to
read as follows:
§ 155.1030 QHP certification standards
related to advance payments of the
premium tax credit and cost-sharing
reductions.
*
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(b) * * *
(1) The Exchange must collect and
review annually the rate allocation and
the actuarial memorandum that an
issuer submits to the Exchange under
§ 156.470 of this subchapter, to ensure
that the allocation meets the standards
set forth in § 156.470(c) and (d).
*
*
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*
(3) The Exchange must use the
methodology specified in the annual
HHS notice of benefit and payment
parameters to calculate advance
payment amounts for cost-sharing
reductions, and must transmit the
advance payment amounts to HHS, in
accordance with § 156.340(a).
(4) HHS may use the information
provided to HHS by the Exchange under
this section for oversight of advance
payments of cost-sharing reductions and
premium tax credits.
*
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PART 156—HEALTH INSURANCE
ISSUER STANDARDS UNDER THE
AFFORDABLE CARE ACT, INCLUDING
STANDARDS RELATED TO
EXCHANGES
28. The authority citation for part 156
is revised to read as follows:
■
Authority: Title I of the Affordable Care
Act, sections 1301–1304, 1311–1312, 1321–
1322, 1324, 1334, 1342–1343, 1401–1402,
and 1412, Pub. L. 111–148, 124 Stat. 119 (42
U.S.C. 18021–18024, 18031–18032, 18041–
18042, 18044, 18054, 18061, 18063, 18071,
18082, 26 U.S.C. 36B, and 31 U.S.C. 9701).
29. Section 156.135 is amended by
revising paragraph (a) and adding
paragraph (g) to read as follows:
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■
§ 156.135 AV calculation for determining
level of coverage.
(a) Calculation of AV. Subject to
paragraphs (b) and (d) of this section, to
calculate the AV of a health plan, the
issuer must use the AV Calculator
developed and made available by HHS
for the given benefit year.
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(g) Updates to the AV calculator. HHS
will update the AV Calculator as
follows, HHS will:
(1) Update the annual limit on cost
sharing and related functions based on
a projected estimate to enable the AV
Calculator to comply with
§ 156.130(a)(2);
(2) Update the continuance tables to
reflect more current enrollment data
when HHS has determined that the
enrolled population has materially
changed;
(3) Update the algorithms when HHS
has determined the need to adapt the
AV Calculator for use by additional plan
designs or to allow the AV Calculator to
accommodate potential new types of
plan designs, where such adaptations
can be based on actuarially sound
principles and will not have a
substantial effect on the AV calculations
performed by the then current AV
Calculator;
(4) Update the continuance tables to
reflect more current claims data no more
than every 3 and no less than every 5
years and to annually trend the claims
data when the trending factor is more
than 5 percent different, calculated on a
cumulative basis; and
(5) Update the AV Calculator user
interface when a change would be
useful to a broad group of users of the
AV Calculator, would not affect the
function of the AV Calculator, and
would be technically feasible.
■ 30. Section 156.150 is revised to read
as follows:
§ 156.150 Application to stand-alone
dental plans inside the Exchange.
(a) Annual limitation on cost-sharing.
For a stand-alone dental plan covering
the pediatric dental EHB under
§ 155.1065 of this subchapter in any
Exchange, cost sharing may not exceed
$300 for one covered child and $400 for
two or more covered children.
(b) [Reserved]
■ 31. Section 156.285 is amended by
adding paragraph (a)(4) and revising
paragraph (c)(7) to read as follows:
§ 156.285
SHOP.
Additional standards specific to
(a) * * *
(4)(i) Adhere to the premium rating
standards described in § 147.102
regardless of whether the QHP is sold in
the small group market or the large
group market; and
(ii) Effective in plan years beginning
on or after January 1, 2015, a QHP issuer
in a Federally-facilitated SHOP may not
offer to an employer premiums that are
based on average enrollee amounts
under § 147.102(c)(3), if the employer
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72389
elects to offer coverage to its employees
under § 155.705(b)(3)(iv)(A).
*
*
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*
(c) * * *
(7) A QHP issuer must enroll a
qualified employee only if the SHOP—
(i) Notifies the QHP issuer that the
employee is a qualified employee;
(ii) Transmits information to the QHP
issuer as provided in § 155.400(a) of this
subchapter; and
(iii) Effective for QHPs offered
through a Federally-facilitated SHOP in
plan years beginning on or after January
1, 2015, does not send a cancellation
notice to the QHP issuer prior to the
effective date of coverage.
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*
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*
*
■ 32. Section 156.298 is added to
subpart C to read as follows:
§ 156.298 Meaningful difference standard
for Qualified Health Plans in the Federallyfacilitated Exchanges.
(a) General. Subject to paragraph
(b)(2) of this section, starting in the 2015
coverage year, in order to be certified as
a QHP offered through a Federallyfacilitated Exchange, a plan must be
meaningfully different from all other
QHPs offered by the same issuer of that
plan within a service area and level of
coverage in the Exchange, as defined in
paragraph (b) of this section.
(b) Meaningful difference standard. A
plan is considered meaningfully
different from another plan in the same
service area and metal tier (including
catastrophic plans) if a reasonable
consumer would be able to identify two
or more material differences among the
following characteristics between the
plan and other plan offerings:
(1) Cost sharing;
(2) Provider networks;
(3) Covered benefits;
(4) Plan type;
(5) Premiums;
(6) Health Savings Account eligibility;
or
(7) Self-only, non-self-only, or childonly coverage offerings.
(c) Exception for limited plan
availability. If HHS determines that the
plan offerings at a particular metal level
(including catastrophic plans) within a
county are limited, plans submitted for
certification in that particular metal
level (including catastrophic plans)
within that county will not be subject to
the meaningful difference requirement
set forth in paragraph (b) of this section.
(d) Two-year transition period for
issuers with new acquisitions. During
the first 2 years after a merger or
acquisition in which an acquiring issuer
obtains or merges with another issuer,
the FFEs may certify plans as QHPs that
were previously offered by the acquired
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and by revising paragraph (b)(1) to read
as follows:
or merged issuer without those plans
meeting the meaningful difference
standard set forth in paragraph (b) of
this section.
■ 33. Section 156.420 is amended by
revising paragraphs (c), (d), and (e) to
read as follows:
§ 156.420
Plan variations.
*
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§ 156.430 Payment for cost-sharing
reductions.
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*
(c) Benefit and network equivalence in
silver plan variations. A standard silver
plan and each silver plan variation
thereof must cover the same benefits
and providers. Each silver plan
variation is subject to all requirements
applicable to the standard silver plan
(except for the requirement that the plan
have an AV as set forth in
§ 156.140(b)(2)).
(d) Benefit and network equivalence
in zero and limited cost sharing plan
variations. A QHP and each zero cost
sharing plan variation or limited cost
sharing plan variation thereof must
cover the same benefits and providers.
The out-of-pocket spending required of
enrollees in the zero cost sharing plan
variation of a QHP for a benefit that is
not an essential health benefit from a
provider (including a provider outside
the plan’s network) may not exceed the
corresponding out-of-pocket spending
required in the limited cost sharing plan
variation of the QHP, and the out-ofpocket spending required of enrollees in
the limited cost sharing plan variation
of the QHP for a benefit that is not an
essential health benefit from a provider
(including a provider outside the plan’s
network) may not exceed the
corresponding out-of-pocket spending
required in the QHP with no costsharing reductions. A limited cost
sharing plan variation must have the
same cost sharing for essential health
benefits not described in paragraph
(b)(2) of this section as the QHP with no
cost-sharing reductions. Each zero cost
sharing plan variation or limited cost
sharing plan variation is subject to all
requirements applicable to the QHP
(except for the requirement that the plan
have an AV as set forth in § 156.140(b)).
(e) Decreasing cost sharing and out-ofpocket spending in higher AV silver
plan variations. The cost sharing or outof-pocket spending required of enrollees
under any silver plan variation of a
standard silver plan for a benefit from
a provider (including a provider outside
the plan’s network) may not exceed the
corresponding cost sharing or out-ofpocket spending required in the
standard silver plan or any other silver
plan variation thereof with a lower AV.
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*
■ 34. Section 156.430 is amended by
removing and reserving paragraph (a)
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(b) * * *
(1) A QHP issuer will receive periodic
advance payments based on the advance
payment amounts calculated in
accordance with § 155.1030(b)(3).
*
*
*
*
*
■ 35. Section 156.470 is amended by
revising paragraph (a) to read as follows:
§ 156.470 Allocation of rates for advance
payments of the premium tax credit.
(a) Allocation to additional health
benefits for QHPs. An issuer must
provide to the Exchange annually for
approval, in the manner and timeframe
established by HHS, for each health
plan at any level of coverage offered, or
intended to be offered, in the individual
market on an Exchange, an allocation of
the rate for the plan to:
(1) EHB, other than services described
in § 156.280(d)(1); and
(2) Any other services or benefits
offered by the health plan not described
in paragraph (a)(1) of this section.
*
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*
*
■ 36. Section 156.1110 is added to
Subpart L to read as follows:
§ 156.1110 Establishment of patient safety
standards for QHP issuers.
(a) Patient safety standards. A QHP
issuer that contracts with a hospital
with greater than 50 beds must verify
that the hospital, as defined in section
1861(e) of the Social Security Act, is
Medicare-certified or has been issued a
Medicaid-only CMS Certification
Number (CCN) and is subject to the
Medicare Hospital Condition of
Participation requirements for—
(1) A quality assessment and
performance improvement program as
specified in 42 CFR 482.21; and
(2) Discharge planning as specified in
42 CFR 482.43.
(b) Documentation. A QHP issuer
must collect, from each of its contracted
hospitals with greater than 50 beds,
information that demonstrates that those
hospitals meet patient safety standards
required in paragraph (a) of this section
including, but not limited to, the CCN.
(c) Reporting. (1) A QHP issuer must
make available to the Exchange the
documentation referenced in paragraph
(b) of this section, upon request by the
Exchange, in a time and manner
specified by the Exchange.
(2) Issuers of multi-State plans, as
defined in § 155.1000(a) of this
subchapter, must provide the
documentation described in paragraph
(b) of this section to the U.S. Office of
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Personnel Management, in the time and
manner specified by the U.S. Office of
Personnel Management.
(d) Effective date. A QHP issuer must
ensure that each QHP meets patient
safety standards in accordance with
paragraph (a) of this section effective for
plan years beginning on or after January
1, 2015.
■ 37. Section 156.1210 is amended by
adding paragraph (c) to read as follows:
§ 156.1210 Confirmation of HHS payment
and collections reports.
*
*
*
*
*
(c) Discrepancies to be addressed in
future reports. Discrepancies in
payment and collections reports
identified to HHS under this section
will be addressed in subsequent
payment and collections reports, and
will not be used to change debts
determined pursuant to invoices
generated under previous payment and
collections reports.
■ 38. Section 156.1215 is added to
Subpart M to read as follows:
§ 156.1215 Payment and collections
processes.
(a) Netting of payments and charges
for 2014. In 2014, as part of its monthly
payment and collections process, HHS
will net payments owed to QHP issuers
and their affiliates under the same
taxpayer identification number against
amounts due to the Federal government
from the QHP issuers and their affiliates
under the same taxpayer identification
number for advance payments of the
premium tax credit, advance payments
of cost-sharing reductions, and payment
of Federally-facilitated Exchange user
fees.
(b) Netting of payments and charges
for later years. In 2015 and later years,
as part of its payment and collections
process, HHS may net payments owed
to issuers and their affiliates operating
under the same tax identification
number against amounts due to the
Federal government from the issuers
and their affiliates under the same
taxpayer identification number for
advance payments of the premium tax
credit, advance payments of and
reconciliation of cost-sharing
reductions, payment of Federallyfacilitated Exchange user fees, and risk
adjustment, reinsurance, and risk
corridors payments and charges.
(c) Determination of debt. Any
amount owed to the Federal government
by an issuer and its affiliates for
advance payments of the premium tax
credit, advance payments of and
reconciliation of cost-sharing
reductions, Federally-facilitated
Exchange user fees, risk adjustment,
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reinsurance, and risk corridors, after
HHS nets amounts owed by the Federal
government under these programs, is a
determination of a debt.
■ 39. Section 156.1220 is added to
subpart M to read as follows:
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§ 156.1220
Administrative appeals.
(a) Requests for reconsideration. (1)
Matters for reconsideration. An issuer
may file a request for reconsideration
under this section to contest a
processing error by HHS, HHS’s
incorrect application of the relevant
methodology, or HHS’s mathematical
error only with respect to the following:
(i) The amount of advance payment of
the premium tax credit, advance
payment of cost-sharing reductions or
Federally-facilitated Exchange user fees
charge for a benefit year;
(ii) The amount of a risk adjustment
payment or charge for a benefit year,
including an assessment of risk
adjustment user fees;
(iii) The amount of a reinsurance
payment for a benefit year;
(iv) The amount of a risk adjustment
default charge for a benefit year;
(v) The amount of a reconciliation
payment or charge for cost-sharing
reductions for a benefit year; or
(vi) The amount of a risk corridors
payment or charge for a benefit year.
(2) Time for filing a request for
reconsideration. The request for
reconsideration must be filed in
accordance with the following
timeframes:
(i) For advance payments of the
premium tax credit, advance payments
of cost-sharing reductions, or Federallyfacilitated Exchange user fee charges,
within 30 calendar days after the issuer
receives a final reconsideration
notification specifying the aggregate
amount of advance payments of the
premium tax credit, advance payments
of cost-sharing reductions, and
Federally-facilitated Exchange user fees
for the applicable benefit year;
(ii) For a risk adjustment payment or
charge, including an assessment of risk
adjustment user fees, within 30 calendar
days of receipt of the notification
provided by HHS under § 153.310(e);
(iii) For a reinsurance payment,
within 30 calendar days of receipt of the
notification provided by HHS under
§ 153.240(b)(1)(ii);
(iv) For a default risk adjustment
charge, within 30 calendar days of
receipt of the notification of the default
risk adjustment charge;
(v) For reconciliation of cost-sharing
reductions, within 30 calendar days of
receipt of the notification provided by
HHS of the cost-sharing reduction
reconciliation payment or charge; and
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(vi) For a risk corridors payment or
charge, within 30 calendar days of
receipt of the notification provided by
HHS under § 153.510(d).
(3) Content of request. (i) The request
for reconsideration must specify the
findings or issues specified in paragraph
(a)(1) of this section that the issuer
challenges, and the reasons for the
challenge.
(ii) Notwithstanding paragraph
(a)(3)(i) of this section, a reconsideration
with respect to a processing error by
HHS, HHS’s incorrect application of the
relevant methodology, or HHS’s
mathematical error may be requested
only if, to the extent the issue could
have been previously identified by the
issuer to HHS under § 153.710(d)(2) or
(e)(2) of this subchapter, it was so
identified and remains unresolved.
(iii) Notwithstanding paragraph
(a)(3)(i) of this section, a reconsideration
with respect to advance payments of the
premium tax credit, advance payments
of cost-sharing reductions, and
Federally-facilitated Exchange user fees
may be requested only if, to extent the
issue could have been previously
identified by the issuer to HHS under
§ 156.1210 of this subpart, it was so
identified and remains unresolved. An
issuer may request reconsideration if it
previously identified an issue under
§ 156.1210 of this subpart after the 15calendar-day deadline, but late
discovery of the issue was not due to
misconduct on the part of the issuer.
(iv) The issuer may include in the
request for reconsideration additional
documentary evidence that HHS should
consider. Such documents may not
include data that was to have been filed
by the applicable data submission
deadline, but may include evidence of
timely submission.
(4) Scope of review for
reconsideration. In conducting the
reconsideration, HHS will review the
appropriate payment and charge
determinations, the evidence and
findings upon which the determination
was based, and any additional
documentary evidence submitted by the
issuer. HHS may also review any other
evidence it believes to be relevant in
deciding the reconsideration, which
will be provided to the issuer with a
reasonable opportunity to review and
rebut the evidence. The issuer must
prove its case by a preponderance of the
evidence with respect to issues of fact.
(5) Reconsideration decision. HHS
will inform the issuer of the
reconsideration decision in writing. A
reconsideration decision is final and
binding for decisions regarding the
advance payments of the premium tax
credit, advance payment of cost-sharing
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reductions, or Federally-facilitated
Exchange user fees. A reconsideration
decision with respect to other matters is
subject to the outcome of a request for
informal hearing filed in accordance
with paragraph (b) of this section.
(b) Informal hearing. An issuer may
request an informal hearing before a
CMS hearing officer to appeal HHS’s
reconsideration decision.
(1) Manner and timing for request. A
request for an informal hearing must be
made in writing and filed with HHS
within 15 calendar days of the date the
issuer receives the reconsideration
decision under paragraph (a)(5) of this
section.
(2) Content of request. The request for
informal hearing must include a copy of
the reconsideration decision and must
specify the findings or issues in the
decision that the issuer challenges, and
its reasons for the challenge. HHS may
submit for review by the CMS hearing
officer a statement of its reasons for the
reconsideration decision.
(3) Informal hearing procedures. (i)
The issuer will receive a written notice
of the time and place of the informal
hearing at least 15 calendar days before
the scheduled date.
(ii) The CMS hearing officer will
neither receive testimony nor accept any
new evidence that was not presented
with the reconsideration request and
HHS statement under paragraph (b) of
this section. The CMS hearing officer
will review only the documentary
evidence provided by the issuer and
HHS, and the record that was before
HHS when HHS made its
reconsideration determination. The
issuer may be represented by counsel in
the informal hearing, and must prove its
case by clear and convincing evidence
with respect to issues of fact.
(4) Decision of the CMS hearing
officer. The CMS hearing officer will
send the informal hearing decision and
the reasons for the decision to the
issuer. The decision of the CMS hearing
officer is final and binding, but is
subject to the results of any
Administrator’s review initiated in
accordance with paragraph (c) of this
section.
(c) Review by the Administrator. (1) If
the CMS hearing officer upholds the
reconsideration decision, the issuer may
request review by the Administrator of
CMS within 15 calendar days of receipt
of the CMS hearing officer’s decision.
The request for review must specify the
findings or issues that the issuer
challenges. HHS may submit for review
by the Administrator a statement
supporting the decision of the CMS
hearing officer.
E:\FR\FM\02DEP2.SGM
02DEP2
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(2) The Administrator will review the
CMS hearing officer’s decision, the
statements of the issuer and HHS, and
any other information included in the
record of the CMS hearing officer’s
decision, and will determine whether to
uphold, reverse, or modify the CMS
hearing officer’s decision. The issuer
must provide its case by clear and
convincing evidence with respect to
issues of fact. The Administrator will
send the decision and the reasons for
the decisions to the issuer.
(3) The Administrator’s determination
is final and binding.
Dated: November 21, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare &
Medicaid Services.
Approved: November 21, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.
[FR Doc. 2013–28610 Filed 11–25–13; 4:15 pm]
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BILLING CODE 4120–01–P
VerDate Mar<15>2010
21:29 Nov 29, 2013
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]]>Agencies
[Federal Register Volume 78, Number 231 (Monday, December 2, 2013)]
[Proposed Rules]
[Pages 72321-72392]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28610]
[[Page 72321]]
Vol. 78
Monday,
No. 231
December 2, 2013
Part IV
Department of Health and Human Services
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45 CFR Parts 144, 147, 153, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2015; Proposed Rule
Federal Register / Vol. 78 , No. 231 / Monday, December 2, 2013 /
Proposed Rules
[[Page 72322]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 147, 153, 155, and 156
[CMS-9954-P]
RIN 0938-AR89
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2015
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule sets forth payment parameters and oversight
provisions related to the risk adjustment, reinsurance, and risk
corridors programs; cost-sharing parameters and cost-sharing
reductions; and user fees for Federally-facilitated Exchanges. It also
proposes additional standards with respect to composite rating, privacy
and security of personally identifiable information, the annual open
enrollment period for 2015, the actuarial value calculator, the annual
limitation in cost sharing for stand-alone dental plans, the meaningful
difference standard for qualified health plans offered through a
Federally-facilitated Exchange, patient safety standards for issuers of
qualified health plans, and the Small Business Health Options Program.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on December 26,
2013.
ADDRESSES: In commenting, please refer to file code CMS-9954-P. 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 ``Submit a
comment'' instructions.
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-9954-P, P.O. Box 8016, Baltimore, MD
21244-8016.
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: CMS-9954-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. Alternatively, you may deliver (by hand or
courier) your written comments ONLY to the following addresses prior to
the close of the comment period:
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,
call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments erroneously mailed to the addresses indicated as
appropriate for hand or courier delivery may be delayed and received
after the comment period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: For general information: Sharon
Arnold, (301) 492-4286; Laurie McWright, (301) 492-4311; or Jeff Wu,
(301) 492-4305.
For matters related to student health insurance coverage and
composite rating: Jacob Ackerman, (301) 492-4179.
For matters related to the risk adjustment program generally, the
small group counting requirements, the risk adjustment methodology, and
the methodology for determining the reinsurance contribution rate and
payment parameters: Kelly Horney, (410) 786-0558.
For matters related to reinsurance generally, oversight of the
premium stabilization programs, distributed data collection, and
administrative appeals: Adrianne Glasgow, (410) 786-0686.
For matters related to reinsurance contributions: Adam Shaw, (410)
786-1019.
For matters related to risk corridors: Jaya Ghildiyal, (301) 492-
5149.
For matters related to cost-sharing reductions, the premium
adjustment percentage, and Federally-facilitated Exchange user fees:
Johanna Lauer, (301) 492-4397.
For matters related to the annual limitation on cost sharing for
stand-alone dental plans, privacy and security of personally
identifiable information, the annual open enrollment period for the
2015 benefit year, and the meaningful difference standard: Leigha
Basini, (301) 492-4380.
For matters related to the Small Business Health Options Program:
Scott Dafflitto, (301) 492-4198.
For matters related to the actuarial value calculator: Allison
Wiley at (410)786-1740.
For matters related to patient safety standards for issuers of
qualified health plans: Nidhi Singh Shah, (301) 492-5110.
For matters related to netting of payments and charges: Pat Meisol,
(410) 786-1917.
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://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be 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.
Table of Contents
I. Executive Summary
II. Background
A. Legislative Authority
B. Stakeholder Consultation and Input
C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2015
A. Part 144--Requirements Relating to Health Insurance Coverage
B. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
1. Composite Rating
[[Page 72323]]
2. Student Health Insurance Coverage
C. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment under the Affordable Care Act
1. Provisions and Parameters for the Permanent Risk Adjustment
Program
a. Risk adjustment user fees
b. HHS risk adjustment methodology considerations
c. Small group determination for risk adjustment
d. Risk adjustment data validation
e. HHS audits of issuers of risk adjustment covered plans
2. Provisions and Parameters for the Transitional Reinsurance
Program
a. Major medical coverage
b. Self-insured plans without third party administrators
c. Uniform reinsurance contribution rate
d. Uniform reinsurance payment parameters
e. Adjustment options
f. Deducting cost-sharing reduction amounts from reinsurance
payments
g. Audits
h. Same covered life
i. Reinsurance contributions and enrollees residing in the
territories
j. Form 5500 counting method
3. Provisions for the Temporary Risk Corridors Program
a. Definitions
b. Compliance with risk corridors standards
c. Participation in the risk corridors program
e. Adjustment options for transitional policy
4. Distributed Data Collection for the HHS-operated Risk
Adjustment and Reinsurance Programs
a. Discrepancy resolution process
b. Default risk adjustment charge
D. Part 155--Exchange Establishment Standards and Other Related
Standards under the Affordable Care Act
1. Election to Operate an Exchange after 2014
2. Ability of States to Permit Agents and Brokers to Assist
Qualified Individuals, Qualified Employers, or Qualified Employees
Enrolling in Qualified Health Plans
3. Privacy and Security of Personally Identifiable Information
4. Annual Open Enrollment Period for 2015
5. Functions of a Small Business Health Options Program
6. Eligibility Determination Process for SHOP
7. Application Standards for SHOP
E. Part 156--Health Insurance Issuer Standards under the
Affordable Care Act, Including Standards Related to Exchanges
1. Provisions Related to Cost Sharing
a. Premium adjustment percentage
b. Reduced maximum annual limitation on cost sharing
c. Design of cost-sharing reduction plan variations
d. Advance payments of cost-sharing reductions
2. Provisions on User Fees for a Federally-facilitated Exchange
a. FFE user fee for the 2015 benefit year
b. Adjustment of FFE user fee
3. Actuarial Value Calculation for Determining Level of Coverage
4. National Annual Limit on Cost Sharing for Stand-alone Dental
Plans in an Exchange
5. Additional Standards Specific to SHOP
6. Meaningful Difference Standard for Qualified Health Plans in
the FFEs
7. Quality Standards: Establishment of Patient Safety Standards
for QHPs Issuers
8. Financial Programs
a. Netting of payments and charges
b. Confirmation of HHS payment and collections reports
c. Administrative appeals
IV. Collection of Information Requirements
V. Response to Comments
VI. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions
D. Regulatory Flexibility Act
E. Unfunded Mandates
F. Federalism
G. Congressional Review Act
VII. Regulations Text
Acronyms
Affordable Care Act--The collective term for the Patient
Protection and Affordable Care Act (Pub. L. 111-148) and the Health
Care and Education Reconciliation Act of 2010 (Pub. L. 111-152)
AV--Actuarial Value
CFR--Code of Federal Regulations
CMS--Centers for Medicare & Medicaid Services
EHB--Essential Health Benefits
ERISA--Employee Retirement Income Security Act of 1974 (Pub. L.
93-406)
FFE--Federally-facilitated Exchange
FF-SHOP--Federally-facilitated Small Business Health Options
Program
FPL--Federal poverty level
HCC--Hierarchical condition category
HHS--United States Department of Health and Human Services
HIPAA--Health Insurance Portability and Accountability Act of
1996 (Pub. L. 104-191)
IRS--Internal Revenue Service
MLR--Medical Loss Ratio
NAIC--National Association of Insurance Commissioners
OMB--Office of Management and Budget
OPM--United States Office of Personnel Management
PHS Act--Public Health Service Act
PII--Personally identifiable information
PSO--Patient Safety Organization
PRA--Paperwork Reduction Act of 1985
PSES--Patient safety evaluation system
QHP--Qualified health plan
SHOP--Small Business Health Options Program
The Code Internal Revenue Code of 1986
I. Executive Summary
Qualified individuals and qualified employers are now able to
purchase private health insurance coverage that begins as early as
January 1, 2014, through competitive marketplaces called Affordable
Insurance Exchanges, or ``Exchanges'' (also called Health Insurance
Marketplaces, or ``Marketplaces'').\1\ Individuals who enroll in
qualified health plans (QHPs) through individual market Exchanges may
receive premium tax credits to make health insurance more affordable
and financial assistance to reduce cost sharing for health care
services. In 2014, HHS will also operationalize the premium
stabilization programs established by the Affordable Care Act--the risk
adjustment, reinsurance, and risk corridors programs--which are
intended to mitigate the impact of possible adverse selection and
stabilize the price of health insurance in the individual and small
group markets. We believe that these programs, together with other
reforms of the Affordable Care Act, will make high-quality health
insurance affordable and accessible to millions of Americans.
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\1\ The word ``Exchanges'' refers to both State Exchanges, also
called State-based Exchanges, and Federally-facilitated Exchanges
(FFEs). In this proposed rule, we use the terms ``State Exchange''
or ``FFE'' when we are referring to a particular type of Exchange.
When we refer to ``FFEs,'' we are also referring to State
Partnership Exchanges, which are a form of FFE.
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HHS has previously outlined the major provisions and parameters
related to the advance payments of the premium tax credit, cost-sharing
reductions, and premium stabilization programs. This proposed rule
proposes additional provisions related to the implementation of these
programs. Specifically, we propose certain oversight provisions for the
premium stabilization programs, as well as key payment parameters for
the 2015 benefit year.
The Patient Protection and Affordable Care Act; HHS Notice of
Benefit and Payment Parameters for 2014 final rule (78 FR 15410) (2014
Payment Notice) finalized the risk adjustment methodology that HHS will
use when it operates risk adjustment on behalf of a State. This
proposed rule proposes minor updates to this risk adjustment
methodology for 2014 to account for certain private market Medicaid
expansion plans, and seeks comment on how to adjust the geographic cost
factor in the payment transfer formula to account for less populous
rating areas in future benefit years. In this proposed rule, we also
propose to clarify the counting methods for determining small
[[Page 72324]]
group size for participation in the risk adjustment and risk corridors
programs.
Using the methodology set forth in the 2014 Payment Notice for
determining the uniform reinsurance contribution rate and uniform
reinsurance payment parameters, we propose in this rule a 2015 uniform
reinsurance contribution rate of $44 annually per capita, and the 2015
uniform reinsurance payment parameters--a $70,000 attachment point, a
$250,000 reinsurance cap, and a 50 percent coinsurance rate. We also
propose to decrease the attachment point for 2014 from $60,000 to
$45,000. Additionally, in order to maximize the financial effect of the
transitional reinsurance program, we propose that if reinsurance
contributions collected for a benefit year exceed the requests for
reinsurance payments for the benefit year, we would increase the
coinsurance rate on our reinsurance payments, ensuring that all of the
contributions collected for a benefit year are expended for claims for
that benefit year.
We also propose several provisions related to cost sharing. First,
we propose a methodology for estimating average per capita premium and
for calculating the premium adjustment percentage for 2015 which is
used to set the rate of increase for several parameters detailed in the
Affordable Care Act, including the maximum annual limitation on cost
sharing and the maximum annual limitation on deductibles for health
plans in the small group market for 2015. We also propose to set the
same reduced maximum annual limitations on cost sharing for the 2015
benefit year as we established for the 2014 benefit year for cost-
sharing reduction plan variations. Additionally, we are proposing
certain modifications to the methodology for calculating advance
payments for cost-sharing reductions for the 2015 benefit year. We also
propose standards for updating the actuarial value (AV) calculator.
This proposed rule provides for a 2015 Federally-facilitated
Exchange (FFE) user fee rate of 3.5 percent of premium. Additionally,
we propose a user fee adjustment allowance for administrative costs in
the 2015 benefit year to reimburse third party administrators that
provide payment for contraceptive services for enrollees in certain
self-insured group health plans that receive an accommodation from the
obligation to cover these services in 2014.
On November 14, 2013, the Federal government announced a policy
under which it will not consider certain non-grandfathered health
insurance coverage in the individual or small group market renewed
between January 1, 2014, and October 1, 2014, under certain conditions
to be out of compliance with specified 2014 market rules, and requested
that States adopt a similar non-enforcement policy.\2\
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\2\ Letter to Insurance Commissioners, Center for Consumer
Information and Insurance Oversight, November 14, 2013. See https://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.PDF.
---------------------------------------------------------------------------
Issuers have set their 2014 premiums for individual and small group
market plans by estimating the health risk of enrollees across all of
their plans in the respective markets, in accordance with the single
risk pool requirement at 45 CFR 156.80. These estimates assumed that
individuals currently enrolled in the transitional plans described
above would participate in the single risk pools applicable to all non-
grandfathered individual and small group plans, respectively (or a
merged risk pool, if required by the State). Individuals who elect to
continue coverage in a transitional plan (forgoing premium tax credits
and cost-sharing reductions that might be available through an Exchange
plan, and the essential health benefits package offered by plans
compliant with the 2014 market rules, and perhaps taking advantage of
the underwritten premiums offered by the transitional plan) may have
lower health risk, on average, than enrollees in individual and small
group plans subject to the 2014 market rules.
If lower health risk individuals remain in a separate risk pool,
the transitional policy could increase an issuer's average expected
claims cost for plans that comply with the 2014 market rules. Because
issuers would have set premiums for QHPs in accordance with 45 CFR
156.80 based on a risk pool assumed to include the potentially lower
health risk individuals that enroll in the transitional plans, an
increase in expected claims costs could lead to unexpected losses.
To help address the effects of this transitional policy on the risk
pool, we are exploring modifications to a number of programs. We have
outlined various options under consideration throughout this proposed
rule, including adjustments to the reinsurance and risk corridors
programs. We are seeking comment on these proposals, as well as
soliciting suggestions for alternate proposals. As the impact of the
transitional policy becomes clearer, we will determine what, if any,
adjustments are appropriate.
The success of the premium stabilization programs depends on a
robust oversight program. This proposed rule expands on provisions of
the Premium Stabilization Rule (77 FR 17220), the 2014 Payment Notice
(78 FR 15410), and the first and second final Program Integrity Rules
(78 FR 54070 and 78 FR 65046). In this proposed rule, we propose that
HHS may audit State-operated reinsurance programs, contributing
entities, and issuers of risk adjustment covered plans and reinsurance
eligible-plans. We also clarify participation standards for the risk
corridors program, and outline a proposed process for validating risk
corridors data submissions and enforcing compliance with the provisions
of the risk corridors program.
We also propose several provisions regarding the HHS-operated risk
adjustment data validation process. On June 22, 2013, we issued ``The
Affordable Care Act HHS-operated Risk Adjustment Data Validation
Process White Paper'' \3\ and on June 25, 2013, we held a public
meeting to discuss how to best ensure the accuracy and consistency of
the data we will use when operating the risk adjustment program on
behalf of a State. In this proposed rule, we propose standards for risk
adjustment data validation, including a sampling methodology for the
initial validation audit and detailed audit standards. These proposed
standards would be tested for 2 years before they are used as a basis
for payment adjustments. This proposed rule also includes a proposal to
implement, over time, the requirements related to patient safety
standards that QHP issuers must meet, and proposes reducing the time
period for which a State electing to operate an Exchange after 2014
must have in effect an approved, or conditionally approved, Exchange
Blueprint and operational readiness assessment from at least 12 months
to 6.5 months prior to the Exchange's first effective date of coverage.
We also propose provisions related to the privacy and security of
personally identifiable information (PII), the annual open enrollment
period for 2015, the annual limitation on cost sharing for stand-alone
dental plans, and the meaningful difference standards for QHPs offered
through an FFE. We also propose certain standards for the Small
Business Health Options Program (SHOP) and for composite rating in the
small group market.
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\3\ Available at: https://www.regtap.info/uploads/library/ACA_HHS_OperatedRADVWhitePaper_062213_5CR_062213.pdf
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II. Background
A. Legislative and Regulatory Overview
The Patient Protection and Affordable Care Act (Pub. L. 111-148)
was enacted
[[Page 72325]]
on March 23, 2010. The Health Care and Education Reconciliation Act of
2010 (Pub. L. 111-152), which amended and revised several provisions of
the Patient Protection and Affordable Care Act, was enacted on March
30, 2010. In this proposed rule, we refer to the two statutes
collectively as the ``Affordable Care Act.''
Section 1302 of the Affordable Care Act directs the Secretary of
Health and Human Services (referred to throughout this rule as the
Secretary) to define EHBs and provides for cost-sharing limits and AV
requirements. Sections 1302(d)(1) and (d)(2) of the Affordable Care Act
describe the determination of the levels of coverage based on AV.
Consistent with section 1302(d)(2)(A) of the Affordable Care Act, AV is
calculated based on the provision of EHB to a standard population.
Section 1302(d)(3) of the Affordable Care Act directs the Secretary to
develop guidelines that allow for de minimis variation in AV
calculations.
Section 1311(b)(1)(B) of the Affordable Care Act directs that the
SHOP assist qualified small employers in facilitating the enrollment of
their employees in QHPs offered in the small group market. Under
section 1312(f)(2)(B) of the Affordable Care Act, beginning in 2017,
States will have the option to allow issuers to offer QHPs in the large
group market through the SHOP.
Section 1311(c)(6)(B) of the Affordable Care Act states that the
Secretary is to require an Exchange to provide for annual open
enrollment periods for calendar years after the initial enrollment
period.
Section 1311(h)(1) of the Affordable Care Act specifies that a QHP
may contract with health care providers and hospitals with more than 50
beds only if they meet certain patient safety standards, including use
of a patient safety evaluation system, a comprehensive hospital
discharge program, and implementation of health care quality
improvement activities. Section 1311(h)(2) of the Affordable Care Act
also provides the Secretary flexibility to establish reasonable
exceptions to these patient safety requirements and section 1311(h)(3)
of the Affordable Care Act allows the Secretary flexibility to issue
regulations to modify the number of beds described in section
1311(h)(1)(A) of the Affordable Care Act.
Section 1313 of the Affordable Care Act, combined with section 1321
of the Affordable Care Act, provides the Secretary with the authority
to oversee the financial integrity of State Exchanges, their compliance
with HHS standards, and the efficient and non-discriminatory
administration of State Exchange activities. Section 1321(a) of the
Affordable Care Act provides general authority for the Secretary to
establish standards and regulations to implement the statutory
requirements related to Exchanges, QHPs, and other components of Title
I of the Affordable Care Act.
When operating an FFE under section 1321(c)(1) of the Affordable
Care Act, HHS has the authority under sections 1321(c)(1) and
1311(d)(5)(A) of the Affordable Care Act to collect and spend user
fees. In addition, 31 U.S.C. 9701 permits a Federal agency to establish
a charge for a service provided by the agency. Office of Management and
Budget (OMB) Circular A-25 Revised establishes Federal policy regarding
user fees and specifies that a user charge will be assessed against
each identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public.
Section 1341 of the Affordable Care Act requires the establishment
of a transitional reinsurance program in each State to help pay the
cost of treating high-cost enrollees in the individual market from 2014
through 2016. Section 1342 of the Affordable Care Act directs the
Secretary to establish a temporary risk corridors program that provides
for the sharing in gains or losses resulting from inaccurate rate
setting from 2014 through 2016 between the Federal government and
certain participating plans. Section 1343 of the Affordable Care Act
establishes a permanent risk adjustment program that is intended to
provide increased payments to health insurance issuers that attract
higher-risk populations, such as those with chronic conditions, and
thereby reduce incentives for issuers to avoid higher-risk enrollees.
Sections 1402 and 1412 of the Affordable Care Act establish a program
for reducing cost sharing for individuals with lower household income
and Indians.
Section 1411(g) of the Affordable Care Act provides that any person
who receives information specified in section 1411(b) provided by an
applicant or information specified in section 1411(c), (d), or (e) from
a Federal agency must use the information only for the purpose of and
to the extent necessary to ensure the efficient operation of the
Exchange, and may not disclose the information to any other person
except as provided in that section. Section 6103(l)(21)(C) of the Code
additionally provides that return information disclosed under section
6103(l)(21)(A) or (B) may be used only for the purpose of and to the
extent necessary in establishing eligibility for participation in the
Exchange, verifying the appropriate amount of any premium tax credit or
cost-sharing reduction, or determining eligibility for participation in
a health insurance affordability program as described in that section.
1. Premium Stabilization Programs
In the July 15, 2011 Federal Register (76 FR 41930), we published a
proposed rule outlining the premium stabilization programs. We
implemented the premium stabilization programs in a final rule,
published in the March 23, 2012 Federal Register (77 FR 17220) (Premium
Stabilization Rule). In the December 7, 2012 Federal Register (77 FR
73118), we published a proposed rule outlining the benefit and payment
parameters for 2014 to expand the provisions related to the premium
stabilization programs and set forth payment parameters in those
programs (proposed 2014 Payment Notice). We published the 2014 Payment
Notice in the March 11, 2013 Federal Register (78 FR 153410).
As discussed above, we published a white paper on risk adjustment
data validation on June 22, 2013, and hosted a public meeting on June
25, 2013, to discuss the white paper.
2. Program Integrity
In the June 19, 2013 Federal Register (78 FR 37032), we published a
proposed rule that proposed certain program integrity standards related
to Exchanges and the premium stabilization programs (proposed Program
Integrity Rule). The provisions of that proposed rule were finalized in
two rules, the ``first final Program Integrity Rule'' published in the
August 30, 2013 Federal Register (78 FR 54070) and the ``second final
Program Integrity Rule'' published in the October 30, 2013 Federal
Register (78 FR 65046).
3. Exchanges, Essential Health Benefits, Actuarial Value
A proposed rule relating to EHBs and AV was published in the
November 26, 2012 Federal Register (77 FR 70644). We proposed standards
related to the premium adjustment percentage in the Standards Related
to Essential Health Benefits, Actuarial Value, and Accreditation Final
Rule, published in the February 25, 2013 Federal Register (78 FR 12834)
(EHB Rule). We established standards for the administration and payment
of cost-sharing reductions and the SHOP in the 2014 Payment Notice and
in the Amendments to the HHS Notice of Benefit and Payment Parameters
for 2014 interim final rule, published in the
[[Page 72326]]
March 11, 2013 Federal Register (78 FR 15541). The provisions
established in the interim final rule were finalized in the second
final Program Integrity Rule.
We set forth standards related to Exchange user fees in the 2014
Payment Notice. We also established an adjustment to the FFE user fee
in the Coverage of Certain Preventive Services Under the Affordable
Care Act final rule, published in the July 2, 2013 Federal Register (78
FR 39870) (Preventive Services Rule).
A Request for Comment relating to Exchanges was published in the
August 3, 2010 Federal Register (75 FR 45584). An Initial Guidance to
States on Exchanges was issued on November 18, 2010. A proposed rule
was published in the July 15, 2011 Federal Register (76 FR 41866) to
implement components of the Exchange. A proposed rule regarding
Exchange functions in the individual market, eligibility
determinations, and Exchange standards for employers was published in
the August 17, 2011 Federal Register (76 FR 51202). A final rule
implementing components of the Exchanges and setting forth standards
for eligibility for Exchanges was published in the March 27, 2012
Federal Register (77 FR 18310) (Exchange Establishment Rule).
4. Market Rules
Provisions relating to the 2014 market reforms and rate review were
published in Patient Protection and Affordable Care Act; Health
Insurance Market Rules; Rate Review proposed rule in the November 26,
2012 Federal Register (77 FR 70584). A final rule implementing these
provisions was published in the February 27, 2013 Federal Register (78
FR 13406) (Market Reform Rule).
5. Medical Loss Ratio
We published a request for comment on PHS Act section 2718 in the
April 14, 2010 Federal Register (75 FR 19297), and published an interim
final rule with a 60-day comment period relating to the medical loss
ratio (MLR) program on December 1, 2010 (75 FR 74864). A final rule
with a 30-day comment period was published in the December 7, 2011
Federal Register (76 FR 76574).
B. Stakeholder Consultation and Input
In addition to seeking advice from the public on risk adjustment
data validation, HHS has consulted with stakeholders on policies
related to the operation of Exchanges, including the SHOP and the
premium stabilization programs. HHS has held a number of listening
sessions with consumers, providers, employers, health plans, the
actuarial community, and State representatives to gather public input.
HHS consulted with stakeholders through regular meetings with the
National Association of Insurance Commissioners (NAIC), regular contact
with States through the Exchange Establishment grant and Exchange
Blueprint approval processes, and meetings with Tribal leaders and
representatives, health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties. We considered all
of the public input as we developed the policies in this proposed rule.
C. Structure of Proposed Rule
The regulations outlined in this proposed rule would be codified in
45 CFR parts 144, 147, 153, 155 and 156. The proposed regulations in
parts 144 and 147 propose amendments relating to student health
insurance coverage. The proposed regulations in part 147 also outline
market-wide provisions regarding composite rating. The proposed
regulations in part 153 outline the 2015 uniform contribution rate and
uniform reinsurance payment parameters for the 2015 benefit year and
oversight provisions related to the premium stabilization programs,
such as provisions related to risk adjustment data validation, risk
corridors data validation, and HHS's authority to audit entities
participating in these programs. The proposed regulations in part 153
propose that excess reinsurance contributions collected for a benefit
year be used for claims for that benefit year.
The proposed regulations in part 155 propose to reduce the time
that States that elect to establish and operate an Exchange after 2014
must have in effect an approved or conditionally approved Exchange
Blueprint and readiness assessment from 12 months to 6.5 months prior
to the Exchange's first effective date of coverage. The proposed
regulations also include a change to the annual open enrollment period
for the 2015 benefit year and certain proposals related to the SHOP
Exchanges, which we discuss in greater detail below. We also propose in
part 155 to amend Sec. 155.260 to allow the Secretary to determine
that additional uses or disclosures of PII not specifically permitted
by Sec. 155.260 ensure the efficient operation of the Exchange. In
addition, we propose to establish a process under which Exchanges may
seek the Secretary's approval for other uses of applicant PII not
specifically permitted by Sec. 155.260. We also propose to amend Sec.
155.260 to more specifically define the term ``non-Exchange entity''
and to provide a baseline for the privacy and security standards to
which Exchanges must bind non-Exchange entities through written
contracts or agreements.
The proposed regulations in part 156 set forth provisions related
to cost sharing, including the premium adjustment percentage, the
maximum annual limitation on cost sharing, the maximum annual
limitation on deductibles for health plans in the small group market,
the reductions in the maximum annual limitation for cost sharing plan
variations, and the methodology to calculate advance payments of cost-
sharing reductions for 2015. They also outline the 2015 FFE user fee
rate and propose a user fee adjustment to reimburse third party
administrators that pay for contraceptive services for enrollees in
certain self-insured group health plans that receive an accommodation
from the obligation to cover these services. They also include
provisions related to parameters for making updates to the AV
calculator in future plan years. The proposed 2015 AV Calculator and a
proposed 2015 AV Calculator methodology, which would supersede the 2014
versions of these documents incorporated by reference in the EHB Rule,
are being incorporated by reference in this proposed rule. In part 156
we also propose a meaningful difference standard for QHPs offered
through an FFE and patient safety standards for issuers of QHPs.
Finally, we propose an administrative appeals process applicable to the
premium stabilization, cost-sharing reduction, advance payments of the
premium tax credit, and FFE user fee programs.
In parts 155 and 156, we also propose the following provisions
related to the SHOP:
We propose to permit all SHOPs performing premium
aggregation to establish one or more standard processes for premium
calculation, payment, and collection.
We propose that in the FF-SHOPs, for plan years when
premium aggregation is available, employers be required to make premium
payments to the FF-SHOP according to a timeline and process established
by HHS. We further propose that for plan years beginning on or after
January 1, 2015, unless the QHP issuer receives a cancellation notice
from the FF-SHOP, the issuer would be required to effectuate coverage.
We propose a standard premium pro-rating methodology for
the FF-SHOPs, for plan years when premium aggregation is available,
providing that groups will be charged for the portion
[[Page 72327]]
of the month for which an enrollee is enrolled.
We propose to make explicit our interpretation of current
regulations that no SHOPs would be permitted to collect information on
a SHOP application unless that information is necessary to determine
SHOP eligibility or effectuate enrollment through the SHOP.
We propose that no SHOPs would be permitted to perform
individual market Exchange eligibility determinations or verifications.
We propose that a qualified employer that becomes a large
employer but continues to purchase coverage through a SHOP would
continue to be rated as a small employer.
We propose to limit the employer and employee eligibility
adjustment periods to circumstances when the SHOP has an optional
verification process, and collects information through that
verification process that is inconsistent with the information provided
by an employer or employee on a SHOP application.
We propose for plan years beginning on or after January 1,
2015 to give SHOPs in States that permit this activity under State law,
the option of permitting enrollment in a SHOP through the Internet Web
site of an agent or broker.
We propose to limit the availability of composite premiums
in the FF-SHOPs after employee choice and premium aggregation become
available.
We propose methods for employers in the FF-SHOPs to offer
stand-alone dental coverage after employee choice becomes available in
those SHOPs.
We propose for plan years beginning on or after January 1,
2015 to permit FF-SHOPs to give employers the flexibility to define
different premium percentage contributions for full-time employees and
non-full-time employees.
We note that nothing in these proposed regulations would limit the
authority of the Office of the Inspector General (OIG) as set forth by
the Inspector General Act of 1978 or other applicable law.
III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2015
A. Part 144--Requirements Relating to Health Insurance Coverage
In Sec. 144.103, the term ``policy year,'' as amended by the
second final Program Integrity Rule, is defined as: (1) With respect to
a grandfathered health plan offered in the individual health insurance
market, the 12-month period that is designated as the policy year in
the policy documents of the individual health insurance coverage. If
there is no designation of a policy year in the policy document (or no
such policy document is available), then the policy year is the
deductible or limit year used under the coverage. If deductibles or
other limits are not imposed on a yearly basis, the policy year is the
calendar year; and (2) with respect to a non-grandfathered health plan
offered in the individual health insurance market, or in a market in
which the State has merged the individual and small group risk pools
(merged market), for coverage issued or renewed beginning January 1,
2014, a calendar year for which health insurance coverage provides
coverage for health benefits. Further, Sec. 147.104, as amended by the
second final Program Integrity Rule, establishes individual market open
enrollment periods based on a calendar policy year and provides that
non-grandfathered coverage in the individual or merged markets must be
offered on a calendar year basis, with a policy year beginning on
January 1 and ending on December 31 of each year.
Under regulations at Sec. 147.145(a), student health insurance
coverage is defined as individual health insurance coverage. Section
147.145(b), however, exempts student health insurance coverage from
certain PHS Act and Affordable Care Act requirements that apply to
individual health insurance coverage, including certain guaranteed
availability provisions of section 2702 of the PHS Act, implemented at
Sec. 147.104. As discussed below, because student health insurance
coverage is traditionally offered on a school year basis (for example,
a policy year beginning on September 1 of each year and ending on
August 30 of the following year), we are proposing to modify Sec.
147.145 to exempt student health insurance coverage from the
requirement under section 2702 to establish open enrollment periods and
coverage effective dates that are based on a calendar policy year,
including the requirement that non-grandfathered coverage in the
individual and merged markets be offered on a calendar year basis. We
are also proposing conforming amendments to the definition of ``policy
year'' to reflect that student health insurance coverage would not be
required to be offered on a calendar year basis. We seek comment on
this proposal.
B. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Composite Rating
Section 2701 of the PHS Act, as added by section 1201 of the
Affordable Care Act, establishes permissible rating factors that may be
used to vary the premium rate charged by a health insurance issuer for
non-grandfathered health insurance coverage (including QHPs) in the
individual and small group markets beginning in 2014.\4\ The factors
are: family size, rating area, age, and tobacco use (within limits).
Section 2701(a)(4) of the PHS Act provides that with respect to family
coverage under a group health plan or health insurance coverage, any
rating variation for age or tobacco use must be applied based on the
proportion of the premium attributable to each family member covered
under the plan or coverage.
---------------------------------------------------------------------------
\4\ Beginning in 2017, States will have the option to allow
issuers to offer QHPs in the large group market through the SHOP. If
a State elects this option, the rating rules in section 2701 and its
implementing regulations will apply to all coverage offered in such
State's large group market (except for self-insured group health
plans) under to section 2701(a)(5) of the PHS Act.
---------------------------------------------------------------------------
In the Market Reform Rule, we applied the per-member rating
requirement of PHS Act section 2701(a)(4) in both the individual and
small group markets. Thus, at Sec. 147.102(c), we generally directed
that issuers calculate a separate premium for each individual covered
under the plan or coverage based on allowable rating factors including
age and tobacco use, and sum the individual rates to determine the
total premium charged by the issuer to a family or to a group health
plan.\5\
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\5\ States that do not permit rating for age or tobacco use may
require health insurance issuers in the individual and small group
markets to use uniform family tiers and corresponding multipliers
established by the State. Sec. 147.102(c)(2).
---------------------------------------------------------------------------
We recognized that in the small group market it is common industry
billing practice to charge an employer a uniform premium for a given
family composition by adding the per-member rates and dividing by the
total number of employees covered under the employer's health insurance
plan. We indicated that nothing prevents an issuer from converting per-
member rates into average enrollee premium amounts (calculated
composite premiums), provided that the total group premium is the same
total amount derived in accordance with the process established by the
regulations.
Because calculated composite premiums are average rates for a
particular group, changes in employee
[[Page 72328]]
census would typically cause a change in the average rate. For example,
a new average rate per enrollee would typically result from employees
adding or dropping coverage during the course of the plan year, causing
employer and employee contributions to change as well. We have been
asked about such mid-year changes in group composition and how issuers
should address the resulting changes in the calculated composite
premium for the group.
In this proposed rule, we propose to add a provision at Sec.
147.102(c)(3) clarifying that if an issuer offers a composite premium
calculated when the employer obtains or renews coverage, the issuer
must ensure that such amount does not vary for any plan participant or
beneficiary during the plan year with respect to the particular plan
involved. Under this approach, an issuer would be required to accept
the group's composite premium, calculated based on applicable employee
enrollment at the beginning of the plan year, as the applicable premium
rate for any new individual who enrolls in the plan during the plan
year.\6\ Terminations of coverage during the plan year also would not
change the composite premium. At the time of renewal, the issuer would
recalculate a group's composite premium based on plan enrollment at
that time for subsequent coverage. This will allow calculated composite
premiums, and thus employer and employee contributions to coverage, to
remain stable during the plan year, regardless of changes in the
group's composition.
---------------------------------------------------------------------------
\6\ In cases where the composite premium does not incorporate
the age or tobacco use rating factor, an issuer would be required to
accept the group's composite premium, calculated based on applicable
employee enrollment at the beginning of the plan year, multiplied by
any applicable age or tobacco rating factor, as the applicable
premium for any new individual who enrolls in the plan during the
plan year. Under Sec. 147.102(a)(1)(iv), rating for tobacco use is
subject to the nondiscrimination and wellness provisions under
section 2705 of the PHS Act and its implementing regulations,
regardless of whether the composite premium incorporates the tobacco
use rating factor.
---------------------------------------------------------------------------
This proposed policy would generally apply to health insurance
issuers offering non-grandfathered health insurance coverage in the
small group market, through a SHOP or outside of a SHOP, for plan years
beginning on or after January 1, 2015. However, we encourage issuers to
voluntarily adopt this approach for plan years beginning in 2014. As
discussed in more detail below, we propose a limited exception to this
policy in Sec. 155.705(b)(11)(ii)(D) and Sec. 156.285(a)(4)(ii) of
this proposed rule, under which composite rating would not be available
when an employer participating in a Federally-facilitated SHOP elects
to offer its employees all QHPs within a single level of coverage under
Sec. 155.705(b)(3)(iv)(A).
We are considering establishing a uniform tiered-composite rating
structure that would apply market wide unless a State requires and HHS
approves an alternate tiered-composite rating methodology. Under the
approach we are considering, a small group market issuer offering
composite rating would calculate the composite premium for different
tiers of enrollees covered under the employer's plan. For example, in a
two-tier structure, one composite premium would be calculated for
covered adults (employees and adult dependents) and another composite
premium would be calculated for covered children. Alternatively, in a
three-tier structure, there would be one composite premium for covered
employees, a second composite premium for covered adult dependents, and
a third composite premium for covered children. The premium for a given
family composition would simply be determined by summing the applicable
tiered-composite rates. We believe a tiered-composite approach would
promote simplicity for issuers and employers, and ensure that premiums
for family coverage appropriately reflect the lower rates for children.
We seek comments on all aspects of this approach to composite
rating. We also seek comments on whether to establish a default uniform
tiered-composite rating structure, including the appropriate number and
types of enrollee tiers (for example, an employee-only tier, an adult
dependent tier, and a child dependent tier).
2. Student Health Insurance Coverage
As discussed above, under Sec. 147.145(a), student health
insurance coverage is defined as a type of individual health insurance
coverage. However, Sec. 147.145(b) provides that for purposes of the
guaranteed availability requirements of section 2702 of the PHS Act, a
health insurance issuer that offers student health insurance coverage
is not required to accept individuals who are not students or
dependents of student in such coverage. Because student health
insurance coverage is traditionally offered on a school year basis that
does not align with the calendar year, we do not believe student health
insurance should be required to establish open enrollment periods and
coverage effective dates under Sec. 147.104(b)(1) and (2) that are
based on a calendar policy year, including the requirement that non-
grandfathered coverage in the individual and merged markets be offered
on a calendar year basis. Accordingly, we are proposing to amend Sec.
147.145(b)(1)(ii) to exempt student health insurance coverage from
these guaranteed availability requirements. We seek comments on this
proposal and whether other modifications are necessary for student
health insurance coverage.
C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment under the Affordable Care Act
1. Provisions and Parameters for the Permanent Risk Adjustment Program
The risk adjustment program is a permanent program created by
section 1343 of the Affordable Care Act that transfers funds from lower
risk, non-grandfathered plans to higher risk, non-grandfathered plans
in the individual and small group markets, inside and outside the
Exchanges. In subparts D and G of the Premium Stabilization Rule, we
established standards for the administration of the risk adjustment
program. A State that is approved or conditionally approved by the
Secretary to operate an Exchange may establish a risk adjustment
program, or have HHS do so on its behalf.
a. Risk Adjustment User Fees
If a State is not approved to operate or chooses to forgo operating
its own risk adjustment program, HHS will operate risk adjustment on
the State's behalf. As described in the 2014 Payment Notice, HHS's
operation of risk adjustment on behalf of States is funded through a
risk adjustment user fee. Section 153.610(f)(2) provides that an issuer
of a risk adjustment covered plan must remit a user fee to HHS for each
month equal to the product of its monthly enrollment in the plan and
the per-enrollee-per-month risk adjustment user fee specified in the
annual HHS notice of benefit and payment parameters for the applicable
benefit year.
OMB Circular No. A-25R establishes Federal policy regarding user
fees, and specifies that a user charge will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public. The risk
adjustment program will provide special benefits as defined in section
6(a)(1)(b) of Circular No. A-25R to an issuer of a risk adjustment
covered plan because it will mitigate the financial instability
associated with risk selection as other market reforms go into effect.
The risk
[[Page 72329]]
adjustment program also will contribute to consumer confidence in the
health insurance industry by helping to stabilize premiums across the
individual and small group health insurance markets.
In the 2014 Payment Notice, we estimated Federal administrative
expenses of operating the risk adjustment program to be $0.96 per
enrollee per year, based on our estimated contract costs for risk
adjustment operations. For the 2015 benefit year, we propose to use the
same methodology to estimate our administrative expenses to operate the
program. These contracts cover development of the model and
methodology, collections, payments, account management, data
collection, data validation, program integrity and audit functions,
operational and fraud analytics, stakeholder training, and operational
support. We do not propose to set the user fee to cover costs
associated with Federal personnel. To calculate the user fee, we would
divide HHS's projected total costs for administering the risk
adjustment programs on behalf of States by the expected number of
enrollees in risk adjustment covered plans (other than plans not
subject to market reforms and student health plans, which are not
subject to payments and charges under the risk adjustment methodology
HHS uses when it operates risk adjustment on behalf of a State) in HHS-
operated risk adjustment programs for the benefit year.
We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of States for 2015 will be approximately
$27.3 million, and that the per capita risk adjustment user fee would
be no more than $1.00 per enrollee per year. We seek comment on this
proposed assessment of user fees to support HHS-operated risk
adjustment programs.
b. HHS Risk Adjustment Methodology Considerations
In the 2014 Payment Notice, we finalized the methodology that HHS
will use when operating a risk adjustment program on behalf of a State
in 2014. We propose to use the same methodology in 2015. In this
proposed rule, we propose to clarify the treatment of premium
assistance Medicaid alternative plans in this risk adjustment
methodology, and seek comment on potential adjustments to the
geographic cost factor in the HHS risk adjustment model for future
years.
(i) Incorporation of Premium Assistance Medicaid Alternative Plans in
the HHS Risk Adjustment Methodology
Section 1343(c) of the Affordable Care Act provides that risk
adjustment applies to non-grandfathered health insurance coverage
offered in the individual and small group markets. In some States,
expansion of Medicaid benefits under section 2001(a) of the Affordable
Care Act may take the form of enrolling newly Medicaid-eligible
enrollees into individual market plans. For example, these enrollees
could be placed into silver plan variations--either the 94 percent
silver plan variation or the zero cost sharing plan variation--with a
portion of the premiums and cost sharing paid for by Medicaid on their
behalf. Because individuals in these types of Medicaid expansion plans
receive significant cost-sharing assistance, they may utilize medical
services at a higher rate. To address this induced utilization in the
context of cost-sharing reduction plan variations in the HHS risk
adjustment methodology, we increase the risk score for individuals in
plan variations by a certain factor. We propose to use the same factor
for individuals enrolled in the corresponding Medicaid expansion plan
variations. Table 1 shows the cost-sharing adjustments for both 94
percent silver plan variation enrollees and zero cost-sharing plan
variation enrollees for silver QHPs as finalized in the 2014 Payment
Notice. We propose to implement these adjustments for 2014. We plan to
evaluate these adjustments in the future, after data from the initial
years of risk adjustment is available. We seek comment on this
approach.
Table 1--Cost-Sharing Reduction Adjustments
------------------------------------------------------------------------
Induced utilization
Plan variation factor
------------------------------------------------------------------------
94 percent Plan Variation...................... 1.12
Zero Cost-Sharing Plan Variation of Silver QHP. 1.12
------------------------------------------------------------------------
(ii) Adjustment to the Geographic Cost Factor
As finalized in the 2014 Payment Notice, the geographic cost factor
is an adjustment in the payment transfer formula to account for plan
costs such as input prices that vary geographically and are likely to
affect plan premiums. For the metal-level risk pool, it is calculated
based on the observed average silver plan premium in a geographic area
relative to the statewide average silver plan premium. It is separately
calculated for catastrophic plans in a geographic area relative to the
statewide catastrophic pool. However, several States have defined a
large number of rating areas. Less populous rating areas raise concerns
about the accuracy and stability of the calculation of the geographic
cost factor because in less populous rating areas the geographic cost
factor might be calculated based on a small number of plans. Inaccurate
or unstable geographic cost factors could distort premiums and the
stability of the risk adjustment model.
We seek comment on how to best adjust the geographic cost factors
or geographic rating areas in future years to address these potential
premium distortions. We also seek comments on how this adjustment
should be implemented for a separately risk adjusted pool of
catastrophic plans. We do not intend to make this adjustment for 2014.
c. Small Group Determination for Risk Adjustment
For a plan to be subject to risk adjustment, according to section
1343(c) of the Affordable Care Act and the definition of a ``risk
adjustment covered plan'' in Sec. 153.20, a plan must be offered in
the ``individual or small group market.'' The definition of small group
market in Sec. 153.20 references the definition at section 1304(a)(3)
of the Affordable Care Act.
Section 1304(a)(3) of the Affordable Care Act, in defining ``small
group market,'' references the definition of a ``small employer'' in
section 1304(b)(2) of the Affordable Care Act. That definition provides
that an employer with an average of at least 1 but not more than 100
employees on business days during the preceding calendar year and who
employs at least 1 employee on the first day of the plan year will be
considered a ``small employer.'' However, section 1304(b)(3) of the
Affordable Care Act provides that, for plan years beginning before
January 1, 2016, a State may elect to limit ``small employer'' to mean
an employer with at least 1 but not more than 50 employees.
In the 2014 Payment Notice, we stated that we believe that the
Affordable Care Act requires the use of a counting method that accounts
for part-time employees, and that the full-time equivalent method
described in section 4980H(c)(2)(E) of the Code is a reasonable method
to apply. Thus, we believe that the risk adjustment program must also
use a counting method that takes employees that are not full-time into
account when determining whether
[[Page 72330]]
a group health plan must participate in that program.
However, we also recognize that, because risk adjustment is
intended to stabilize premiums by mitigating the effects of the rating
rules, it is important that the program be available to plans that are
subject to the rating rules, to the extent permissible under the
Affordable Care Act. We recognize that a number of States, which have
primary enforcement jurisdiction over the market rules, may use
counting methods that do not take non-full-time employees into account.
Thus, we propose to clarify that in determining which group health
plans participate as small group plans in the risk adjustment program,
we would apply the applicable State counting method, unless the State
counting method does not take into account employees that are not full-
time. In that circumstance, we would apply the full-time equivalent
method described in section 4980H(c)(2)(E) of the Code.\7\ We believe
that this approach defers to State counting methods and aligns with
State enforcement of rating rules, within the bounds of what is
permissible under the Affordable Care Act. We seek comment on our
interpretation of the permissible counting rules for purposes of risk
adjustment, the approach described above, and on alternate counting
methods that may be preferable. We also seek comment on whether we
should codify these risk adjustment counting rules in regulation text.
---------------------------------------------------------------------------
\7\ We note that the IRS has published a proposed regulation
that contains further details that would apply to this calculation
(54.4980H-2(c)).
---------------------------------------------------------------------------
d. Risk Adjustment Data Validation
The 2014 Payment Notice established a risk adjustment data
validation program that HHS will use when operating risk adjustment on
behalf of a State. In the 2014 Payment Notice, we specified a framework
for this program that includes six stages: (1) Sample selection; (2)
initial validation audit; (3) second validation audit; (4) error
estimation; (5) appeals; and (6) payment adjustments.
To develop the details of the program, we sought the input of
issuers, consumer advocates, providers, and other stakeholders. We
issued the ``Affordable Care Act HHS-Operated Risk Adjustment Data
Validation Process White Paper'' on June 22, 2013. That white paper
discussed and sought comments on a number of potential considerations
for the development of the risk adjustment data validation methodology.
On June 25, 2013, we held a public meeting to discuss the topics
considered in the white paper. We received submissions from 53
commenters, including issuers, issuer trade groups, advocacy groups,
and consultants. As we noted in the white paper, our overall goals are
to promote consistency and a level playing field by establishing
uniform audit requirements, and to protect private information by
limiting data transfers during the data validation process.
In this proposed rule, we propose provisions for the risk
adjustment data validation process and methodology that reflect our
analysis of the white paper comments and our discussions with
stakeholders. We note that a State operating a risk adjustment program
is not required to adopt these standards. These proposed rules are
consistent with the white paper and lessons drawn from our experience
with Medicare Advantage risk adjustment data validation and thus should
be familiar to issuers.
(i) Sample Selection
The first stage in the HHS-operated risk adjustment data validation
process is the selection of a sample of an issuer's enrollees whose
risk adjustment data will be validated. In the proposed 2014 Payment
Notice, we stated that HHS would choose a sample size of enrollees such
that the estimated risk score errors would be statistically sound and
the enrollee-level risk score distributions would reflect enrollee
characteristics for each issuer. We stated that in determining the
appropriate sample size for data validation, we recognized the
importance of striking a balance between ensuring statistical soundness
of the sample and minimizing the operational burden on issuers,
providers, and HHS. Additionally, we stated that we would ensure that
the sample would cover critical subpopulations of enrollees for each
risk adjustment covered plan, such as enrollees with and without
hierarchical condition categories (HCCs). To develop a proposed sample
size for the first year of the HHS risk adjustment data validation
program, we propose to use the methodology outlined in the white paper.
Our goal in determining the enrollee sample size for the initial 2
years of risk adjustment data validation is to propose a statistically
valid sample large enough to inform us to the dynamics of the risk
adjustment data validation process in operation and estimation of risk
score accuracy. As we established in the 2014 Payment Notice, for HHS
to observe and optimize the risk adjustment data validation process, no
payment adjustments will be made based on the risk adjustment data
validation process for the initial 2 years of HHS-operated risk
adjustment.
In general, we propose to select the initial validation audit
sample for a given benefit year by dividing the relevant population
into a number of ``strata,'' representing different demographic and
risk score bands. We are proposing that, for the initial 2 years of the
risk adjustment data validation program, the initial validation audit
sample will consist of 200 enrollees from each issuer. We stated in the
2014 Payment Notice that the overall sample will reflect a
disproportionate selection of enrollees with HCCs. Here, we discuss in
detail our proposed sampling methodology, including our proposal to
group enrollees to account for age characteristics and health status.
Some commenters on the white paper suggested that we also consider
sampling based on plan types and other characteristics. We will
consider other sampling strategies in the future, but believe that we
do not yet have enough experience with the risk adjustment process to
determine the most appropriate sampling groups at this time.
Therefore, we are proposing a simple age and risk score
stratification for at least the initial 2 years of the program.
Following the division of the relevant population into strata, we
propose to use the following formulas to calculate a proposed sample
size for the initial validation audit each year. In general, the
proposed formula for the overall sample size for an issuer (n) is:
[[Page 72331]]
[GRAPHIC] [TIFF OMITTED] TP02DE13.008
Where:
H is the number of strata;
Nh is the population size of the hth stratum;
Y is the average risk score of the population, adjusted based upon
the estimated risk score error;
Sh represents the standard deviation of risk score error
for the hth stratum;
Prec represents the desired precision level (for example, 10
percent, meaning a 10 percent margin of error in the estimated risk
score); and
z-value is the z-value associated with the desired confidence level
(for example, 1.96 for a two-sided 95 percent confidence level).
As noted above, we propose a sample size of 200 enrollees from each
issuer for the initial 2 years of the program. The formula above would
be used after this initial 2-year period to calculate a more precise,
issuer-specific sample size for each issuer.
The proposed formula for calculating the sample size for each
stratum is:
[GRAPHIC] [TIFF OMITTED] TP02DE13.009
Where:
Nh is the population size of the hth stratum;
n is the overall sample size; and
Sh represents the standard deviation of risk score error for the
hth stratum.
For the 2014 benefit year, the parameters listed above were
developed using data from two principal sources: Medicare Advantage
risk adjustment data validation net error rates and variances; and
expenditures data from the Truven Health Analytics 2010
MarketScan[supreg] Commercial Claims and Encounters database
(MarketScan[supreg]). We chose to use Medicare Advantage error rates
because Medicare Advantage utilizes an HCC-based methodology similar to
the one used for HHS risk adjustment, and because it uses a similar
risk adjustment data validation process to determine payment error
rates.
We also chose to use the MarketScan[supreg] expenditure database
because of the comprehensiveness of the database, which was the primary
source for calibration for the HHS risk adjustment models. The database
contains enrollee-specific claims utilization, expenditures, and
enrollment across inpatient, outpatient, and prescription drug services
from a selection of large employers and health plans. The database
includes de-identified data from approximately 100 payers, and contains
more than 500 million claims from insured employees, spouses, and
dependents.
We used enrollee predicted expenditure results from our risk
adjustment model calibration, which was based on the MarketScan[supreg]
data, to stratify the population (by age group for enrollees with HCCs,
and within a single group for enrollees with no HCCs), then calculated
risk scores for the predicted expenditures to relate them to the
average expenditures. To estimate a sample size for each issuer, an
average issuer size was estimated based on the total expected insured
population and the total expected number of issuers. The average issuer
population containing enrollees with and without HCCs was assumed to be
split 20 percent with HCCs and 80 percent without HCCs, consistent with
the MarketScan[supreg] data.
We propose to group each issuer's enrollee population into 10
strata based on age group, risk level, and presence of HCCs, as
follows:
Strata 1-3 would include low, medium, and high risk adults
with the presence of at least one HCC.
Strata 4-6 would include low, medium, and high risk
children with the presence of at least one HCC.
Strata 7-9 would include low, medium, and high risk
infants with the presence of at least one HCC.
Stratum 10 will include the No-HCC population, which will
not be further stratified by age or risk level, because we assume this
stratum has a uniformly low error rate.
We calculated a predicted risk score for each individual in each
stratum by dividing the predicted expenditures for that individual by
the average predicted expenditures for the entire population. Using
these individual predicted risk scores, we calculated the overall
average risk score for all individuals in each risk-based stratum. This
calculation was performed nine times for the HCC population--once for
each of the three risk-based strata within each of the three age
groups. We set the minimum risk score for enrollees without HCCs in the
tenth stratum.
This method of stratification is similar to that used in the
Medicare Advantage risk adjustment data validation program. That
program divides enrollees into three strata, representing low, medium,
and high risk expenditures. Error rates and variances are calculated
for each of these strata. In the initial year, before error rate and
standard deviation data for the population subject to the HHS-operated
risk adjustment program are available, we propose to use the Medicare
Advantage error rates and variances to calculate sample sizes. After
the initial year, we will evaluate whether sufficient HHS-operated risk
adjustment error rate and standard deviation data are available to
calculate sample sizes.
We propose to use the lowest error rate across all HCC strata as
the error rate for the stratum of enrollees without HCCs, and we
propose to use the variance associated with that error rate to
calculate the standard deviation of the error for the stratum of
enrollees without HCCs. If error rates and variances are smaller than
assumed for this stratum, the resulting sampling precision may
increase.
Because the Medicare Advantage error rates and variances are not
calculated for different age bands, and therefore are available only
for three risk-score differentiated subgroups, we used the same risk
score error rates and standard
[[Page 72332]]
deviation for the age bands for a risk category. Thus, we used the same
risk score error rate and standard deviation assumptions for the adult,
child, and infant strata associated with each risk score band. We do
not anticipate the expected risk score error rate and variance to be
uniform for all age groups; however, in the absence of data, we made
this simplifying assumption. In general, we believe the Medicare
Advantage error rates and variances likely overstate the corresponding
error rates and assumptions for the HHS risk adjusted population, and
therefore, the estimated precision of our error estimates may be
understated.
The formulas identified above require data on error rates and
standard deviations for the strata, and also a target confidence
interval and sampling precision level (or margin of error). For the
initial year, we propose to use a 10 percent relative sampling
precision at a two-sided 95 percent confidence level. That is, we wish
to obtain a sample size such that 1.96 \8\ multiplied by the standard
error, divided by the estimated adjusted risk score, equals 10 percent
or less. After actual data are collected from the initial year, we will
test and evaluate the data for use in determining the sample size in
future years.
---------------------------------------------------------------------------
\8\ Critical value for the two-sided 95 percent confidence
level.
---------------------------------------------------------------------------
Once the proposed overall sample size is calculated, the enrollee
count will be distributed among the population based on the second
formula above for calculating the sample size of each stratum. Because
strata with enrollees with HCCs have a higher standard deviation of
risk score error, the overall sample will be disproportionately
allocated to enrollees with HCCs (Strata 1-9), helping to ensure
adequate coverage of the higher risk portion of the enrollee
population.
In the proposed rule for the 2014 Payment Notice, we suggested that
an issuer's initial validation audit sample for risk adjustment data
validation would consist of approximately 300 enrollees. After
conducting the calculations described above, we believe that we can
achieve acceptable sampling precision with a sample size of 200
enrollees for the initial years of HHS-operated risk adjustment data
validation. Therefore, we are proposing a sample size of 200 enrollees
in the initial 2 years of the program. As noted above, we may provide
for different, or issuer-specific, sample sizes in future years.
When data becomes available from the program's first year, we
expect to examine our sampling assumptions using actual enrollee data.
We anticipate that at least in the initial years of the risk adjustment
data validation program, the stratification design will remain
consistent with the design outlined above--nine HCC strata and one No-
HCC stratum. However, the specific size and allocation of the sample to
each stratum may be refined based on average issuer enrollee risk score
distributions. For example, in future years, we are considering using
larger sample sizes for larger issuers or issuers with higher
variability in their enrollee risk scores, and smaller sample sizes for
smaller issuers or issuers with lower variability in their enrollee
risk scores. The sampling design may also consist of a minimum and
maximum sample size per stratum for each average issuer (large, medium,
small) to follow when selecting the sample.
We seek comments on this approach, including our proposed sample
size of 200 enrollees for the initial 2 years of HHS-operated risk
adjustment data validation.
(ii) Initial Validation Audit
The second stage of the HHS-operated risk adjustment data
validation process is the initial validation audit. In Sec.
153.630(b)(1), we require an issuer of a risk adjustment covered plan
to engage one or more independent auditors to perform an initial
validation audit of a sample of its risk adjustment data selected by
HHS, which will include individually identifiable health information
subject to HIPAA.\9\ In this section of this proposed rule, we discuss
proposed standards and guidelines regarding the qualifications of the
initial validation auditor, including conflict of interest standards,
standards for the initial validation audit, rater consistency and
reliability, and confirmation of risk adjustment errors. As discussed
in the white paper, we considered existing best practices and standards
for independent auditors, such as those of Medicare Quality Improvement
Organizations and the National Committee for Quality Assurance, when
establishing our standards for initial validation auditors.
---------------------------------------------------------------------------
\9\ Whether any given organization is a HIPAA business associate
is a fact-specific inquiry. We expect that most independent auditors
operating on behalf of an issuer of a health plan would be
performing activities that would render them a business associate of
the covered plan, and would be required to enter into and maintain a
business associate agreement with the health plan.
---------------------------------------------------------------------------
(1) Initial Validation Auditor
The 2014 Payment Notice established certain standards for the
initial validation auditor. In Sec. 153.630(b)(2) and (b)(3), we
direct the issuer to ensure that the initial validation auditor is
reasonably capable of performing an initial validation audit, and is
reasonably free of conflicts of interest, such that it is able to
conduct the initial validation audit in an impartial manner with its
impartiality not reasonably open to question.
In the white paper, we elaborated on options for ensuring that an
initial validation auditor meets these criteria, including standardized
auditor certification processes and promulgation of best practices.
Many commenters sought additional information and guidance regarding
initial validation auditor selection and requested that HHS define
conflicts of interest between an issuer and the initial validation
auditor. We propose certain guidance on these topics here.
We are considering the following criteria for assessing conflicts
of interest between the issuer and the initial validation auditor:
Neither the issuer nor any member of its management team
(or any member of the immediate family of such a member) may have any
material financial or ownership interest in the initial validation
auditor, such that the financial success of the initial validation
auditor could be seen as materially affecting the financial success of
the issuer or management team member (or immediate family member) and
the impartiality of the initial validation audit process could
reasonably be called into question, or such that the issuer or
management team member (or immediate family member) could be reasonably
seen as having the ability to influence the decision-making of the
initial validation auditor;
Neither the initial validation auditor nor any member of
its management team or data validation audit team (or any member of the
immediate family of such a member) may have any material financial or
ownership interest in the issuer, such that the financial success of
the issuer could be reasonably seen as materially affecting the
financial success of the initial validation auditor or management team
or audit team member (or immediate family member) and the impartiality
of the initial validation audit process could reasonably be called into
question, or such that the initial validation auditor or management or
audit team member (or immediate family member) could be seen as having
the ability to influence the decision-making of the issuer;
Owners, directors and officers of the issuer may not be
owners, directors
[[Page 72333]]
or officers of the initial validation auditor, and vice versa;
Members of the data validation audit team of the initial
validation auditor may not be married to, in a domestic partnership
with, or otherwise be in the same immediate family as an owner,
director, officer, or employee of the issuer; and
The initial validation auditor may not have had a role in
establishing any relevant internal controls of the issuer related to
the risk adjustment data validation process when HHS is operating risk
adjustment on behalf of a State, or serve in any capacity as an advisor
to the issuer regarding the initial validation audit. In addition, we
are considering standards under which issuers would verify that no key
individuals involved in supervising or performing the initial
validation audit have been excluded from working with either the
Medicare or Medicaid program, are on the Office of the Inspector
General exclusion list, or are under investigation with respect to any
HHS programs.
We note that we intend to review the initial validation auditor's
qualifications and relationship to the issuer to verify that the
initial validation auditor is qualified to perform the audit, and that
the issuer and initial validation auditor are free of actual or
apparent conflicts of interest, including those stated above. We note
that HHS could gather information through external reporting to support
that review. Although we are confident that most issuers will exercise
diligence in selecting an initial validation auditor that will be able
to comply with HHS audit standards, we intend to monitor the
performance of initial validation auditors to determine whether
certification or additional safeguards are necessary.
We propose to amend Sec. 153.630(b)(1) to specify that the issuer
of a risk adjustment covered plan must provide HHS with the identity of
the initial validation auditor, and must attest to the absence of
conflicts of interest between the initial validation auditor (or the
members of its audit team, owners, directors, officers, or employees)
and the issuer (or its owners, directors, officers, or employees). We
propose to consider any individual with a significant ownership stake
in an entity such that the individual could reasonably be seen to have
the ability to influence the decision making of the entity to be an
``owner,'' and propose to consider any individual that serves on the
governing board of an entity to be a director of the entity. We are
contemplating beginning the initial validation process at the end of
the first quarter of the year following the benefit year, with the
issuer's submission of the initial validation auditor's identity. We
expect to identify the enrollee sample for the initial validation audit
in the summer of the year following the benefit year. We are
contemplating requiring delivery of the initial validation audit
findings to HHS in the fourth quarter of that year. We include a
proposed schedule of the risk adjustment data validation process at the
end of this section.
Once the audit sample is selected by HHS, we expect issuers would
ensure that the initial validation audit is conducted in the following
manner:
The issuer would provide the initial validation auditor
with source enrollment and source medical record documentation to
validate issuer-submitted risk adjustment data for each sampled
enrollee;
The issuer and initial validation auditor would determine
a timeline and information-transfer methodology that satisfies data
security and privacy requirements, including the applicable provisions
of HIPAA, and enables the initial validation auditor to meet HHS
established timelines;
The initial validation auditor would analyze the
enrollment and medical record data to validate the demographic
information, plan or plan variation enrollment, and health status of
each enrollee in the sample in accordance with the standards
established by HHS; and
The initial validation auditor would provide HHS with the
final results from the initial validation audit and all requested
information for the second validation audit.
We note that Sec. 153.630(f)(2) is not changed by this proposal,
and that the issuer would be required to ensure that its initial
validation auditor comply with the security standards described at 45
CFR 164.308, 164.310, and 164.312 in connection with the initial
validation audit. We seek comments on these proposals.
(2) Standards for the Initial Validation Audit
We propose to add a new paragraph (b)(5) to Sec. 153.630, in which
we propose that an initial validation audit review of enrollee health
status be conducted by medical coders certified after examination by a
nationally recognized accrediting agency for medical coding, such as
the American Health Information Management Association (AHIMA) or the
American Academy of Professional Coders (AAPC). We seek comment on
other nationally recognized accrediting agencies that may be
appropriate to certify medical coders who are performing the initial
validation audit review of enrollee health status.
(3) Validation of Enrollees' Risk Scores
An enrollee's risk score is derived from demographic and health
status factors, which requires the use of enrollee identifiable
information. Thus, we propose to add paragraph (b)(6) to Sec. 153.630,
to require an issuer to provide the initial validation auditor and the
second validation auditor with all relevant information on each sampled
enrollee, including source enrollment documentation, claims and
encounter data, and medical record documentation (defined below) from
providers of services to enrollees in the applicable sample without
unreasonable delay and in a manner that reasonably assures
confidentiality and security of data in transmission (``data in
transit''). We note that existing privacy and security standards, such
as standards under HIPAA and those detailed at Sec. 153.630(f)(2),
would apply. This information will be used to validate the enrollment,
demographic, and health status data of each enrollee. Only source
documentation for encounters with dates of services within the
applicable benefit year would be considered relevant. This would
require issuers to collect the appropriate enrollment and claims
information from their own systems, as well as from all relevant
providers (particularly with respect to medical record documentation).
We note that only a very small percentage of an issuer's records
containing personally identifiable information would be made available
to auditors as part of the risk adjustment data validation process, and
that similar transmissions are required today for data validation for
the Medicare Advantage program. As we describe in this section at
(viii), regarding data security standards, we are seeking comment on
the applicability and effectiveness of current standards, as well as
what other standards HHS should promulgate to ensure data security and
privacy protections.
We also propose to add paragraph (b)(7) to Sec. 153.630 to
describe the standards for validating each factor of an enrollee's risk
score. In paragraph (b)(7)(i), we propose that the initial validation
auditor must validate demographic data and enrollment information by
reviewing plan source enrollment documentation, such as the
[[Page 72334]]
834 transaction,\10\ which is the HIPAA-standard form used for plan
benefit enrollment and maintenance transactions. These enrollment
transactions reflect the data the issuer captured for an enrollee's
age, name, sex, plan of enrollment, and enrollment periods in the plan.
We note that certain identifying information from these enrollment
transactions, such as the enrollee's name, would be used to ensure that
the appropriate medical documentation has been provided.
---------------------------------------------------------------------------
\10\ Issuers and State Exchanges use the ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3--Benefit
Enrollment and Maintenance (834), August 2006, ASC X12N/005010X220,
as referenced in Sec. 162.1502, or ``834 form'' to transmit and
update enrollment and eligibility to HHS as often as daily but at
least monthly. In Federal operations, HHS and the issuer exchange
and update data via this same form.
---------------------------------------------------------------------------
The sample audit pool will consist of enrollees with and without
risk adjustment-eligible diagnoses within eligible dates of service.
For each enrollee in the sample with risk adjustment HCC scores, the
initial validation auditor would validate diagnoses through a review of
the relevant risk adjustment-eligible medical records. We consider
medical record documentation generated with respect to dates of service
that occurred during the benefit year at issue to be relevant for these
purposes. For enrollees without risk adjustment HCCs for whom the
issuer has submitted a risk adjustment-eligible claim or encounter, we
would require the initial validation auditor to review all medical
record documentation for those risk adjustment-eligible claims or
encounters, as provided by the issuer, to determine if HCC diagnoses
should be assigned for risk score calculation, provided that the
documentation meets the requirements for the risk adjustment data
validation audits. Documents used to validate all components of the
risk score must reflect dates of service during the applicable benefit
year. In the initial years of the data validation program, we plan to
accept certain supplemental documentation, such as health assessments,
to support the risk adjustment diagnosis. We expect to provide
additional details on acceptable supplemental documentation in future
guidance.\11\
---------------------------------------------------------------------------
\11\ See ``HHS-Operated Data Collection Policy FAQ'' for a
discussion of chart review as an acceptable source of supplemental
diagnosis codes. Additional detail will be provided in future
guidance. https://www.regtap.info/uploads/library/HHS_OperatedDataCollectionPolicyFAQs_062613.
---------------------------------------------------------------------------
Therefore, in Sec. 153.630(b)(7)(ii), we propose that the
validation of enrollee health status (that is, the medical diagnoses)
occur through medical record review, that the validation of medical
records include a check that the records originate from the provider of
the medical services, that they align with the dates of service for the
medical diagnosis, and that they reflect permitted providers and
services. In this paragraph, we also propose, for purposes of Sec.
153.630, that ``medical record documentation'' mean: ``clinical
documentation of hospital inpatient or outpatient treatment or
professional medical treatment from which enrollee health status is
documented and related to accepted risk adjustment services that
occurred during a specified period of time.'' Medical record
documentation must be generated in the course of a face-to-face or
telehealth visit documented and authenticated by a permitted provider.
We expect to provide additional guidance on telehealth services in
future guidance.
In Sec. 153.630(b)(7)(iii), we propose that medical record review
and abstraction be performed in accordance with industry standards for
coding and reporting. Current industry standards are set forth in the
International Classification of Diseases, Ninth Revision, Clinical
Modification (ICD-9-CM), or the International Statistical
Classification of Diseases and Related Health Problems, Tenth Revision,
4th Edition (ICD-10-CM) guidelines for coding and reporting.
(4) Confirmation of Risk Adjustment Errors
We note that the data validation audit processes may identify
various discrepancies, many of which will have no impact on an
enrollee's risk score. For example, if a medical diagnosis underlying
an enrollee's HCC was present on a claim but was not supported by
medical record documentation, but the same HCC was supported by the
medical record for a different diagnosis, we propose that no risk
adjustment error be assessed for the enrollee's HCC. However, if none
of the medical record documentation supports a particular HCC diagnosis
for an enrollee, we propose that a risk adjustment error be assessed.
We consider a risk adjustment error to occur when a discrepancy
uncovered in the data validation audit process results in a change to
the enrollee's risk score. A risk adjustment error may result from
incorrect demographic data, an unsupported HCC diagnosis, or a new HCC
diagnosis identified during the medical record review. An unsupported
HCC diagnosis could be the result of missing medical record
documentation, medical record documentation that does not reflect the
diagnosis, or invalid medical record documentation (such as an
unauthenticated record or a record that does not meet risk adjustment
data collection standards for the applicable benefit year).
We propose in Sec. 153.630(b)(7)(iv) that a senior reviewer must
confirm any finding of a risk adjustment error. We believe that a
senior reviewer is a reviewer with substantial expertise in medical
record coding such that the initial validation auditor would consider
the senior reviewer to be the standard against which to measure inter-
rater reliability and coding consistency. As such, we propose to define
a senior reviewer as a medical coder certified by a nationally
recognized accrediting agency who possesses at least 5 years of
experience in medical coding. We seek comment on the credentials and
expertise that should be required of a senior reviewer.
(5) Review Consistency and Reliability
Validation audits typically include methods of evaluating review
consistency and reliability. We believe such processes help to ensure
the integrity of the data validation process and strengthen the
validity of audit results. In Sec. 153.630(b)(8), we propose that the
initial validation auditor measure and report to the issuer and HHS its
inter-rater reliability rates among its reviewers. Such processes
measure the degree of agreement among reviewers. We propose to set the
threshold for the acceptable level of consistency among reviewers at 95
percent for both demographic and enrollment data review, and health
status data review outcome. Reviews should be performed using rater-to-
standard procedures whereby reviews conducted by reviewers with
extensive qualifications and credentials are used to establish testing
thresholds or standards for consistency.
(iii) Second Validation Audit
The initial validation audit will be followed by a second
validation audit, which will be conducted by an auditor retained by HHS
to verify the accuracy of the findings of the initial validation audit.
We propose to select a subsample of the initial validation audit
sample enrollees for review by the second validation auditor. The
second validation auditor would perform the data validation audit of
the enrollee subsample, adhering to the same audit standards applicable
to the initial validation audit described above, but would only review
enrollee information that was originally presented during the initial
validation audit. In Sec. 153.630(c),
[[Page 72335]]
we established standards for issuers of risk adjustment covered plans
related to HHS's second validation audit. In Sec. 153.630(b)(4), we
established that issuers must submit (or ensure that their initial
validation auditor submits) data validation information, as specified
by HHS, from their initial validation audit for each enrollee included
in the initial validation sample. Issuers must transmit all information
to HHS or its second validation auditor in a timeframe and manner to be
determined by HHS. The second validation auditor would inform the
issuer of error findings based on its review of enrollees in the second
validation audit subsample. We will provide additional guidance on the
manner and timeframe of these submissions in the future.
As discussed in the white paper, we are considering selecting the
second validation audit subsample using a sampling methodology that
will allow for pair-wise means testing to establish statistical
difference between the initial and second validation audit results. If
the pair-wise means test results suggest that the difference in
enrollee results between the initial validation audit and second
validation audit is not statistically significant, the initial
validation audit error results would be used for error estimation and
calculation of adjustments for plan average risk score. If the test
results suggest a statistical difference, the second validation auditor
would perform another validation audit on a larger subsample of the
enrollees previously subject to the initial validation audit. The
results from the second validation audit of the larger subsample would
again be compared to the results of the initial validation audit using
the pair-wise means test. Again, if no statistical difference is found
between the initial validation audit and the second validation audit
conducted on the larger subsample, HHS would apply the initial
validation audit error results for error estimation using all enrollees
selected for the initial validation audit sample. However, if a
statistical difference is found based on the second validation audit on
the larger subsample, HHS would apply the second validation audit error
results to modify the risk scores of the issuer's enrollees, as
discussed below. We are considering using a 95 percent confidence
interval, but seek comment on the appropriate confidence interval to
use with respect to these pair-wise means tests.
As discussed in the white paper, we are considering a number of
ways to expedite the second validation audit and the subsequent appeals
processes. One possibility would be to begin the second validation
audit on those enrollees for which the initial validation audit is
complete, even if the entire initial validation audit has not been
completed. For example, an issuer could allow its initial validation
auditor to submit data validation documentation and results a number of
months in advance of the HHS established deadline for submission of
initial validation audit results. The second validation auditor would
thus be able to begin its review earlier, permitting more time to
provide feedback to the issuer on the results of that review and
allowing for more opportunity for discussion prior to finalizing the
second validation audit findings. Prior to finalizing the risk score
adjustment based on the second validation audit findings, the second
validation auditor may request discussions with the initial validation
auditor to identify the source of the differences, or may review the
initial validation auditor's processes. If the initial validation
audits are substantiated, the second validation auditor may adjust its
risk scores accordingly. This process would not allow for any
additional documentation to be submitted on those enrollees for which
the second validation audit began early. The appeals decision from the
expedited, concurrent process would be final and binding, but would
provide issuers the opportunity to begin the process earlier. If HHS
establishes a concurrent second validation audit and appeals process,
we would need to develop intermediate timelines for initial validation
auditor submission of audit documentation and data to the second
validation auditor. We seek comments on this approach for establishing
a concurrent second validation audit and appeals process.
(iv) Error Estimation
The fourth stage in the HHS risk adjustment data validation process
is error estimation. Upon completion of the initial and second
validation audits, HHS will derive an issuer-level risk score
adjustment and confidence interval. This adjustment would be used to
adjust the average risk score for each risk adjustment eligible plan
offered by the issuer. HHS intends to provide each issuer with
enrollee-level audit results and the error estimates.
We are proposing a two-phase procedure to accept or correct the
results of the initial validation audit based on the results of the
second validation audit. In phase one, as described above, we conduct a
pair-wise statistical test for consistency between the initial
validation and second validation audit results (as described above for
second validation audits). In phase two, if we determine that the
results of the two audits are inconsistent, we would adjust the initial
validation audit results based on the second validation audit results.
For phase two, we describe two options for using second validation
audit results to derive an estimate of an overall corrected risk score
for each issuer.
Phase One: Consistency Test between Initial and Second Validation Audit
In phase one, a pair-wise statistical test would be performed to
determine if the initial validation audit sample results should be
adjusted using the results of the second validation audit. To
illustrate the underlying statistical test, consider the following
notations:
xi is the ith initial validation audit risk score observation in
the second validation audit sample of n observations;
yi is the ith second validation audit risk score observation in the
second validation audit sample of n observations;
di is the difference between yi and xi within the second validation
audit sample;
d is the mean of all di observations within the second validation
audit sample; and
Sx is standard deviation of all di observations within the second
validation audit sample.
Assume an issuer submits enrollment and claims data to its
dedicated distributed data environment that are used to compute a set
of ``original'' risk scores. As required by the risk adjustment data
validation process, the issuer engages an independent validation
auditor, who reviews N enrollee records, as sampled by HHS, and
validates the original enrollee risk scores.
From the N enrollees in the initial validation audit sample, HHS
selects a smaller second validation audit subsample of n enrollees. For
each second validation audit selected record, HHS calculates the
difference, di = yi - xi. HHS then conducts a pair-wise means test to
determine whether the mean difference, d, is statistically significant
(that is, unlikely to be zero). Specifically, HHS would conduct a
statistical test to determine if zero (0) is contained within the
range,
[GRAPHIC] [TIFF OMITTED] TP02DE13.010
If so, HHS would conclude that there is no statistically significant
difference between risk scores determined by the initial and second
validation audit
[[Page 72336]]
processes, and would accept the results of the initial validation
audit.
However, if zero (0) is not contained within this range (that is,
the difference between d and zero is statistically significant), HHS
would expand the second validation audit subsample to select a larger
subset of N, have the second validation auditor review the enrollee
files, and again conduct a pair-wise means test using this larger
subsample. If the statistical test shows no statistically significant
difference, HHS would accept the results of the initial validation
audit. If the statistical test shows a statistically significant
difference between the initial and larger subsample second validation
audit findings, HHS would conduct phase two to adjust the full initial
validation audit sample based on the larger subsample second validation
audit findings.
Phase Two: Adjustment to the Initial Validation Audit Sample
In phase two, we propose that if the difference between the initial
and second validation audits is found to be statistically significant,
then HHS would utilize the risk score error rate calculated from the
larger second validation audit subsample to adjust the full initial
validation audit sample, which could in turn be used to adjust the
average risk scores for each plan. This approach would adjust the
entire initial validation audit sample using a one-for-one replacement
for the enrollees reviewed by the second validation audit, and a
uniform adjustment for the enrollees that were not. We also considered
another option, as discussed in the white paper and below. Under this
alternate approach, we would use the error rate from the larger second
validation audit subsample directly in our determination of whether and
by how much to adjust the risk scores of all enrollees in the issuer's
risk adjustment covered plans. This approach would disregard all
enrollees in the initial validation audit sample that were not reviewed
as part of the larger second validation audit subsample.
To illustrate these two options under the phase two adjustment
process, consider the following notations:
M is the total number of enrollees in the risk adjustment covered
plan;
N is the initial validation audit sample size;
n is the size of the larger second validation audit subsample;
yN is the mean of the initial validation audit-adjusted risk scores
in the initial validation audit sample N;
yn is the mean of the second validation audit-adjusted risk scores
in the second validation audit sample n;
xN is the mean of the original risk scores in the initial
validation audit sample N;
xn is the mean of the original risk scores in the second validation
audit sample n;
XM is the original risk score total across all M records;
YN is the projected correct risk score across all M records using
the initial validation error rate; and
[GRAPHIC] [TIFF OMITTED] TP02DE13.011
yn is the projected correct risk score across all M records using
the error rate from the larger second validation audit subsample.
[GRAPHIC] [TIFF OMITTED] TP02DE13.012
Under this proposed approach, we would undertake the following
steps to adjust the risk scores in the initial validation audit
samples:
(1) Replace the initial validation audit-adjusted risk scores with
the second validation audit-adjusted risk scores in the n records that
were sampled from N (one-for-one risk score adjustment).
(2) Apply a uniform adjustment factor,
[GRAPHIC] [TIFF OMITTED] TP02DE13.013
to the initial validation audit-adjusted risk scores in the (N-n)
records not reviewed by the second validation audit.
Under the alternate approach, the second validation audit-adjusted
risk scores in the n records in the larger second validation audit
subsample would be used as the basis for adjustment of plan-level
average risk scores.
Considering the comments in response to the white paper, and in
order to estimate error using a narrower confidence interval, we are
proposing to use the larger second validation audit subsample to adjust
the initial validation audit sample (by direct replacement for
enrollees reviewed by the second validation audit, and by proportional
adjustment for the other enrollees), whose adjusted error rate could be
used as a basis to adjust plan average risk scores for all risk
adjustment covered plans of the issuer. We seek comment on our proposed
approach.
Adjusted Risk Score Projections
Based on the proposals described above, the results of the initial
or second validation audits could be used as the basis for projecting a
corrected risk score for each issuer's population. The projections
described above would be performed on a stratum-by-stratum level and
weighted accordingly to achieve an estimate of the corrected risk score
for each issuer. As described in the white paper, a stratified separate
ratio estimator \12\ would be used to estimate the corrected average
risk score for each issuer. To compute the stratified separate ratio
estimator, HHS would first extrapolate the total correct risk score
within each stratum, then sum the stratum-specific projected correct
risk scores for all strata, with the total sum divided by the total
enrollee count to arrive at the corrected average risk score. The
projected risk score error could then be calculated as the difference
between the recorded average risk score across the entire population
and the point estimate.
---------------------------------------------------------------------------
\12\ For a discussion of stratified separate ratio estimators,
see Cochran, William G., Sampling Techniques, third edition, John
Wiley & Sons, 1977, at 164.
---------------------------------------------------------------------------
The stratified separate ratio estimator of the total correct risk
score is calculated using the following equation:
[GRAPHIC] [TIFF OMITTED] TP02DE13.014
Where:
YR is used to estimate the correct risk score;
yh is the sample mean of the correct risk score in stratum h;
xh is the sample mean of the original risk score in stratum h;
Xh is the total sum of the original risk score in stratum h; and
H is the total number of strata.
YR would then be normalized by the enrollment count to derive a
corrected average risk score for the issuer.
To estimate the variance of the point estimate, HHS will first
estimate the variance within each stratum and then sum the stratum-
specific variances for all strata. The estimated variance of the
stratified separate ratio estimate for the correct risk score is
calculated as follows:
[[Page 72337]]
[GRAPHIC] [TIFF OMITTED] TP02DE13.015
Where:
nh is the number of enrollees sampled in stratum h;
Nh is the population frequency in stratum h;
yih is the corrected risk score for the ith sampled enrollee in
stratum h;
xih is the original risk score for the ith sampled enrollee in
stratum h; and
[GRAPHIC] [TIFF OMITTED] TP02DE13.016
The square root of the estimated variance is the standard error (SE).
We are proposing to use the issuer's corrected average risk score
to compute an adjustment factor, based on the ratio between the
corrected average risk score and the original average risk score that
could be applied to adjust plan average risk for all risk adjustment
eligible plans within the issuer. We are considering two options for
applying the adjustment factor. Under the first option, we are
considering directly applying an adjustment factor to all of the
issuer's risk adjustment covered plans. Under the second option, we are
considering applying this adjustment only if the corrected average risk
score and the recorded average risk score are statistically different.
Were we to implement the second option, a critical parameter of the
statistical test would be the target confidence interval, which would
determine the stringency of the test. For example, we could perform the
statistical test at the 90, 95, or 99 percent confidence interval. We
note that the HHS Office of the Inspector General performs certain
similar data validation tests using a 90 percent confidence interval,
while the Medicare Advantage risk adjustment data validation program
uses a 99 percent confidence interval. We also note that even if the
statistical test finds the two risk scores to be statistically
different, we could apply the adjustment factor to adjust plan average
risk scores based upon using the point estimate of the adjusted average
risk score, or some other value within an interval around the point
estimate, such as the upper or lower bound of a 95 percent confidence
interval around the point estimate.
The choice among these options poses a tradeoff between reducing
issuers' incentives to aggressively report or code diagnoses, and
increasing the variability of issuers' risk adjustment payments. Under
the first option, an issuer that reports data that systematically
overstates its risk score would, on average, assuming the corrected
risk scores are unbiased estimates of the true risk scores, receive a
downward adjustment to its reported risk score equal in magnitude to
the degree of overstatement. As a result, this option could eliminate
an issuer's incentive to overstate its risk score. On the other hand,
due to sampling variation, the first option would routinely introduce
significant variability in issuers' risk scores (both up and down),
even if the issuer was making no attempt to manipulate its risk scores.
While these adjustments would make such an issuer's risk adjustment
payments less predictable in any given year, they would not introduce
systematic bias in risk scores (assuming the corrected risk scores are
unbiased estimates of the true risk scores).
The second option, in contrast, would only adjust an issuer's risk
scores when it is very likely that the reported risk scores deviated
from the true values, so issuers' risk adjustment payments would be
more predictable. However, particularly if the confidence level of the
statistical test were set at a high threshold, this approach would
often fail to make adjustments when an issuer does in fact overstate
its risk score.
Based on commenters' feedback on the white paper, we are proposing
to use the second approach described above--we would adjust the plan
average risk scores of an issuer based upon the ratio between the
correct average risk score estimate and recorded average risk score
only if the difference between the estimated and recorded average risk
scores were determined to be statistically significant. We are
proposing to use a 95 percent confidence interval to determine if the
adjusted average risk score and the recorded average risk score are
statistically different. Nevertheless, we welcome comments on both
options discussed above and on the appropriate tradeoff between
reducing issuers' incentive to aggressively report or code diagnoses
and increasing the variability of issuers' risk adjustment payments. In
addition, regarding the proposed approach in particular, we seek
comments on the appropriate confidence interval to apply when
determining whether an adjustment to an issuer's plan average risk
score is necessary.
Error Estimation Example
To illustrate the corrected average risk score and error estimation
process described above, assume that a sample of 200 enrollees is
selected for initial validation audit review for a particular issuer.
From this sample, assume that a subsample of 20 enrollees is selected
for second validation audit review. Assume the issuer's average
recorded population risk score is 1.60 and the projected correct
population risk score from the sample of 200 is 1.40, with a two-sided
95 percent confidence interval of 1.30 to 1.50.
The first step in the error estimation process will determine if
the initial validation audit results should be corrected based on the
second validation audit review or accepted without adjustment. We would
perform a pair-wise means test to compare the projected risk scores for
the sample of 200 enrollees and the subsample of 20 enrollees.
For this example, assume that the statistical test fails (that is,
there is a statistically significant difference between the projected
risk scores in the sample of 200 and the subsample of 20).\13\ We would
then select an expanded subsample from the original sample of 200
enrollees. Assume that the larger sample is a sample of 100 enrollees.
Following completion of the larger second validation audit, we would
perform the pair-wise means test again. Assume the test fails again
(that is, there is a statistically significant difference in the
projected risk scores between the sample of 200 and the larger
subsample of 100). We would conclude that the risk scores in the sample
of 200 enrollees need to be adjusted.
---------------------------------------------------------------------------
\13\ If the test passes, then no adjustments would be made to
the sample of 200 and the projected results from this sample would
be used to adjust average plan liability risk scores.
---------------------------------------------------------------------------
[[Page 72338]]
In the second step of error estimation, HHS would adjust the risk
scores in the sample of 200 using a one-for-one replacement for the
risk scores of the enrollees reviewed by the second validation auditor,
and a uniform adjustment for the other enrollees in the initial
validation audit sample. The one-for-one replacement will replace the
risk scores calculated based on initial validation audit findings, with
the risk scores calculated based on the second validation audit
findings for the larger subsample of 100. The remaining 100 enrollees
that were not included in the second validation audit subsample would
be adjusted based on the ratio of two projections: (1) the projected
correct population risk score using the second validation audit
findings in the subsample of 100 (assume this projected risk score is
1.50, with a two-sided 95 percent confidence interval of 1.30 to 1.70);
divided by (2) the projected correct population risk score using the
initial validation audit findings in the sample of 200 (equal to 1.40
based on the assumption noted above). The adjustment ratio is equal to
1.07 = 1.50/1.40. Therefore, the risk scores of the remaining 100
enrollees not included in the second validation audit subsample would
be increased by 7 percent.
The projected correct population risk score from the revised sample
of 200 would therefore be 1.45, with a two-sided 95 percent confidence
interval of 1.35 to 1.55.
(v) Appeals
We anticipate that the risk adjustment data validation appeals
process would occur annually, beginning in the spring of the year in
which the error rate will be applied to adjust risk scores and affect
risk adjustment payments and charges. Because we are not applying error
rates to adjust payments and charges for the initial 2 years of the
risk adjustment program, the first year for which payments and charges
would apply would be 2016. Risk scores and initial payments and charges
would be calculated in the spring of 2017 for that payment cycle. We
anticipate the appeals process will begin in the spring of 2018, prior
to the 2017 payment transfers. We will provide additional guidance on
the appeals process and schedule in future rulemaking.
(vi) Payment Transfer Adjustments
Risk adjustment payment transfer amounts will be based on adjusted
plan average risk scores. The data validation audits would be used to
develop a risk score error adjustment for each issuer, as described
above. Each issuer's risk score adjustment would be applied to adjust
the plan average risk score for each of the issuer's risk adjustment
covered plans. This adjustment would be applied on a prospective basis
beginning with the risk adjustment data for benefit year 2016 (that is,
the adjustments would take effect in 2018, during payment transfers for
2017). Because an issuer's adjusted plan average risk score is
normalized as part of the risk adjustment payment calculation, the
effect of an issuer's risk score error adjustment will depend upon its
magnitude and direction compared to the average risk score error
adjustment and direction for the entire market.
We are considering reporting the following summary findings to
issuers for the initial 2 years of the program:
State- or market-wide error rates.
Issuer error rates.
Initial validation audit or error rates.
Projected financial impact of the proposed risk
adjustments, as determined by the initial and second validation
auditors.
The 2-year interval before risk adjustment data validation
adjustments are applied to risk scores and affect payments and charges
will provide initial validation auditors and issuers the opportunity to
reform existing processes prior to the implementation of HHS payment
transfer adjustments for the 2016 benefit year. We believe that the
reports described above will help issuers and initial validation
auditors better understand the likely effects of the risk adjustment
data validation program in States where HHS operates risk adjustment.
We seek comment on considerations for reporting error rates and any
additional information that could improve transparency in the markets.
(vii) Oversight
The second final Program Integrity Rule outlined selected oversight
provisions related to the premium stabilization programs, such as
maintenance of records, sanctions for failing to establish a dedicated
distributed data environment, and the application of a default risk
adjustment charge to issuers in the individual and small group market
that fail to provide data necessary for risk adjustment. We are
proposing to expand on these provisions to include oversight related to
risk adjustment data validation when HHS operates risk adjustment on
behalf of a State.
Section 153.620 provides that an issuer that offers risk adjustment
covered plans must comply with any data validation requests by the
State or HHS on behalf of the State, and that an issuer that offers
risk adjustment covered plans must also maintain documents and records,
whether paper, electronic, or in other media, sufficient to enable the
evaluation of the issuer's compliance with applicable risk adjustment
standards, and must make that evidence available upon request to HHS,
OIG, the Comptroller General, or their designee, or in a State where
the State is operating risk adjustment, the State or its designee to
any such entity.
Based on our authority under section 1321(c)(2) of the Affordable
Care Act, we are proposing in Sec. 153.630(b)(9) that, when HHS
operates risk adjustment on behalf of a State, an issuer of a risk
adjustment covered plan that does not engage an initial validation
auditor within the timeframe specified by HHS of the year following the
benefit year, or that otherwise does not arrange for a risk adjustment
initial validation audit that complies with applicable regulations, may
be subject to civil money penalties. We note that we intend to apply
the proposed sanction so that the level of the enforcement action would
be proportional to the level of the violation. While we would reserve
the right to impose penalties up to the maximum amounts proposed in
Sec. 156.805(c), as a general principle, we intend to work
collaboratively with issuers to address problems in conducting the risk
adjustment data validation process. In our application of the proposed
sanction, we would take into account the totality of the issuer's
circumstances, including such factors as an issuer's previous record
(if any), the frequency and level of the violation, and any aggravating
or mitigating circumstances. Our intent is to encourage issuers to
address non-compliance and not to severely affect their business,
especially where the issuer demonstrates good faith in monitoring
compliance with applicable standards, identifies any suspected
occurrences of non-compliance, and attempts to remedy any non-
compliance.
We also note that HHS will not perform the initial validation audit
for an issuer that does not hire an initial validation auditor or
otherwise does not submit initial validation audit results that comply
with the regulations in subpart G and subpart H of part 153. For these
issuers, we propose in Sec. 153.630(b)(10) to assign a default risk
adjustment charge. We are considering whether this charge should be the
same charge as contemplated in Sec. 153.740(b), should be based on a
default error rate, or should be calculated based on some other
methodology. We will propose a
[[Page 72339]]
methodology for computing the default error rate or default charge in
future rulemaking.
Issuers may request technical assistance from HHS at any stage of
the risk adjustment data validation process. HHS may also offer such
assistance directly if we become aware of technical issues arising at
any time during the risk adjustment data validation process. We plan to
provide further assistance and clarification around the risk adjustment
data validation process through a range of vehicles, including
additional guidance, training materials, webinars, and user group
calls. We welcome comment on these proposals.
(viii) Data Security
We recognize that the risk adjustment data validation process
outlined here will require the transmission of sensitive data and
documents between the issuer and the initial and second validation
auditors. HHS takes seriously the importance of safeguarding protected
health information and personally identifiable information. As outlined
in the white paper, we believe that it will be necessary to specify
standards for safeguarding this information through proper information
storage and transmission methods.
We note that Sec. 153.630(f)(2) requires issuers to ensure that it
and its initial validation auditor comply with the security standards
described at 45 CFR 164.308, 164.310, and 164.312 in connection with
the initial validation audit, the second validation audit, and any
appeal. In addition to these requirements, we are considering defining
standards and expectations that would apply to issuers and initial and
second validation auditors pertaining to data security, management, and
transmission. These standards could require systems to safeguard and
encrypt data ``at rest'' and ``in transit,'' and to authenticate
identities of users. They could also prohibit the auditors from using
or disclosing the information they receive for any purpose other than
the audit and oversight. Similar standards have been implemented under
the Medicare Advantage risk adjustment data validation process. We
intend to address these issues and the treatment of initial and second
validation auditors under HIPAA in future rulemaking or guidance, and
seek comment on the applicability and effectiveness of current
standards, as well as what other standards HHS should promulgate to
ensure data security and privacy protections.
(ix) Implementation Timeline
For the 2014 benefit year, we expect to implement risk adjustment
data validation activities in early 2015. Implementation activities
would begin with issuers submitting the identity of their initial
validation auditor to HHS in accordance with Sec. 153.630(b)(1). In
the spring of 2015, we would utilize the data submitted by issuers for
risk adjustment payments and charges and apply the sampling methodology
described above to select the audit sample for each issuer for the
initial validation audit. During the same timeframe, we would train
issuers and initial validation auditors on the risk adjustment data
validation process and the applicable standards for performing the
initial validation audit, which would begin in the summer of 2015. Once
the initial validation audit has concluded in the fall of 2015, HHS
would begin the second validation audit process, which would continue
into 2016. Risk adjustment data validation implementation activities
for the 2014 benefit year data would conclude in 2016 after
distribution of HHS findings to issuers, processing of appeals, and
estimation and reporting of final risk scores. Since the 2014 benefit
year is the first year of implementation of risk adjustment data
validation, we expect to report on lessons learned from these
activities, and to use this information to improve the risk adjustment
data validation process.
We expect that the risk adjustment data validation implementation
activities would follow a similar schedule for each subsequent benefit
year. The 2016 benefit year would be the first year when payments and
charges are adjusted. Those adjustments would occur after the
conclusion of risk adjustment data validation activities for the 2016
benefit year, in the summer of 2018.
e. HHS Audits of Issuers of Risk Adjustment Covered Plans
In order to safeguard Federal funds, we propose in Sec. 153.620(c)
that HHS or its designee may audit an issuer of a risk adjustment
covered plan, when HHS operates risk adjustment on behalf of a State,
to assess the issuer's compliance with the requirements of subparts G
and H of 45 CFR part 153. The issuer must also ensure that its relevant
contractors, subcontractors, or agents cooperate with the audit. We
anticipate conducting targeted audits of issuers of risk adjustment
covered plans informed by, among other criteria and sources, the data
provided to HHS through the dedicated distributed data environment and
any previous history of noncompliance with these standards. We will
provide further details on this audit program, including timelines,
procedures, and substantive requirements, in future rulemaking and
guidance. This audit will focus on those aspects of the risk adjustment
program that are not validated through the risk adjustment data
validation program, described above in this proposed rule. In
particular, we anticipate that the audit will focus on records
documenting that the plan was a risk adjustment covered plan. For
example, the audit might seek to review records evidencing the type of
plan at issue (for example, an individual market metal level plan
versus a catastrophic plan), the plan renewal date (to ensure the plan
was subject to the market reform rules during the time periods for
which data was submitted to the dedicated distributed data
environment), and, in the case of an insured group health plan, the
plan size (to ensure the plan was a small employer plan).
We also propose that if an audit results in a finding of material
weakness or significant deficiency (as these terms are defined in GAAS
issued by the American Institute of Certified Public Accountants, and
Government Auditing Standards issued by the Government Accountability
Office (GAO) \14\) for compliance with any requirement of subpart G or
H of 45 CFR part 153, the issuer: (i) Within 30 calendar days of the
issuance of the final audit report, must provide a written corrective
action plan to HHS for approval; (ii) implement that corrective action
plan; and (iii) provide to HHS written documentation of the corrective
actions once taken. If HHS determines as the result of an audit that
the issuer of the risk adjustment covered plan was required to pay
additional risk adjustment charges or has received risk adjustment
payments to which it was not entitled, it may require the issuer to pay
such amounts to the Federal government.
---------------------------------------------------------------------------
\14\ See Government Auditing Standards (2011 Revision),
available at: https://www.gao.gov/yellowbook. For public companies,
the Public Company Accounting Oversight Board (PCAOB) sets audit
standards. See https://pcaobus.org/Standards/Auditing/Pages/default.aspx. For non-public companies, the AICPA sets audit
standards. See https://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
---------------------------------------------------------------------------
To reduce the burden on issuers and HHS, to the extent practical,
we intend to coordinate any audits of issuers of risk adjustment
covered plans with related audits of Exchange financial programs and
premium stabilization programs, such as reinsurance. We seek comment on
this proposal, including
[[Page 72340]]
the standards that should govern these audits.
2. Provisions and Parameters for the Transitional Reinsurance Program
The Affordable Care Act directs that a transitional reinsurance
program be established in each State to help stabilize premiums for
coverage in the individual market from 2014 through 2016. In the 2014
Payment Notice, we expanded on the standards set forth in subparts C
and E of the Premium Stabilization Rule and established the reinsurance
payment parameters and uniform reinsurance contribution rate for the
2014 benefit year. In this proposed rule, we propose the reinsurance
payment parameters and uniform reinsurance contribution rate for the
2015 benefit year and certain oversight provisions related to the
operation of the reinsurance program.
a. Major Medical Coverage
Section 1341(b)(3)(B)(i) of the Affordable Care Act states that
``the contribution amount for each issuer [must] proportionally reflect
each issuer's fully insured commercial book of business for all major
medical products . . .'' In the preamble to the 2014 Payment Notice (78
FR 15456), we included a general description of major medical coverage
for reinsurance purposes based on the comprehensiveness of the coverage
provided (for example, a range of medical, surgical, and preventive
services) and the settings in which the coverage is provided (for
example, inpatient and outpatient settings). Commenters requested that
HHS codify a definition of major medical coverage for purposes of
reinsurance contributions in regulation text.
Codification in regulation text of a more specific definition of
major medical coverage for reinsurance contributions purposes would
provide additional clarification for some contributing entities.
Therefore, we propose to add a definition of major medical coverage in
Sec. 153.20 to mean health coverage for a broad range of services and
treatments provided in various settings that provides minimum value in
accordance with Sec. 156.145.
We believe that because minimum value is calculated on a broad set
of services--comparable to the essential health benefits applicable to
individual and small group coverage--it is a reasonable measure of
comprehensiveness of coverage. Minimum essential coverage under an
employer-sponsored plan generally will provide minimum value if the
plan's share of total allowed costs of benefits provided under the plan
exceeds 60 percent of such costs (see section 36B(c)(2)(C)(II) of the
Code). The minimum value standards established under Sec. 156.145 also
deem coverage that meets any of the levels of coverage requirements
described in Sec. 156.140 to satisfy this requirement. Because the
calculation of minimum value is an objective process, we believe that
the use of the concept of minimum value is a reasonable way to clarify
the definition of major medical coverage and reduce uncertainty as to
whether reinsurance contributions are required of certain unique plan
arrangements. In addition, we believe that the concept of minimum value
will be familiar to stakeholders, and will not add undue burden to the
determination of whether a plan offers major medical coverage for
reinsurance purposes. It is important to note that this definition of
major medical coverage only applies for determining reinsurance
contributions under section 1341 of the Affordable Care Act. We seek
comment on this proposed definition.
b. Self-insured Plans Without Third Party Administrators
Section 1341(b)(1)(A) of the Affordable Care Act provides that
``health insurance issuers and third party administrators on behalf of
group health plans'' must make reinsurance contributions. We recognize
that some self-insured group health plans self-administer the benefits
and services provided under the plan, and do not use the services of a
third party administrator. We believe that section 1341(b)(1)(A) of the
Affordable Care Act clearly applies to both issuers of insured plans as
well as to self-insured plans that use third party administrators.
However, our continued study of this issue leads us to believe that
this provision may reasonably be interpreted in one of two ways--it may
be interpreted to mean that self-insured, self-administered plans must
make reinsurance contributions, or it may be interpreted to mean that
such plans are excluded from the obligation to make reinsurance
contributions. For the reasons discussed below, we propose to modify
the definition of a ``contributing entity'' for the 2015 and 2016
benefit years to exclude self-insured group health plans that do not
use a third party administrator in connection with claims processing or
adjudication (including the management of appeals) or plan enrollment.
Following consideration of the comments submitted with respect to
the 2014 Payment Notice and the proposed Program Integrity Rule, we
propose that for the 2015 and 2016 benefit years, the phrase ``third
party administrators on behalf of group health plans'' not include
self-insured, self-administered group health plans. An insured plan and
a self-insured plan administered by a third party administrator are
similar in that each arrangement involves an employer and an outside
commercial entity--an issuer or a third party administrator (which is
often an insurance company or an affiliate)--for the administration of
the core health insurance functions of claims processing and plan
enrollment. We note that under section 1341(b)(3)(B) of the Affordable
Care Act and Sec. 153.400(a)(1)(ii), reinsurance contribution amounts
are to reflect a ``commercial book of business.'' Our consideration of
these comments leads us to believe that a group health plan
administered by a third party administrator would normally be viewed as
part of the third party administrator's ``commercial book of
business,'' but that a self-insured, self-administered plan would not
normally be viewed as part of any entity's ``commercial book of
business.''
Therefore, we propose that for the 2015 and 2016 benefit years, a
``contributing entity'' would mean: (a) A health insurance issuer; or
(b) a self-insured group health plan (including a group health plan
that is partially self-insured and partially insured, where the health
insurance coverage does not constitute major medical coverage) that
uses a third party administrator in connection with claims processing
or adjudication (including the management of appeals) or plan
enrollment. The proposed modification for the 2015 and 2016 benefit
years would exclude from the obligation to make reinsurance
contributions those self-insured plans that do not use a third party
administrator for their core administrative processing functions--
adjudicating, adjusting, and settling claims (including the management
of appeals), and processing and communicating enrollment information to
plan participants and beneficiaries. This proposed amendment would
recognize that some self-insured group health plans, which we believe
would generally not be considered to be using the core services of a
third party administrator, may use third parties for ancillary
administrative support, and we would consider these plans to be self-
administered for purposes of the reinsurance program.
For purposes of the definition of ``contributing entity,'' we
propose to consider a third party administrator to be, with respect to
a self-insured group
[[Page 72341]]
health plan, an entity that is not under common ownership or control
with the self-insured group health plan or its sponsor that provides
administrative services to the self-insured group health plan in
connection with claims processing or adjudication (including the
management of appeals) or plan enrollment. We seek comment on this
definition, and whether certain types of service providers, such as an
attorney providing legal advice in connection with claims adjudication,
or an issuer administering an insured component of a group health plan
that is partially self-insured and partially insured should be
considered a third party administrator for these purposes.
In addition, we seek comment on whether the core administrative
functions that we have described above--claims processing or
adjudication (including the management of appeals) and plan
enrollment--are the appropriate criteria for this revised definition,
and what other administrative functions, such as medical management
services, provider network development, or other support tasks, should
be considered in determining whether a self-insured group health plan
uses a third party administrator. We also seek comment on whether a
self-insured plan must perform these core administrative functions for
all healthcare benefits and services provided to enrollees under the
plan in order not to be considered to be using a third party
administrator, or whether certain benefits or services, such as
pharmaceutical benefits or behavioral health benefits, or a de minimis
or small percentage of all benefits and services may be performed by an
unaffiliated service provider. If so, we seek comment on which benefits
or services should be excluded from this criterion, or how such a de
minimis amount or small percentage should be measured.
While, upon further consideration of the issue, we believe the
statutory language can reasonably be read to support the proposition
that self-insured group health plans that do not use third party
administrators for the functions described above should not be
obligated to make reinsurance contributions, we also recognize, as a
public policy matter, that it would be disruptive to plans and issuers
to modify the definition of ``contributing entity'' for the 2014
benefit year at this late date. Health insurance issuers have already
set premiums and developed operational processes based on the
definition of ``contributing entity'' that was previously finalized in
the 2014 Payment Notice. To prevent lower reinsurance payments, the
contribution rate would have to be raised for other contributing
entities, many of whom have already set their 2014 premiums based on
the contribution rate finalized in March 2013. Excluding self-insured,
self-administered group health plans from the set of entities that must
provide reinsurance contributions for the 2014 benefit year, without
raising the rate on other entities, would decrease the funds available
for reinsurance payments for that benefit year, and thus upset settled
estimates with respect to expected reinsurance payments that were used
to establish premiums.
Therefore, we do not propose to change the definition of a
``contributing entity'' for the 2014 benefit year. That definition will
remain as provided for in the second final Program Integrity Rule--a
health insurance issuer or a self-insured group health plan (including
a group health plan that is partially self-insured and partially
insured, where the health insurance coverage does not constitute major
medical coverage), regardless of whether the group health plan uses a
third party administrator. The modification to the definition of
``contributing entity'' described above would be effective only for the
2015 and 2016 benefit years.
Finally, we note that our proposed change to the definition of a
contributing entity may have implications for our plan aggregation
rules at Sec. 153.405(g), and seek comment on whether a plan sponsor
that maintains two or more group health plans covering the same covered
lives, where one or more group health plans are insured and one or more
are self-insured and do not use a third party administrator for core
administrative functions, should be required to treat the multiple
plans as a single group health plan for purposes of calculating any
reinsurance contribution amount due.
c. Uniform Reinsurance Contribution Rate
(i) Uniform Reinsurance Contribution Rate for the 2015 Benefit Year
Section 153.220(c) provides that HHS is to publish in the annual
HHS notice of benefit and payment parameters the uniform reinsurance
contribution rate for the upcoming benefit year. Section
1341(b)(3)(B)(iii) of the Affordable Care Act specifies that $10
billion for reinsurance contributions are to be collected from
contributing entities in 2014 (the reinsurance payment pool), $6
billion in 2015, and $4 billion in 2016. Additionally, sections
1341(b)(3)(B)(iv) and 1341(b)(4) of the Affordable Care Act direct that
$2 billion in funds are to be collected for contribution to the U.S.
Treasury in 2014, $2 billion in 2015, and $1 billion in 2016. Finally,
section 1341(b)(3)(B)(ii) of the Affordable Care Act allows for the
collection of additional amounts for administrative expenses. Taken
together, these three components make up the total dollar amount to be
collected from contributing entities for each of the 3 years of the
reinsurance program under the uniform reinsurance contribution rate.
As discussed in the 2014 Payment Notice, each year, the uniform
reinsurance contribution rate will be calculated by dividing the sum of
the three amounts (the reinsurance payment pool, the U.S. Treasury
contribution, and administrative costs) by the estimated number of
enrollees in plans that must make reinsurance contributions:
[GRAPHIC] [TIFF OMITTED] TP02DE13.017
As discussed in greater detail below, we are proposing to collect $25.4
million for administrative expenses for the 2015 benefit year (or 0.4
percent of the $6 billion to be dispersed). Therefore, the total amount
to be collected would be approximately $8.025 billion. Our estimate of
the number of enrollees in plans that must make reinsurance
contributions yields an annual per capita contribution rate of $44 for
the 2015 benefit year.
[[Page 72342]]
(ii) Timing of Collection of Reinsurance Contributions
As set forth in the 2014 Payment Notice, under Sec. 153.405(b), no
later than November 15 of the 2014, 2015, and 2016 benefit years, as
applicable, a contributing entity must submit an annual enrollment
count of the number of covered lives of reinsurance contribution
enrollees for the applicable benefit year to HHS. Under Sec.
153.405(c)(1), HHS is to notify the contributing entity of the
reinsurance contribution amount to be paid for the applicable benefit
year within 30 days of the submission of the annual enrollment count,
or by December 15 of the applicable benefit year. Under Sec.
153.405(c)(2), a contributing entity is to remit reinsurance
contributions to HHS within 30 days after the date of the notification.
We recognize that the reinsurance collections provided for in the
Affordable Care Act--$12 billion for 2014, $8 billion for 2015, and $5
billion for 2016--will result in substantial up-front payments from
contributing entities for the reinsurance program. Therefore, we are
proposing to modify our collection schedule for the program, so that we
would collect the reinsurance contribution amounts for reinsurance
payments and for administrative expenses earlier in the calendar year
following the applicable benefit year, approximately in accordance with
the schedule currently described in Sec. 153.405(c), but collect the
reinsurance contribution amounts for payments to the U.S. Treasury in
the last quarter of the calendar year following the applicable benefit
year. Therefore, we propose to modify Sec. 153.405(c) so that a
contributing entity would make reinsurance contributions in two
installments to HHS--one at the beginning of the calendar year
following the applicable benefit year, and one at the end. As noted in
the second final Program Integrity Rule, the proposed policy is
designed to alleviate the upfront burden of the reinsurance
contribution, allowing contributing entities additional time to make
the payment. We note that the proposed change in the collection
schedule would not affect the amount of funds collected for reinsurance
payments. Additionally, the amounts allocated to reinsurance payments
and administrative expenses are needed to operate the reinsurance
program, while the amounts allocated for payments to the U.S. Treasury
are not needed for the operation of the transitional reinsurance
program. Therefore, collecting the amounts allocated to payments to the
U.S. Treasury later in the calendar year following the applicable
benefit year will not affect the reinsurance program, and will
alleviate a contributing entity's upfront financial burden.
Under this proposal, the first of the two installments each year
would include the reinsurance contribution amounts allocated to
reinsurance payments and administrative expenses. We propose in Sec.
153.405(c)(1) that following submission of the annual enrollment count,
HHS would notify a contributing entity of the reinsurance contribution
amount allocated to reinsurance payments and administrative expenses to
be paid for the applicable benefit year. If the enrollment count is
timely submitted, HHS intends to notify the contributing entity by
December of benefit year 2014, 2015, or 2016, as applicable. We note
that, due to our desire to align the notification of reinsurance
contributions due with our monthly payment and collections cycle, this
schedule differs slightly from the schedule currently set forth in
Sec. 153.405(c)(3), which provides for notification by the later of 30
days of the submission of the annual enrollment count or by December
15. We propose in Sec. 153.405(c)(3) that the contributing entity
remit this amount within 30 days after the date of the first
notification.
The second installment would cover the portion of the reinsurance
contribution amount allocated to the payments for the U.S. Treasury to
be paid for a benefit year. We propose in Sec. 153.405(c)(2), that in
the fourth quarter of the calendar year following the applicable
benefit year, HHS would notify the contributing entity of the portion
of the reinsurance contribution amount allocated for payments to the
U.S. Treasury for the applicable benefit year. Again, under proposed
Sec. 153.405(c)(3), a contributing entity would remit this amount
within 30 days after the date of this second notification. We note that
the contributing entity would be required to submit an annual
enrollment count only once for each benefit year under Sec.
153.405(b).
For example, for the 2014 benefit year, of the $63.00 annual per
capita contribution rate, $52.50 would be allocated towards reinsurance
payments and administrative expenses, and $10.50 towards payments to
the U.S. Treasury. Thus, we contemplate that if a contributing entity
submits its enrollment count for the 2014 benefit year in a timely
manner (by November 15, 2014), a reinsurance contribution payment of
$52.50 per covered life would be invoiced in December 2014, and payable
in January, 2015. Another reinsurance contribution payment of $10.50
per covered life would be invoiced in the fourth quarter of 2015, and
payable late in the fourth quarter of 2015.
We propose that for the 2015 benefit year, the proposed $44 annual
per capita contribution rate be allocated $33 towards reinsurance
payments and administrative expenses, and $11 towards payments to the
U.S. Treasury. These amounts would similarly be payable in January 2016
and late in the fourth quarter of 2016, respectively.
We plan to establish the uniform reinsurance contribution rate for
the 2016 benefit year in the HHS notice of benefit and payment
parameters for 2016.
We seek comment on this proposal. We note that we are considering a
variation of this proposal under which contributing entities would be
provided the option of paying the entire reinsurance contribution
amount with the first installment, at the beginning of the calendar
year following the applicable benefit year. We also clarify that the
two installment payments (or one, should a contributing entity be
permitted and elect to make the entire payment with the first
installment) would be reported with 2014 data for purposes of the risk
corridors and MLR calculations due July 31, 2015, despite the fact that
the later installment would not have been paid at that time. This has
the effect of leaving the MLR and risk corridors calculations
unchanged.
(iii) Allocation of Uniform Reinsurance Contribution Rate
Section 153.220(c) provides that HHS is to set in the annual HHS
notice of benefit and payment parameters for the applicable benefit
year the proportion of contributions collected under the uniform
reinsurance contribution rate to be allocated to reinsurance payments,
payments to the U.S. Treasury, and administrative expenses. In the 2014
Payment Notice, we stated that reinsurance contributions collected for
2014 will be allocated pro rata to the reinsurance pool, administrative
expenses, and the U.S. Treasury, up to $12.02 billion. In Table 2, we
specify these proportions (or amounts, as applicable):
[[Page 72343]]
Table 2--Proportion of Reinsurance Contributions Collected Under the
Uniform Reinsurance Contribution Rate for the 2015 Benefit Year for
Reinsurance Payments, Payments to the U.S. Treasury, and Administrative
Expenses
------------------------------------------------------------------------
------------------------------------------------------------------------
Proportion or amount for:...... If total If total
contribution contribution
collections under collections under
the uniform the uniform
reinsurance reinsurance
contribution rate contribution rate
are less than or are more than
equal to $8.025 $8.025 billion.
billion.
Reinsurance payments........... 74.8 percent ($6 The difference
billion/$8.025 between total
billion). collections and
those
contributions
allocated to the
U.S. Treasury and
administrative
expenses.
Payments to the U.S. Treasury.. 24.9 percent ($2 $2 billion.
billion/$8.025
billion).
Administrative expenses........ 0.3 percent ($25.4 $25.4 million.
million/$8.025
billion).
------------------------------------------------------------------------
As shown in Table 2, if the total amount of contributions collected
is less than or equal to $8.025 billion, we propose to allocate
approximately 74.8 percent of the reinsurance contributions collected
to reinsurance payments, 24.9 percent of the reinsurance contributions
collected to the U.S. Treasury, and 0.3 percent of the reinsurance
contributions collected to administrative expenses. We note that the
proposed method of collection would not affect the allocation to
reinsurance payments, administrative expenses, and payments to the U.S.
Treasury.
To provide that all reinsurance contributions collected for a
benefit year are paid out for claims for that benefit year, we propose
to amend Sec. 153.230(d) to provide that if HHS determines that the
amount of all reinsurance payments requested under the national payment
parameters from all reinsurance-eligible plans in all States for a
benefit year will not be equal to the amount of all reinsurance
contributions collected for reinsurance payments under the national
contribution rate in all States for an applicable benefit year, HHS
will determine a uniform pro rata adjustment (up or down) to be applied
to all such requests for reinsurance payments for all States. We
propose that each applicable reinsurance entity, or HHS on behalf of a
State, must reduce or increase the reinsurance payment amounts for the
applicable benefit year by any adjustment required under that
paragraph.
For example, for 2014, if HHS collects $9 billion for the
reinsurance payments pool and $10 billion in reinsurance payments are
requested, HHS and each applicable reinsurance entity would reduce all
reinsurance payments by 10 percent (effectively decreasing the
coinsurance rate). If HHS collects $11 billion for the reinsurance
payments pool and $10 billion in reinsurance payments are requested,
HHS and each applicable reinsurance entity would increase all
reinsurance payments by 10 percent (effectively increasing the
coinsurance rate).
We seek comment on this payment proposal, including on whether any
excess collections should be allocated to increasing coinsurance rates
above 100 percent, or whether such funds should be used instead to
change other reinsurance parameters or used for future benefit years.
Because our proposal above would provide that all reinsurance
contributions collected for a benefit year are paid out for claims for
that benefit year, we propose to delete and reserve Sec. 153.235(b),
which currently provides that any excess reinsurance contributions
collected from contributing entities for any benefit year but unused
for the applicable benefit year must be used for reinsurance payments
in subsequent benefit years. For years beyond the 2014 benefit year
(for which we propose to pay out all reinsurance contributions
collected, as described above), we seek comment on whether we should
have the flexibility to use excess contributions collected in the
applicable benefit year for that benefit year or in a subsequent
benefit year.
(iv) Administrative Expenses
In the 2014 Payment Notice, we estimated that the Federal
administrative expenses of operating the reinsurance program would be
$20.3 million, based on our estimated contract and operational costs.
We propose to use the same methodology to estimate the administrative
expenses for the 2015 benefit year. These estimated costs would cover
the costs related to contracts for developing the uniform reinsurance
payment parameters and the uniform reinsurance contribution rate,
collecting reinsurance contributions, making reinsurance payments, and
conducting account management, data collection, program integrity and
audit functions, operational and fraud analytics, training for entities
involved in the reinsurance program, and general operational support.
We propose to exclude from these administrative expenses the costs
associated with work performed by Federal personnel. To calculate our
proposed reinsurance administrative expenses for 2015, we divided HHS's
projected total costs for administering the reinsurance programs on
behalf of States by the expected number of enrollees in reinsurance-
eligible plans for the benefit year.
We estimate this amount to be approximately $25.4 million for the
2015 benefit year. This estimate has increased for the 2015 benefit
year because we will be making reinsurance payments in the 2015 benefit
year for the 2014 benefit year, and as discussed below, will engage in
program integrity and audit-related activity in 2015 to oversee the
reinsurance program. We believe that this figure reflects the Federal
government's significant economies of scale, which helps to decrease
the costs associated with operating the reinsurance program. Based on
our estimate of covered lives for which reinsurance contributions are
to be made for 2015, we are proposing a uniform reinsurance
contribution rate of $0.14 annually per capita for HHS administrative
expenses. We provide details below on the methodology we used to
develop the 2015 enrollment estimates.
For the 2014 benefit year, we allocated the administrative expenses
equally between contribution and payment-related activities. Because we
anticipate that our additional activities in the 2015 benefit year,
including our program integrity and audit activities, will also be
divided approximately equally between contribution and payment-related
activities, we again propose to allocate the total administrative
expenses equally between these two functions. Therefore, as shown in
Table 3, we expect to apportion the annual per capita amount of $0.14
of administrative expenses as follows: (a) $0.07 of the total amount
collected per capita for administrative expenses for the collection of
contributions from health insurance issuers and group health plans; and
(b) $0.07 of the total amount collected per capita for administrative
expenses for
[[Page 72344]]
reinsurance payment activities, supporting the administration of
payments to issuers of reinsurance-eligible plans.
TABLE 3--Breakdown of Administrative Expenses (annual, per capita)
------------------------------------------------------------------------
Estimated
Activities expenses
------------------------------------------------------------------------
Collecting reinsurance contributions from health $0.07
insurance issuers and group health plans...............
Calculation and disbursement of reinsurance payments.... 0.07
Total annual per capita expenses for HHS to perform all 0.14
reinsurance functions..................................
------------------------------------------------------------------------
If HHS operates the reinsurance program on behalf of a State, HHS
would retain the annual per capita fee to fund HHS's performance of all
reinsurance functions, which would be $0.14. If a State establishes its
own reinsurance program, HHS would transfer $0.07 of the per capita
administrative fee to the State for purposes of administrative expenses
incurred in making reinsurance payments, and retain the remaining $0.07
to offset the costs of collecting contributions. We note that the
administrative expenses for reinsurance payments will be distributed to
those States that operate their own reinsurance program in proportion
to the State-by-State total requests for reinsurance payments made
under the uniform reinsurance payment parameters.
d. Uniform Reinsurance Payment Parameters
Our goal in setting the reinsurance payment parameters is to
achieve the greatest impact on rate setting, and therefore premiums,
through reductions in plan risk, while complementing the current
commercial reinsurance market. Section 1341(b)(2)(B) of the Affordable
Care Act directs the Secretary, in establishing standards for the
transitional reinsurance program, to include a formula for determining
the amount of reinsurance payments to be made to issuers for high-risk
individuals that provides for the equitable allocation of funds. In the
Premium Stabilization Rule, we provided that reinsurance payments to
eligible issuers will be made for a portion of an enrollee's claims
costs paid by the issuer (the coinsurance rate, meant to reimburse a
proportion of claims while giving issuers an incentive to contain
costs) that exceeds an attachment point (when reinsurance would begin),
subject to a reinsurance cap (when the reinsurance program stops paying
claims for a high-cost individual). The coinsurance rate, attachment
point, and reinsurance cap together constitute the uniform reinsurance
payment parameters.
Given the smaller pool of reinsurance contributions to be collected
for the 2015 benefit year, we are proposing that the uniform
reinsurance payment parameters for the 2015 benefit year be established
at an attachment point of $70,000, a reinsurance cap of $250,000, and a
coinsurance rate of 50 percent. We estimate that these uniform
reinsurance payment parameters will result in total requests for
reinsurance payments of approximately $6 billion for the 2015 benefit
year. We believe setting the coinsurance rate at 50 percent and
increasing the attachment point allows for the reinsurance program to
help pay for nearly the same group of high-cost enrollees as was the
case for the 2014 benefit year, while still encouraging issuers to
contain costs. We believe that maintaining the reinsurance cap for the
2015 benefit year while ensuring that the coinsurance rate sufficiently
compensates issuers for high risk individuals will make it easier for
issuers to estimate the effects of reinsurance. We believe that these
uniform reinsurance payment parameters will support the reinsurance
program's goals of promoting nationwide premium stabilization and
market stability while providing issuers incentives to continue to
effectively manage enrollee costs. We intend to continue to monitor
individual market enrollment and claims patterns to appropriately
disburse reinsurance payments throughout each of the benefit years of
the transitional reinsurance program.
As discussed in the 2014 Payment Notice, to assist with the
development of the uniform reinsurance payment parameters and the
premium adjustment percentage index, HHS developed the Affordable Care
Act Health Insurance Model (ACAHIM). The ACAHIM estimates market
enrollment, incorporating the effects of State and Federal policy
choices, and accounting for the behavior of individuals and employers.
The outputs of the ACAHIM, especially the estimated enrollment and
expenditure distributions, were used to analyze a number of policy
choices relating to the uniform reinsurance contribution rate and
uniform reinsurance payment parameters proposed in this rule.
The ACAHIM generates a range of national and State-level outputs
for 2015, including the level and composition of enrollment across
markets given the eligible population in each State. The ACAHIM is
described below in two sections: (1) the approach for estimating 2015
enrollment; and (2) the approach for estimating 2015 expenditures. The
ACAHIM uses recent Current Population Survey (CPS) data adjusted for
small populations at the State level, exclusion of undocumented
immigrants, and population growth in 2015 to assign individuals to the
various coverage markets.
Specifically, the ACAHIM assigns each individual to a single health
insurance market as his or her baseline (pre-Affordable Care Act)
insurance status. In addition to assuming that individuals currently in
Medicare, TRICARE, or Medicaid will remain in such coverage, the ACAHIM
takes into account the probability that a firm will offer employment-
based coverage based on the CPS distribution of coverage offers for
firms of a similar size and industry. Generally, to determine the
predicted insurance enrollment status for an individual or family (the
``health insurance unit'' or ``HIU''), the ACAHIM calculates the
probability that the firm will offer insurance, then models Medicaid
eligibility, and finally models eligibility for advance payments of the
premium tax credit and cost-sharing reductions under the Exchange.
Whenever a transition to another coverage market is possible, the
ACAHIM takes into account the costs and benefits of the decision for
the HIU and assigns a higher probability of transition to those with
the greatest benefit. The ACAHIM assumptions of the rate at which
uninsured individuals will take up individual market coverage are based
on current take-up rates of insurance across States, varied by
demographics and incomes and adjusted for post-Affordable Care Act
provisions, such as advance payments of the premium tax credit and
cost-sharing reductions.
Estimated expenditure distributions from the ACAHIM are used to set
the uniform reinsurance payment parameters so that estimated
contributions from all contributing entities equal estimated payments
for all reinsurance-eligible plans. The ACAHIM uses the Health
Intelligence Company, LLC (HIC) database from calendar year 2010, with
the claims data trended to 2015 to estimate total medical expenditures
per enrollee by age, gender, and area of residence. The expenditure
distributions are further adjusted to take into account plan benefit
design, or ``metal'' level (that is, ``level of coverage,'' as defined
in
[[Page 72345]]
Sec. 156.20) and other characteristics of individual insurance
coverage in an Exchange. To describe a State's coverage market, the
ACAHIM computes the pattern of enrollment using the model's predicted
number and composition of participants in a coverage market. These
estimated expenditure distributions were the basis for the uniform
reinsurance payment parameters.
e. Adjustment Options
In the 2014 Payment Notice, we finalized the following uniform
reinsurance payment parameters for the 2014 benefit year--a $60,000
attachment point, a $250,000 reinsurance cap, and an 80 percent
coinsurance rate. However, updated information, including the actual
premiums for reinsurance-eligible plans, as well as recent policy
changes, suggest that our prior estimates of the payment parameters may
overestimate the total covered claims costs of individuals enrolled in
reinsurance-eligible plans in 2014. To account for this, we propose to
decrease the 2014 attachment point to $45,000. We seek comment on this
proposal.
f. Deducting Cost-Sharing Reduction Amounts From Reinsurance Payments
Subpart H of 45 CFR part 153 governs the submission of reinsurance
claims to an issuer's dedicated distributed data environment. Under
Sec. 156.410, if an individual is determined eligible to enroll in a
QHP in the individual market offered through an Exchange and elects to
do so, the QHP issuer must assign the individual to a standard plan or
cost-sharing plan variation based on the enrollment and eligibility
information submitted by the Exchange. Issuers of QHPs offered in an
individual market through an Exchange will receive cost-sharing
reduction payments for enrollees in their plan variations. Therefore,
in the 2014 Payment Notice (78 FR 15499), we stated that the enrollee-
level data submitted by an issuer of a reinsurance-eligible plan must
include claims data and data related to determining cost-sharing
reductions provided through a cost-sharing plan variation, to permit
HHS to calculate an issuer's plan paid amounts on behalf of an
enrollee. Here, we propose to explain the methodology HHS would use to
deduct the amount of cost-sharing reductions paid on behalf of an
enrollee enrolled in a QHP in an individual market through an Exchange.
In this section, we first set forth a methodology for policies that
cover only one enrollee, then policies with more than one enrollee,
such as family plans, and finally, for policies under a limited cost
sharing plan variation.
As specified in Sec. 153.230, HHS will calculate reinsurance
payments by applying the uniform reinsurance payment parameters for the
applicable benefit year to the issuer's plan paid amounts on behalf of
each enrollee in a reinsurance-eligible plan for the benefit year.
However, this calculation may not always account for the cost-sharing
reduction payments the QHP issuer receives for an enrollee, resulting
in an issuer receiving payments twice for the same enrollee's total
costs. We believe that the cost-sharing amounts provided by HHS to a
QHP issuer for an enrollee in a plan variation should be deducted from
the total plan paid amounts to avoid ``double payment'' \15\ to the QHP
issuer of the reinsurance-eligible plan because the QHP issuer is
already being reimbursed for the value of the cost-sharing reductions
provided.
---------------------------------------------------------------------------
\15\ We note an increase in reinsurance claims spread evenly
across the individual market may not necessarily result in higher
reinsurance payments to all issuers in aggregate. However, increased
requests for reinsurance payments may result in a higher pro rata
reduction to be applied to all reinsurance payments because total
reinsurance payments for a benefit year cannot exceed the
reinsurance contributions collected for reinsurance payments (see 45
CFR 153.230(d)).
---------------------------------------------------------------------------
Under the Secretary's authority under section 1341(b)(2)(B) of the
Affordable Care Act to establish a payment formula for the reinsurance
program, we propose a method through which HHS intends to account for
cost-sharing reduction payments when calculating reinsurance payments
for QHP issuers for reinsurance-eligible plans offered in an individual
market. We seek to avoid requiring QHP issuers to engage in a
complicated re-adjudication of claims to determine cost-sharing
reduction amounts multiple times throughout the year. We believe that
the proposed methodology set forth below will accurately estimate those
cost-sharing reduction payments while also alleviating the burden on
both QHP issuers and HHS.
We propose that for each enrollee enrolled in a QHP plan variation,
we will subtract from the QHP issuer's total plan paid amounts for the
enrollee in a reinsurance-eligible plan the difference between the
annual limitation on cost sharing for the standard plan and the annual
limitation on cost sharing for the plan variation. Because reinsurance
payments are made for enrollees only when the issuer's total plan paid
amounts exceeds the attachment point (for example, $60,000 in the 2014
benefit year), we believe that it is highly unlikely that an enrollee
for which a QHP issuer is eligible for reinsurance payments will not
have reached the annual limitation on cost sharing. Therefore, the
difference between the two annual limitations on cost sharing is likely
to be an accurate estimate of cost-sharing reduction payments provided
by HHS to the QHP issuer.\16\ We propose to apply this approach to
calculating the amounts of cost-sharing reductions provided for an
enrollee in a silver plan variation or a zero cost sharing plan
variation.
---------------------------------------------------------------------------
\16\ We note that because the annual limitation on cost sharing
applies only to in-network services, it is possible that an enrollee
could incur additional cost-sharing reductions on out-of-network
services. However, except in the case of zero cost sharing plan
variations, an issuer is not required to reduce cost sharing out-of-
network, and we believe that an issuer will rarely choose to do so
because the AV calculator does not recognize any change in AV due to
a reduction in out-of-network cost sharing. Although it is possible
that an enrollee in a zero cost sharing plan variation could incur
significant out-of-network cost-sharing reductions beyond the
standard plan's annual limitation on cost sharing, we believe such a
circumstance will be relatively rare because of the substantial out-
of-pocket costs an enrollee would likely incur in the form of
balance billing.
---------------------------------------------------------------------------
For policies with multiple enrollees, such as family policies, we
propose to allocate the difference in annual limitation in cost sharing
across all enrollees covered by the family policy in proportion to the
enrollees' QHP issuer total plan paid amounts. We believe that such an
approach is intuitive and will be easy to operationalize. We considered
an alternative approach that would allocate the difference in annual
limitation in cost sharing equally across all enrollees in a family
policy, with any difference in annual limitations on cost sharing that
exceeds the total plan paid amounts for a particular enrollee to be
reallocated equally across the other enrollees. That approach would
tend to result in a higher allocation of cost sharing on low-claims-
cost individuals, which we believe is unrealistic.
In contrast, we propose not to reduce the QHP issuer's plan paid
amounts for purposes of calculating reinsurance payments for an Indian
in a limited cost sharing plan variation. We note that such enrollees
will have the same annual limitation on cost sharing as individuals
enrolled in standard plans, and thus, an approach that calculates the
difference in annual limitations on cost sharing would yield estimated
cost-sharing reductions of zero. We believe that this result is
reasonable for individuals with plan paid amounts greater than the
attachment point because those individuals are likely to have incurred
significant claims costs with providers for which cost sharing is not
reduced--that is, providers other
[[Page 72346]]
than the Indian Health Service and facilities operated by an Indian
Tribe, Tribal Organization, or Urban Indian Organization. Thus, we
believe that these individuals are likely to have reached the full
annual limitation on cost sharing for the standard plan.
We also considered an alternative approach that would require
issuers to re-adjudicate claims periodically throughout the year to
calculate cost-sharing reductions provided to date for an Indian
enrolled in a limited cost sharing plan, but believe that such an
approach would be burdensome to QHP issuers and only slightly improve
the accuracy of cost-sharing reduction estimates. Finally, we
considered an approach under which QHP issuers would submit an estimate
of the effective annual limitation on cost sharing for limited cost
sharing plans. However, we believe that this will be difficult for a
QHP issuer to estimate due to the lack of cost-sharing reduction data
for the early years of the Exchanges.
g. Audits
(i) HHS Audits of State-Operated Reinsurance Programs
To safeguard the use of Federal funds in the transitional
reinsurance program, we propose in Sec. 153.270(a) that HHS or its
designee may conduct a financial and programmatic audit of a State-
operated reinsurance program to assess compliance with the requirements
of subparts B and C of 45 CFR part 153. A State that establishes a
reinsurance program must ensure that its applicable reinsurance entity
and any relevant contractors, subcontractors, or agents cooperate with
an audit of its reinsurance program by HHS or its designee.
Under the proposed rule, HHS may conduct targeted audits of State-
operated reinsurance programs based on the State summary report
provided to HHS for each benefit year described in Sec. 153.260(b),
the results of the independent external audit conducted for each
benefit year under Sec. 153.260(c), and issuer input, among other
factors. Such audits may, for example, examine the receipt and
expenditure of reinsurance funds, as well as funds received from HHS
for administrative expenses. The audits may also examine the
reinsurance program's compliance with the requirements for the State
and the program under subparts B and C of 45 CFR part 153. We will
provide further details on our audit program, including timelines,
procedures, and substantive requirements, in future rulemaking and
guidance.
We propose in Sec. 153.270(b) that if an audit by HHS results in a
finding of material weakness or significant deficiency (as these terms
are defined in GAAS issued by the American Institute of Certified
Public Accountants, and Government Auditing Standards issued by the
Government Accountability Office (GAO) \17\) with respect to the State-
operated reinsurance program's compliance with any requirement of
subparts B or C of 45 CFR part 153, the State must ensure that its
applicable reinsurance entity provide a written corrective action plan
to HHS for approval within 60 calendar days of the issuance of the
final audit report. The applicable reinsurance entity must implement
the plan and provide to HHS written documentation of the corrective
actions once taken. We seek comment on this proposal, including the
standards that should govern these audits.
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\17\ See Government Auditing Standards (2011 Revision),
available at: https://www.gao.gov/yellowbook. For public companies,
the Public Company Accounting Oversight Board (PCAOB) sets audit
standards. See https://pcaobus.org/Standards/Auditing/Pages/default.aspx. For non-public companies, the AICPA sets audit
standards. See https://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
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(ii) HHS Audits of Contributing Entities
We propose in Sec. 153.405(i) that HHS or its designee may audit a
contributing entity to assess its compliance with the requirements of
subpart E of 45 CFR part 153. We anticipate conducting targeted audits
of contributing entities based on, among other criteria and sources,
data provided to HHS through the annual enrollment count submitted
under Sec. 153.405(b) and any previous history of noncompliance with
these standards. We will provide further details on this audit program,
including timelines, procedures, and substantive requirements, in
future rulemaking and guidance. We anticipate that these audits will
focus on records relating to the enrollment of the applicable self-
insured or insured plan, to confirm that the number of covered lives
was correctly counted and that the correct amount of reinsurance
contributions was paid. Audits may also identify entities that were
required to but did not make reinsurance contributions. If HHS
determines as the result of an audit that a contributing entity was
required to pay additional reinsurance contributions, it may require
the contributing entity to pay such amounts to the Federal government.
If the contributing entity is an issuer subject to an audit for other
Exchange financial programs or premium stabilization programs, such as
risk adjustment, we intend to coordinate these audits, to the extent
practical, to reduce the burden on both the contributing entity and
HHS.
We seek comment on this proposal, including the standards that
should govern these audits.
(iii) HHS Audits of Issuers of Reinsurance-Eligible Plans
We propose in Sec. 153.410(d) that HHS or its designee may audit
an issuer of a reinsurance-eligible plan to assess its compliance with
the requirements of subparts E and H of 45 CFR part 153, and that if an
audit results in a finding of material weakness or significant
deficiency, the issuer must:
Within 30 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval;
Implement that corrective action plan; and
Provide to HHS written documentation of the corrective
actions once taken.
If HHS determines as the result of an audit that the issuer of a
reinsurance-eligible plan has received reinsurance payments to which it
was not entitled, it may require the issuer to pay such amounts back to
the Federal government.
We anticipate conducting targeted audits of issuers of reinsurance-
eligible plans based on, among other criteria and sources, the data
provided to HHS through the dedicated distributed data environment and
any previous history of noncompliance with these standards. We will
provide further details on this audit program, including timelines,
procedures, and substantive requirements, in future rulemaking and
guidance. We anticipate that this audit will focus on claims records
validating the requests for reinsurance payments submitted to the
dedicated distributed data environments, as well as records indicating
the plan was a reinsurance-eligible plan. To reduce the burden on
issuers and HHS, to the extent practical, we intend to coordinate any
audits of issuers of reinsurance-eligible plans with related audits of
Exchange financial programs and premium stabilization programs, such as
risk adjustment.
We seek comment on this proposal, including the standards that
should govern these audits.
h. Same Covered Life
In the second final Program Integrity Rule (78 FR 65057), we stated
that it is our intent not to require payment of reinsurance
contributions more than once for the same covered life. We
[[Page 72347]]
stated that we recognize that certain complex group health plan
arrangements can lead to situations in which lives are covered by
multiple arrangements, where it is unclear whether more than one health
plan or issuer must make reinsurance contributions, and that we
intended to provide clarity on the matter in future rulemaking.
Therefore, we propose to make two changes to Sec. 153.400. In
Sec. 153.400(a)(1), we propose to clarify the general principle that
reinsurance contributions are required for major medical coverage that
is considered to be part of a commercial book of business, but are not
required to be paid more than once with respect to the same covered
life.
In addition, we propose to add paragraph (vi) to Sec.
153.400(a)(1), which would provide that no reinsurance contributions
would be required in the case of employer-provided group health
coverage where (A) such coverage applies to individuals who are also
enrolled in individual market health insurance coverage for which
reinsurance contributions are required; or (B) such coverage is
supplemental or secondary to group health coverage for which
reinsurance contributions must be made for the same covered lives. This
language would address situations in which a person covered under a
group health plan also obtains individual market coverage, and in which
multiple group health plans cover the same lives, such as if a union
offers a plan that supplements a group health plan offered by the
employer. It would also address a situation in which two spouses are
each covered as dependents by the respective group health plans offered
by their two independent employers.
If it is not clear from the terms of the health plans which group
health plan is supplemental, we propose, in keeping with Sec.
153.400(a)(3), that the group health plan that offers the greater
portion of inpatient hospitalization benefits be deemed the primary
health plan. If it is not clear from the terms of the health plans
which group health plan is primary and which is secondary, we propose
to defer to the arrangements on primary and secondary liability worked
out by the respective plan sponsors, in accordance with applicable
State coordination of benefit laws and regulations. In such a
situation, we would hold a plan sponsor harmless from non-compliance
actions for failure to pay reinsurance contributions to the extent the
sponsor relied in good faith upon a written representation by the other
sponsor that the other sponsor's coverage has primary liability for
claims for particular covered lives.
We seek comment on these proposals, including which entity should
be responsible for the reinsurance contributions, how that
responsibility should be determined, and what arrangements should be
required between the entities to assure efficient coordination of the
responsibility for the reinsurance contributions, and what other
situations we should address in which reinsurance contributions might
be required to achieve the goal of preventing more than one
contribution per covered life.
i. Reinsurance Contributions and Enrollees Residing in the Territories
Section 1323(a)(1) of the Affordable Care Act provides that a U.S.
territory may establish an Exchange, and any territory that elects to
establish an Exchange will be ``treated as a State'' for purposes of
the Exchange standards in sections 1311 through 1313 of the Affordable
Care Act. In a letter dated December 10, 2012 to the governors of the
U.S. territories (Territories Letter), HHS stated that ``if a territory
establishes an approved Exchange, it may elect to establish a
transitional reinsurance program . . . consistent with the provisions
in section 1341 . . . of the Affordable Care Act.'' The Territories
Letter further stated that if a territory does not establish a
transitional reinsurance program, HHS would not do so on the
territory's behalf, and that in order to operate a reinsurance program
for the 2014 benefit year, the territory was required to notify HHS of
its intention to do so by March 1, 2013. No territory has notified HHS
of an intention to operate a reinsurance program.
In this proposed rule, we propose that a contributing entity is not
required to make reinsurance contributions on behalf of enrollees who
reside in a territory that does not operate a reinsurance program. We
propose to add in Sec. 153.400(a)(1)(v) an exception for when a
contributing entity must make reinsurance contributions for its self-
insured group health plans and health insurance coverage. To the extent
that the coverage applies to enrollees with primary residence in a
territory when that territory does not operate a reinsurance program, a
contributing entity would not be required to make reinsurance
contributions for those enrollees. We believe that this proposal aligns
with the goals of the reinsurance program because reinsurance
contributions would only be required with respect to those
jurisdictions that benefit from the premium stabilization effects of
the reinsurance program.
We propose that a contributing entity may use any reasonable method
to determine the primary residence of an enrollee, including using the
last-known mailing address of the principal subscriber on the
enrollee's policy. We seek comment on other methods that would be
acceptable for determining the primary residence of an enrollee,
including the principal work location of the principal subscriber on
the enrollee's policy.
We note that a contributing entity is required to allocate its
covered lives by primary residence between the territories, on the one
hand, and the 50 States and the District of Columbia, on the other
hand, only if it wishes to exclude covered lives from reinsurance
contributions under proposed Sec. 153.400(a)(1)(v).
j. Form 5500 Counting Method
In the 2014 Payment Notice (78 FR 15463), we established counting
methods for calculating the annual enrollment for determining
reinsurance contributions for self-insured group health plans, fully
insured health plans, and plans that are partially insured and
partially self-insured. One of the allowable methods for a self-insured
group health plan is the Form 5500 counting method in Sec.
153.405(e)(3). In this proposed rule, we seek to clarify Sec.
153.405(e)(3), by changing the references from ``benefit year'' to
``plan year'' \18\ to clarify that a self-insured group health plan may
use the enrollment set forth in the Form 5500 even if the group health
plan is based on a plan year other than the benefit year, which is
defined in Sec. 153.20 and Sec. 155.20 as a calendar year for which a
health plan provides coverage for health benefits. Therefore, a self-
insured group health plan that chooses to use the Form 5500 counting
method and offers self-only coverage would calculate the number of
lives covered by adding the total participants covered at the beginning
and end of the most current plan year, as reported on the Form 5500,
then dividing by two. A self-insured group health plan that offers both
self-only coverage and coverage other than self-only coverage would
calculate the number of lives covered by adding the total participants
covered at the beginning and the end of the most current plan year, as
reported on the Form 5500.
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\18\ Plan year as defined in 45 CFR 155.20 as a consecutive 12
month period during which a health plan provides coverage for health
benefits. A plan year may be a calendar year or otherwise.
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[[Page 72348]]
3. Provisions for the Temporary Risk Corridors Program
a. Definitions
In the first final Program Integrity Rule, we provided that, in 45
CFR part 153, subpart F, regarding risk corridors, any reference to a
``qualified health plan'' or ``QHP'' includes plans that are the
``same'' as a QHP or ``substantially the same'' as a QHP. We noted that
plans that are substantially the same as a QHP will continue to be
considered substantially the same even if they differ in terms of
benefits, premium, provider network or cost-sharing structure, provided
that the differences are tied directly and exclusively to Federal or
State requirements or prohibitions on the coverage of benefits that
apply differently to plans depending on whether they are offered
through an Exchange or outside of an Exchange.
In the first final Program Integrity Rule, we recognized that OPM
might issue additional standards for multi-State plan (MSP) issuers in
the future (for example, standards related to provider networks) that
could create situations analogous to the ones we discuss above. We are
considering whether a plan that differs from a QHP (as defined at Sec.
155.20) based on these standards would be considered to be
``substantially the same'' as a QHP for the purposes of participating
in the risk corridors program, and are considering amending the
definition of a QHP at Sec. 153.500 in response. We seek comment on
this approach.
b. Compliance With Risk Corridors Standards
The risk corridors program requires the Federal government and
participating plans to share in profits or losses resulting from
inaccurate rate setting for benefit years 2014 through 2016. A robust
oversight process is critical for this program because risk corridors
payments are Federal funds. In this proposed rule, we outline our
proposed process for validating risk corridors data submissions and
enforcing compliance with the risk corridors requirements in subpart F
of 45 CFR part 153. Because the MLR program and the risk corridors
program will require similar data, we propose to closely align the data
submission, data validation, audit provisions, and sanctions for the
two programs. We note that the risk corridors oversight provisions will
apply to all plans, including QHPs and plans that are substantially the
same as QHPs (as defined in the first final Program Integrity Rule)
that are subject to the risk corridors program, whether these plans are
offered through the Exchange or outside of the Exchange.
For the 2014 benefit year, we propose to collect risk corridors
data through the same form used for MLR data collection, at the same
time (July 31 of the year following the applicable benefit year). We
note that we would modify the collection instrument and adjust the
operational aspects of data submission as necessary to ensure that the
data collection process adheres to the requirements for both programs.
We would leverage data validation procedures that are used by the MLR
program to uncover data inconsistencies, and would add additional
validation steps that would allow us to identify QHP issuers and verify
QHP-specific premium information. In addition, we are considering
conducting an internal quality check of risk corridors data to ensure
that the information submitted is consistent with information submitted
for other programs (for example, premiums and claims reported in the
dedicated distributed data environment). Similar to the MLR process, we
anticipate requiring issuers to resubmit corrected data after risk
corridors data errors are identified. We request comment on this
approach.
To ensure the integrity of risk corridors data reporting, we
propose in Sec. 153.540(a) to establish HHS authority to conduct post-
payment audits of QHP issuers. Because similar data is used in the risk
corridors and MLR calculations, we are considering conducting the risk
corridors audits using the existing MLR auditing process set forth at
Sec. 158.402 to reduce the time and expense (for both HHS and issuers)
of conducting multiple audits on similar data. We are further
contemplating conducting risk corridors audits under an overall issuer
audit program so that we may simultaneously obtain the financial
information necessary to determine compliance with other programs, such
as the risk adjustment and reinsurance programs. We believe that this
may further reduce the overall audit burden on issuers. Some States
already review data and audit issuer information related to MLR
reporting and rebate obligations; HHS does not intend to review
information that would be duplicative of a review that has been
completed by a State. However, because States may not examine all data
required to be examined for the risk corridors program, HHS could audit
a QHP issuer's risk corridors data to the extent not examined by the
State. We request comments on all aspects of this approach, including
appropriate criteria for identifying issuers for audit in any
particular benefit year.
The second final Program Integrity Rule provides that a QHP issuer
on an FFE that fails to comply with the risk corridors provisions may
be subject to decertification or civil money penalties (CMPs), but does
not extend this remedy to a QHP issuer on a State Exchange. State
Exchange issuers that fail to submit risk corridors charges, and
consequently owe HHS money, would be subject to the Federal debt
collection processes; however, without risk corridors data, HHS will be
unable to determine whether a debt is owed or the amount of a debt.
Therefore, in Sec. 153.540(b) we propose to extend our CMP authority
under sections 1321(a)(1) and (c)(2) of the Affordable Care Act to all
QHP issuers that fail to provide timely, accurate, and complete data
necessary for risk corridors calculations, or that otherwise do not
comply with the standards in subpart F of 45 CFR part 153. We propose
to assess CMPs on QHP issuers in State Exchanges in accordance with the
same enforcement and sanction procedures that apply to QHP issuers on
FFEs, under Sec. 156.805. For purposes of calculating the maximum CMP
amount, we may consider using enrollment information acquired from
other internal sources (for example, risk adjustment and reinsurance
enrollment data from the dedicated distributed data environment). Under
this approach, we would either use enrollment information from all of
an issuer's non-grandfathered plans within a State market, or would
limit calculation of the CMP amount to the number of enrollees in an
issuer's QHPs (including enrollees in plans that are substantially the
same as a QHP). We note that, consistent with our general approach
relating to the application of sanctions, we would take various factors
into account when determining the amount of a CMP, including an
issuer's record of prior compliance with risk corridors requirements,
the gravity and the frequency of the violation, and the issuer's
demonstrated success in correcting violations that HHS has identified
(for example, errors identified in corrective action plans).\19\ We
request comments on all aspects of this approach, particularly for the
methodology that we should use to determine a CMP amount for a QHP
[[Page 72349]]
issuer that does not comply with risk corridors data requirements.
---------------------------------------------------------------------------
\19\ We note that the good faith provision at Sec. 156.800(c)
will not be applicable in this context because risk corridors
activities, such as data submission and payment, occur beginning in
2015.
---------------------------------------------------------------------------
c. Participation in the Risk Corridors Program
Because the premium stabilization programs, including the risk
corridors program, are intended to mitigate pricing uncertainty
associated with the 2014 market reforms, particularly the rating rules
at section 2701 of the PHS Act and Sec. 147.102, we believe that the
protections of these programs should be for plans that are subject to
the premium rating rules. Therefore, in the 2014 Payment Notice, we
clarified that under the methodology HHS will use when operating risk
adjustment on behalf of a State, a plan that is not subject to the
market reform rules, including the premium rating rules, is not a risk
adjustment covered plan. In the second final Program Integrity Rule, we
further clarified that stand-alone dental plans would not be subject to
the risk corridors program because they are not subject to the premium
rating rules, and therefore do not require the protections of the risk
corridors program. In this proposed rule, we are similarly proposing to
amend the risk corridors rules to provide that a plan that is not
subject to the market reform rules and premium rating rules would not
participate in the risk corridors program. We propose to add a
paragraph (f) to Sec. 153.510 to provide that the risk corridors
program would apply only to qualified health plans, as defined in Sec.
153.500, including all plans offered through the individual market
Exchange or SHOP, regardless of employer size, that are subject to the
following provisions within title 45 of the CFR:
Sec. 147.102 (fair health insurance premiums).
Sec. 147.104 (guaranteed availability of coverage).
Sec. 147.106 (guaranteed renewability of coverage).
Sec. 147.150 (essential health benefits).
Sec. 156.80 (single risk pool) and subpart B of 45 CFR
part 156 (essential health benefits package).
We believe that this approach is consistent with how QHPs have
determined their pricing for the 2014 benefit year. We note that a QHP
that must adhere to the premium rating rules as a condition of
participation on the SHOP is a plan that is ``subject to the rating
rules'' for the purposes of this policy.
We are also proposing that the employee counting method applicable
under State law would determine whether a plan is considered to be
offered in the small group market for purposes of the risk corridors
program even if the State definition does not take non-full-time
employees into account, and thus could include some employers as small
employers that would be large employers under the Federal definition.
Given our broad authority to establish the risk corridors program, we
believe that we have the discretion to include such employers in the
program even if they do not meet the Federal definition of small
employer that would apply for other purposes. We believe that the
inclusion of such employers in the definition of small employers for
purposes of the risk corridors program would maintain consistency
between the risk corridors calculation and implementation of the single
risk pool provision, which is generally enforced by the State. We
further believe that clearly specifying the employee counting method
that is specific to the risk corridors program would provide clarity
for QHP issuers with plans that could either be excluded from or
subject to the risk corridors program, depending on the employee
counting method used. We note that permitting the use of a State
employee counting method that is inconsistent with Federal law for
purposes of the risk corridors program differs from the approach taken
under the MLR program and the proposed counting method for the risk
adjustment program that is described elsewhere in this proposed rule.
Under these programs, non-full-time employees must be counted. We note
that the State's employee counting method would also be used to
determine whether a plan that is not a QHP is part of the non-
grandfathered individual or small group market within a State, and
would, therefore, be part of a QHP issuer's risk corridors data
submission under Sec. 153.530. We also note that the State's employee
counting method would determine whether any plan offered outside of an
Exchange that is the ``same'' as or ``substantially similar'' to an
Exchange QHP (under the definition set forth in Sec. 153.500) would be
part of the individual or small group market for purposes of the risk
corridors program, and, therefore whether it is eligible to receive or
make risk corridors payments. This proposed approach would serve to
align the market-wide rating rules with the protections of the premium
stabilization programs. However, the approach could likely lead to a
more complex data submission for risk corridors and MLR, because we may
not be able to align the market definitions between the two programs.
We seek comment on our proposal that a QHP must be subject to the
market reform rules in order to participate in the risk corridors
program. We also seek comment on our proposal to use the State employee
counting method to define plans in the small group market for purposes
of determining which plans participate in the risk corridors program,
even where that would include employers that would be large employers
under the Federal definition, or whether we should instead use the
counting method used for the MLR program and proposed for risk
adjustment purposes. We also seek comments on whether we should
explicitly codify the applicable counting rules for each program in
regulations text.
d. Adjustment Options for Transitional Policy
As discussed earlier, on November 14, 2013, the Federal government
announced a policy under which it will not consider certain health
insurance coverage in the individual or small group market between
January 1, 2014, and October 1, 2014, under certain conditions to be
out of compliance with specified 2014 market rules, and requested that
States adopt a similar non-enforcement policy.\20\ CMS noted in a
letter to the insurance commissioners of the 50 States and the District
of Columbia that while this transitional policy would not have been
anticipated by issuers in setting rates for 2014, the risk corridors
program should ameliorate the effect of this policy. We also stated
that we intended to explore ways to modify the risk corridors program
to address any unanticipated effects of this policy.
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\20\ Letter to Insurance Commissioners, Center for Consumer
Information and Insurance Oversight, November 14, 2013. See https://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.PDF.
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Therefore, for the 2014 benefit year, we are considering whether we
should make an adjustment to the risk corridors formula that would help
to further mitigate any unexpected losses for issuers of plans subject
to risk corridors that are attributable to the effects of the
transition policy. One potential option we are considering would be to
implement an adjustment to the risk corridors formula set forth in
subpart F of part 153 for each of the individual and small group
markets by increasing the profit margin floor (from 3 percent of after-
tax profits) and the allowable administrative costs ceiling (from 20
percent of after-tax profits) in an amount sufficient to offset the
effects of the transitional policy upon the claims costs of a model
plan (that is, a plan with an 80 percent allowable costs-to-premium
ratio). This adjustment could serve to
[[Page 72350]]
increase a QHP issuer's risk corridors ratio and its risk corridors
payment amount to help offset the loss in premium revenue and profit
that might occur under the transitional policy as a result of predicted
increased claims costs that were not accounted for when setting 2014
premiums. We are considering applying this adjustment only to plans
whose allowable costs (as defined at 45 CFR 153.500) are at least 80
percent of their after-tax premiums, because issuers under this
threshold would generally be required to pay out rebates to consumers.
We note that for plans whose ratio of allowable costs to after-tax
premium are below 80 percent, the 3 percent risk corridors profit
margin and 20 percent allowable administrative cost ceiling would
continue to apply for these plans.
The effect on the risk pool of plans compliant with the 2014 market
rules may vary significantly from State to State, depending upon the
extent to which each State elects not to enforce the 2014 market rules,
as recommended under the transition policy, and upon the market
dynamics of the health insurance market within the State. We believe
that the State-wide effect on this risk pool will increase with the
increase in the percentage enrollment in transitional plans in the
State, and so we are considering having the State-specific percentage
adjustment to the risk corridors formula also vary with the percentage
enrollment in these transitional plans in the State.
We are considering calculating the State-specific percentage
adjustment by analyzing the effects of the transitional policy upon a
plan with specified characteristics. For example, our actuaries believe
the following are reasonable plan assumptions: allowable costs
(including claims) equal to 80 percent of premiums, federal income
taxes equal to 35 percent of pre-tax profits, other tax liability equal
to 7.5 percent of premiums, and other administrative costs equal to 8
percent of premiums.
We are considering calculating the State-specific percentage
adjustment to the risk corridors profit margin floor and allowable
administrative costs ceiling in a manner that would help to offset the
effects of the transitional policy upon the model plan's claims costs.
We propose to estimate the effect of the transitional policy upon
the model plan's claims costs by assuming that allowable costs
(including claims) among the transitional plans are 80 percent of the
allowable costs that would have resulted from the broad risk pool, in
the absence of the transitional policy. After consulting our actuaries,
we believe that this assumption is a reasonable reflection of the
effects of underwriting on the transitional plans. To estimate this
State-specific effect of the transitional policy on average claims
costs, we propose to require all issuers participating in the
individual and small group markets in a State to submit to HHS a
member-month enrollment count for transitional plans and non-
transitional plans in the individual and small group markets. This
submission would occur in 2015 prior to the risk corridors submission.
HHS would analyze that data, and publish the State-specific adjustments
that issuers would use in the risk corridors calculations for the 2014
benefit year.
We have proposed a State-wide adjustment for reasons of
administrative simplicity and due to the analytical difficulty in
estimating this effect on an issuer-by-issuer basis. Although the
adjustment that we are considering would affect each issuer
differently, depending on its particular claims experience and
administrative cost rate, we believe that, on average, the adjustment
would suitably offset the losses that a standard issuer might
experience as a result of the transitional policy. We also note that,
because the risk corridors program applies only to certain plans
defined to be qualified health plans at 45 CFR 153.500, the extent to
which an issuer may receive the full effect of this adjustment would
depend upon the portion of an issuer's individual and small group
enrollees in plans subject to risk corridors.
Another option we are considering would be to make a similar
modification to the medical loss ratio formula. We would use our
authority under section 2718(c) of the Public Health Service Act to
``take into account . . . special circumstances of different types of
plans'' to ensure that the proposed adjustment to the risk corridor
program does not distort the implementation of MLR requirements, so
that the rebates that would be owed absent the transitional policy and
this adjustment would not substantially change. We seek comment on the
best way to make such a modification, and whether such a modification
is required.
We request comment on all aspects of these potential approaches to
help mitigate any potential impact of the transitional policy. As we
continue to analyze its potential impacts, we will determine whether
such approaches and modifications are warranted. We seek comment on
alternate ways of implementing adjustments to current risk corridors
and reinsurance program policy that would help offset issuers for any
unexpected losses that might be incurred as a result of the
transitional policy. In particular, we seek comment on whether this
risk corridors adjustment should depend upon State-wide market
characteristics, as we have proposed, or whether it should be national,
tailored to each issuer, or based upon different State-wide
characteristics.
We also seek comment on whether the characteristics of the standard
plan we have outlined above are the appropriate characteristics to use
for our modeling. We seek comment on the data that we should collect to
measure the key characteristics for this adjustment, and who we should
collect that data from. We seek comment on whether particular ceilings
and floors should be placed upon the amount of the adjustment. We also
seek comment on whether the adjustment should apply to QHP issuers with
allowable costs that are below 80 percent of after-tax premiums.
4. Distributed Data Collection for the HHS-operated Risk Adjustment and
Reinsurance Programs
a. Discrepancy Resolution Process
(i) Confirmation of HHS Dedicated Distributed Data Environment Reports
Because the accuracy of the data on an issuer's dedicated
distributed data environment is critical to the accuracy of the HHS-
operated risk adjustment and reinsurance calculations, we are proposing
an iterative discrepancy reporting process that would allow an issuer
of a risk adjustment covered plan or a reinsurance-eligible plan to
notify HHS in a timely fashion of data and calculation discrepancies
related to the data the issuer uploaded to its dedicated distributed
data environment. We anticipate that this process would allow HHS and
issuers sufficient time to resolve discrepancies, prior to HHS
notifying issuers of final risk adjustment payments and charges and
reinsurance payments. This process would also enable HHS to identify
and address issues that affect multiple issuers throughout the benefit
year.
Interim dedicated distributed data environment reports: Beginning
in 2014, HHS anticipates sending interim dedicated distributed data
environment reports to issuers of risk adjustment covered plans and
reinsurance-eligible plans that have loaded data onto their dedicated
distributed data environments. (We also intend to issue these interim
reports to issuers of risk adjustment covered plans and reinsurance-
eligible plans that do not load data, to verify this result.) We
anticipate that issuers of risk adjustment covered plans would receive
interim
[[Page 72351]]
reports that include preliminary risk scores based on this data. We
anticipate that issuers of reinsurance-eligible plans would receive
interim reports that include an estimate of the issuer's aggregated
total claims eligible for reinsurance payments based on this data.
Therefore, we propose in Sec. 153.710(d) that within 30 calendar days
of the receipt of an interim dedicated distributed data environment
report from HHS, the issuer must either confirm to HHS that the
information in the interim report accurately reflects the data to which
the issuer has provided access to HHS through its dedicated distributed
data environment in accordance with Sec. 153.700(a) for the timeframe
specified in the report, or else must describe to HHS any discrepancy
it identifies in the interim report. Following the identification of a
discrepancy in an interim dedicated distributed data environment
report, HHS would review the evidence submitted by the issuer, along
with any other relevant data, and would determine if the preliminary
risk score or estimated payment amount at issue was properly calculated
using the applicable data. We believe that the 30-calendar-day
timeframe would provide sufficient opportunity for an issuer to verify
the preliminary risk scores and estimated reinsurance payment amounts,
but note that an issuer may notify HHS of a newly discovered
discrepancy in connection with responses to later interim or final
dedicated distributed environment reports until 15 calendar days after
the final dedicated distributed data environment report is issued, as
discussed below. We anticipate that the interim dedicated distributed
data environment reports would allow issuers to proactively address any
data discrepancies regarding the data the issuer made accessible to HHS
on the dedicated distributed data environment and HHS's analysis of the
data.
We note that under Sec. 153.700(a), an issuer of a risk adjustment
covered plan or a reinsurance-eligible plan in a State where HHS
operates the risk adjustment or reinsurance program on behalf of the
State, must establish a dedicated distributed data environment and
provide data access to HHS, in a manner and timeframe specified by HHS,
for any HHS-operated risk adjustment or reinsurance program. For the
issuer and HHS to effectively address and resolve discrepancies through
the proposed interim reporting process, we propose that once an
issuer's dedicated distributed data environment is established, the
issuer would be required, on a quarterly basis, to make a complete and
current enrollment file accessible to HHS through the dedicated
distributed data environment, and would be required to make good faith
efforts to make accurate and current claims files accessible to HHS
through the dedicated distributed data environment. An issuer may later
(up until April 30 of the year after the benefit year, as provided for
in Sec. 153.730) adjust these files with the most current information
to account for changing enrollments or more current adjudications of
claims in later periods. However, we believe it is critical for issuers
to provide quarterly uploads of enrollment and claims files to permit
issuers and HHS to monitor data collection.
We note that, as part of the process for making these files
available to HHS on a dedicated distributed data environment, we
anticipate providing an issuer a transactional process report that will
identify data that has been attempted to be uploaded, but that has been
rejected. To fulfill its obligation to make these files available to
HHS, an issuer would be required to either correct or accept the
rejection of this data for the submission process to be considered
complete.
Final dedicated distributed data environment report: We propose
that HHS would provide issuers with a final dedicated distributed data
environment report following the applicable benefit year, after the
April 30 data submission deadline. The final dedicated distributed data
environment report would include final risk scores and claims amounts
eligible for reinsurance payments, each calculated from the issuer's
data that was timely loaded onto the dedicated distributed data
environment. As with the interim reports discussed above, we propose in
Sec. 153.710(e) that the issuer be required, within 15 calendar days
of receipt of the final report, to either confirm to HHS that the
information in the final dedicated distributed data environment report
accurately reflects the data to which the issuer has provided access to
HHS through its dedicated distributed data environment in accordance
with Sec. 153.700(a) for the benefit year specified in the report, or
to describe to HHS any discrepancy it identifies in the final dedicated
distributed data environment report. The shorter 15-calendar-day
reporting timeframe for the final dedicated distributed data
environment report is necessary so that HHS can notify issuers of their
final risk adjustment payments and charges and final reinsurance
payments by June 30 of the year following the applicable benefit year,
as required under Sec. 153.310(e) and Sec. 153.240(b)(1)(ii). We seek
comment on these proposals.
Notification of payments and charges: Last, as required under Sec.
153.310(e) and Sec. 153.240(b)(1)(ii), HHS will provide issuers a
report detailing their final risk adjustment payments and charges and
reinsurance payments for the applicable benefit year by June 30 of the
year following the applicable benefit year. We also anticipate
providing a report on cost-sharing reduction reconciliation payments
and charges for that benefit year in the same timeframe. Although we
anticipate that the interim and final dedicated distributed data
environment reports would permit HHS and issuers to resolve most data
and payment discrepancies for risk adjustment and reinsurance before
the June 30 report is issued, we recognize that some discrepancies
might remain unresolved. Therefore, we propose in Sec. 153.710(f) that
if a discrepancy that is first identified in an interim or final
dedicated distributed data environment report in accordance with
proposed Sec. 153.710(d)(2) or Sec. 153.710(e)(2) remains unresolved
after issuance of the June 30 report, an issuer of a risk adjustment
covered plan or reinsurance-eligible plan may make a request for
reconsideration using the process proposed in Sec. 156.1220(a). To
promote the goals of the premium stabilization programs and to ensure
that risk adjustment and reinsurance payments are provided to an issuer
of a risk adjustment covered plan or reinsurance-eligible plan in a
timely fashion, HHS would assess charges and make payments based on the
amounts listed in the June 30 report, whether or not the issuer had
submitted a request for reconsideration under proposed Sec.
156.1220(a), and would later correct any charges or payments determined
to be inaccurate under the reconsideration or administrative appeals
process.
(ii) Reporting of Payments and Charges Under Reconsideration
Because risk adjustment payment and charge amounts and reinsurance
payment amounts are factors in an issuer's risk corridors and MLR
calculations, a delay in resolving final risk adjustment payments and
charges and reinsurance payments could make it difficult for issuers to
comply with reporting requirements under the risk corridors and MLR
programs. Therefore, to clarify how issuers are to comply with these
reporting requirements, we propose in Sec. 153.710(g)(1) that,
notwithstanding any discrepancy report made under paragraph Sec.
153.710(d)(2) or (e)(2), or any request for
[[Page 72352]]
reconsideration under Sec. 156.1220(a), unless the dispute has been
resolved, an issuer must report, as applicable, for purposes of the
risk corridors and the MLR program, the risk adjustment or reinsurance
payment to be made to the Federal government, or the risk adjustment
charge assessed by the Federal government, as reflected in the June 30
report.
If the amount of cost-sharing reductions a QHP issuer has provided
is at issue because the issuer requested reconsideration of a cost-
sharing reduction reconciliation payment or charge under the process
proposed in Sec. 156.1220(a), we propose that for the purposes of the
risk corridors and the MLR program, a QHP issuer would be required to
report a cost-sharing reduction amount equal to the amount of the
advance payments of cost-sharing reductions paid to the issuer by HHS
for the benefit year as reflected in the HHS report on cost-sharing
reduction reconciliation payments and charges. Additionally, if a QHP
issuer requests reconsideration of risk corridors payments or charges
under the process proposed in Sec. 156.1220(a), then for purposes of
MLR reporting, the QHP issuer would be required to report the risk
corridors payment to be made to the Federal government or charge
assessed by the Federal government as reflected in the notification
provided under Sec. 153.510(d).
Finally, we propose in Sec. 153.710(g)(2) that an issuer must
report any adjustment made following any discrepancy report made under
paragraph (d)(2) or (e)(2), or any request for reconsideration under
Sec. 156.1220(a) with respect to any risk adjustment payment or
charge, including an assessment of risk adjustment user fees,
reinsurance payment, cost-sharing reconciliation payment or charge, or
risk corridors payment or charge, or following any audit, where the
adjustment has not been accounted for in a prior risk corridors or
medical loss ratio report, in the next following risk corridors and
medical loss ratio report.
We seek comment on these proposals.
b. Default Risk Adjustment Charge
As described in the second final Program Integrity Rule, if an
issuer does not establish a dedicated distributed data environment or
submits inadequate risk adjustment data, HHS would not have the
required risk adjustment data from the issuer to calculate risk scores
or payment transfers for the issuer. As a result, HHS would not be able
to properly calculate risk adjustment payments and charges for the
entire applicable market for the State. Under Sec. 153.740(b), if an
issuer of a risk adjustment covered plan fails to establish a dedicated
distributed data environment or fails to provide HHS with access to
risk adjustment data in such environment by April 30 of the year
following the applicable benefit year in accordance with Sec. Sec.
153.610(a), 153.700, 153,710, or 153.730, such that HHS cannot apply
its Federally certified risk adjustment methodology to calculate the
plan's risk adjustment payment transfer amount in a timely fashion, HHS
will assess a default risk adjustment charge.
As described in the second final Program Integrity Rule, the total
risk adjustment default charge for a risk adjustment covered plan would
equal a per member per month (PMPM) amount multiplied by the plan's
enrollment.
Tn = Cn x En
Where:
Tn = total default risk adjustment charge for a plan n;
Cn = the PMPM amount for plan n; and
En = the total enrollment (total billable member months) for
plan n.
In the second final Program Integrity Rule, we provided that En
could be calculated using an enrollment count provided by the issuer,
using enrollment data from the issuer's MLR and risk corridors filings
for the applicable benefit year, or using other reliable data sources.
We are considering several methods to calculate Cn--the PMPM amount
for a plan. As discussed in the proposed Program Integrity Rule, one
method would be to set a PMPM amount that is equal to the highest PMPM
transfer charge that HHS calculates based on risk adjustment data
submitted by risk adjustment covered plans in the applicable risk pool
in the applicable market in the State. Such a method could yield a PMPM
amount that would reflect a PMPM charge that reflects the high end of
the PMPM distribution in certain States. However, in a situation in
which the risk adjustment covered plans that provide the necessary risk
adjustment data have very similar risk scores, a PMPM amount calculated
under this method may yield a relatively low risk adjustment charge,
and fail to provide adequate incentive for prompt establishment of a
compliant distributed data system.
A second option would be to assess a PMPM amount based on the
standard deviation of the PMPM charge among all risk adjustment covered
plans in the applicable risk pool in the applicable market in the
State. The PMPM amount used to calculate the default risk adjustment
charge would be an amount equal to the mean PMPM amount plus two such
standard deviations. Such an approach could also yield a PMPM amount
that is high but reflects the PMPM distribution in certain situations,
but, again, low in others. The amount might also be quite unpredictable
ex ante.
A third option would be to assess a charge equal to a fixed
percentage of the State-wide weighted average premium, which would be
calculated as the enrollment-weighted mean of all plan average premiums
of risk adjustment covered plans in the applicable risk pool in the
applicable market in the State. This option might be relatively
straightforward to implement, but would yield a charge that is not
linked to the distribution of PMPM amounts within the relevant risk
pool in the market in the State.
We note the many possible variations of these methods. For example,
instead of the highest PMPM amount in the risk pool in the market in
the State, the PMPM amount could be a fixed percentile along the
distribution of PMPM charges for the risk pool in the market in the
State--thus, we could use the 75th percentile or an amount equal to 10
percent above the 100th percentile, for example. Instead of the amount
based on the mean PMPM amount and two standard deviations, a different
number of standard deviations could be used. Also, instead of using a
fixed percentage of the State-wide weighted average premium, a fixed
percentage of the plan's premium, or a fixed percentage of the average
premium of a subpopulation of risk adjustment covered plans in the
State, such as those plans in the applicable risk pool, or those plans
paying risk adjustment charges, could be used.
Commenters to the proposed Program Integrity Rule also suggested an
approach under which the PMPM amount would be the highest amount
calculated under each of the three methods described above. Finally, to
ensure that a total default charge is not excessive for a particular
plan, we are considering setting an upper limit on the total default
charge for a plan based on a percentage of the plan's own total
premiums. We seek comment on these methods, or other appropriate
methods for calculating a default risk adjustment charge.
D. Part 155--Exchange Establishment Standards and Other Related
Standards under the Affordable Care Act
1. Election to Operate an Exchange After 2014
HHS has learned through the process of approving or conditionally
approving
[[Page 72353]]
the first generation of State Exchanges that it is challenging to make
an accurate assessment of a State's progress and ability to complete an
Exchange build 10 months prior to open enrollment and a year prior to
the first date that coverage would become effective. We are therefore
proposing to reduce the time that the State must have in effect an
approved or conditionally approved Exchange Blueprint and readiness
assessment from 12 months to 6.5 months prior to the Exchange's first
effective date of coverage. We propose to amend Sec. 155.106(a)(2) by
moving the deadline for the approval of the Exchange Blueprint for
States electing to establish and operate an Exchange after 2014 to June
15th of the previous plan year rather than January 1st of the previous
plan year. We believe that this proposal will give States more time
prior to approval of the Blueprint to prepare for the transition from
an FFE or State Partnership Exchange to a State Exchange. It will also
enable HHS to gauge the State's actual technical, business and
operational progress as more indicative milestones should be reached by
June 15th. It should be noted that Sec. 155.106(a)(2) sets the date by
which a State electing to operate an Exchange after 2014 must ``[h]ave
in effect'' an ``approved, or conditionally approved, Exchange
Blueprint and operational readiness assessment'' and that the rule is
silent about the date by which such a State must submit the Exchange
Blueprint. HHS, therefore, proposes to extend the date by which a State
must submit the Exchange Blueprint from November 15th to June 1st.
2. Ability of States to Permit Agents and Brokers to Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs
In Sec. 155.220, we propose to add new paragraph (i) to provide
that current paragraph (c)(3), which addresses enrollment through an
Internet Web site of an agent or broker, and currently applies only to
the individual market Exchanges, would apply to the SHOPs for plan
years beginning on or after January 1, 2015. Agents and brokers have
traditionally assisted employers in the small group market, and many of
them use Internet Web sites to assist employers. Permitting an employer
to complete QHP selection through the Internet Web site of an agent or
broker would provide an additional potential SHOP enrollment option for
small employers. Under this proposal, employers that have not
traditionally worked with agents and brokers but have, in the past,
utilized Internet Web sites of agents and brokers for purchasing
insurance would have another option to learn about and participate in
the SHOPs, in a manner similar to that already available in the current
market. We propose to allow SHOPs, in States that allow this activity
under State law, to permit enrollment in a SHOP QHP through an Internet
Web site of an agent or broker under the standards outlined in Sec.
155.220(c)(3) if a State SHOP or the FF-SHOP has the technical
capability to make this possible. We invite comment on this proposal.
3. Privacy and Security of Personally Identifiable Information
Section 1411(g)(2)(A) of the Affordable Care Act provides that
Exchanges may use information provided by an applicant ``. . . only for
the purposes of, and to the extent necessary in, ensuring the efficient
operation of the Exchange . . .'' Section 155.260(a)(1) provides the
specific circumstances under which an Exchange may use or disclose PII
the Exchange creates or collects for the purposes of determining
eligibility for enrollment in a QHP; determining eligibility for other
insurance affordability programs as defined at Sec. 155.20; or
determining eligibility for exemptions from the individual
responsibility provisions in section 5000A of the Code (collectively
referred to as ``eligibility and enrollment PII''). We believe, based
on considerations that have been brought to our attention by States as
we work together to implement the Exchanges, that Sec. 155.260(a)(1)
unduly limits the ability of an Exchange to ensure its efficient
operation. We therefore propose to amend Sec. 155.260(a)(1) to permit
an Exchange to use or disclose eligibility and enrollment PII to ensure
the efficient operation of an Exchange through uses or disclosures that
may not be directly connected to the Exchange minimum functions
described at Sec. 155.200, subject to privacy and security standards.
We anticipate that there may be uses or disclosures of eligibility
and enrollment PII that present additional opportunities to ensure the
efficient operation of the Exchange, consistent with the strict
protections of section 1411(g)(2)(A) of the Affordable Care Act.
Therefore, we propose in Sec. 155.260(a)(1)(ii) that the Secretary may
approve other uses and disclosures of eligibility and enrollment PII,
provided that HHS determines that the information will be used only for
the purposes of and to the extent necessary in ensuring the efficient
operation of the Exchange consistent with section 1411(g)(2)(A) of the
Affordable Care Act and determines that the use or disclosure is
appropriate and permissible under relevant law and policy. In addition,
prior to an Exchange using eligibility and enrollment PII for such an
approved function, the individual would need to provide consent before
his or her eligibility and enrollment PII could be used or disclosed
for this additional function. We anticipate providing additional
information in future guidance about uses or disclosures determined by
the Secretary that ensure the efficient operation of the Exchange while
maintaining information privacy and security, and we seek comment on
such uses and disclosures.
Further, in Sec. 155.260(a)(1)(iii) we propose a process under
which Exchanges may seek approval from the Secretary for uses or
disclosures of eligibility and enrollment PII not explicitly described
in Sec. 155.260(a)(1)(i) or (ii). Requestors must show that the
proposed use or disclosure will ensure the efficient operation of the
Exchanges consistent with section 1411(g)(2)(A) of the Affordable Care
Act and describe how the information to be used or disclosed will be
protected by privacy and security standards that are compliant with
Sec. 155.260. In addition, any time an Exchange is using eligibility
and enrollment PII for such an approved function, the individual would
need to provide consent before his or her eligibility and enrollment
PII could be used or disclosed. We anticipate providing additional
information in future guidance about this process and about the facts
and circumstances that will be considered in determining whether a
proposed use or disclosure will ensure the efficient operation of an
Exchange while maintaining information privacy and security and is also
an appropriate and permissible use or disclosure under relevant law and
policy. We seek comment on this proposed process, as well as other
factors or information that should be considered when determining
whether a proposed use or disclosure should be approved pursuant to
this proposed process.
We further recognize the imperative to maintain safeguards for
eligibility and enrollment PII when it is used or disclosed to support
functions beyond those described in Sec. 155.200. Exchanges would be
required to limit the disclosure of eligibility and enrollment PII to
the extent necessary to accomplish the proposed function and obtain an
individual's consent. The proposed use and disclosure would be
[[Page 72354]]
subject to privacy and security standards that Sec. 155.260 requires
Exchanges to establish in relation to non-Exchange entities.
In light of the proposed amendments to Sec. 155.260(a)(1), we
further propose to amend Sec. 155.260(a)(2) to delete the specific
reference to Sec. 155.200 minimum functions and to indicate that all
permitted uses under Sec. 155.260(a)(1) must be consistent with Sec.
155.260.
Section 155.260(a)(3) provides that Exchanges must establish and
implement privacy and security standards consistent with the eight
principles in Sec. 155.260(a)(3)(i) through (a)(3)(viii). Section
155.260(b) addresses situations in which Exchanges share PII with
``non-Exchange entities,'' including ``. . . individuals or entities,
such as Navigators, agents, and brokers.'' Through public comment to
the Program Integrity Proposed Rule, we received requests for
clarification on the definition of ``non-Exchange entities'' and also
received questions asking if the regulatory language ``individuals or
entities, such as Navigators, agents, and brokers,'' was meant to be an
exhaustive list. In the preamble to the first final Program Integrity
Rule (78 FR 54082), we stated that we would issue further guidance on
this topic. We now propose to amend the regulation text to address
these questions.
In Sec. 155.260(b)(1), we propose that any individual or entity
that gains access to PII submitted to an Exchange or collects, uses or
discloses PII gathered directly from applicants, qualified individuals,
or enrollees while that individual or entity is performing the
functions agreed to with the Exchange, be considered a non-Exchange
entity, such that a non-Exchange entity is defined based on access to
PII and not based on a representative or exhaustive list of entities.
As clarification, we believe that entities that would qualify as ``non-
Exchange entities'' based on this proposed definition include, but are
not limited to, Medicaid agencies; CHIP agencies; Certified Application
Counselors; in person assisters; agents and brokers, including Web-
brokers; QHP issuers; Navigators; and other third party contractors. We
feel very strongly about the importance of requiring privacy and
security standards and believe that this proposed definition of non-
Exchange entity makes even more clear which entities are subject to
these standards.
At Sec. 155.260(b)(2), we propose to maintain the existing
requirement for Exchanges to enter into a contract or agreement with
non-Exchange entities, while providing more details regarding the
required elements of these contracts and agreements. We propose that
the contract or agreement between an Exchange and a non-Exchange entity
must include at least five elements. First, we believe it is important
to define in this contract or agreement the functions that the non-
Exchange entity will perform so that both parties agree to the
circumstances and tasks during which the privacy and security standards
will be applicable, and propose to include this requirement in Sec.
155.260(b)(2)(i). This requirement already exists in Sec.
155.260(b)(2), where reference is made to a non-Exchange entity
performing the functions outlined in the agreement with the Exchange.
Second, we propose in Sec. 155.260(b)(2)(ii) that in the required
contract or agreement, the Exchange must impose a requirement for
compliance with privacy and security standards and specifically list or
incorporate by reference the privacy and security standards and
obligations with which the non-Exchange entity must comply. A similar
requirement also already exists in the current text of Sec.
155.260(b), where an Exchange must require the same or more stringent
privacy and security standards as a condition of contract or agreement
with the non-Exchange entity. The nature of these standards will be
discussed in greater detail in the next paragraph. Third, we propose in
Sec. 155.260(b)(2)(iii) that in the contract or agreement, the
Exchange must require the non-Exchange entity to monitor, periodically
assess, and update its security controls and related system risks to
ensure the continued effectiveness of those controls in accordance with
Sec. 155.260(a)(5). It is assumed that the Exchange would expect this
type of assessment to occur any time the non-Exchange entity has a
major change in the operational or technical environment employed to
meet the duties outlined in their contracts or agreements with the
Exchange, and at the time of renewal of the contract or agreement.
Fourth, we propose in Sec. 155.260(b)(2)(iv) that in the contract or
agreement, the Exchange must require the non-Exchange entity to inform
the Exchange of any change in its administrative, technical, or
operational environment defined within the contract that would require
an alteration of the standards within the contract or agreement. The
intent of this requirement is to provide an opportunity to assess and
revise standards to ensure that the standards remain relevant. We seek
comment on other mechanisms that could be more effective in keeping
standards aligned with operating environments. Fifth, we propose in
Sec. 155.260(b)(2)(iv) that the contract or agreement include a
requirement that the non-Exchange entity, in a written contract or
agreement, must require any downstream entities that also meet the
definition established in Sec. 155.260(b)(1) to comply with the same
privacy and security standards with which the non-Exchange entity
agrees to comply under its contract or agreement with the Exchange. We
feel it is important that the privacy and security standards continue
to apply to PII as it moves to additional downstream entities.
Currently, Sec. 155.260(b) states that an Exchange must require
the same or more stringent privacy and security standards as a
condition of contract or agreement with individuals or entities that
gain access to PII submitted to an Exchange. In Sec. 155.260(b)(3), we
maintain the specification for an Exchange to require privacy and
security standards as a condition of contract or agreement with non-
Exchange entities and we propose criteria for the establishment of
these standards that allow Exchanges flexibility in setting standards
for non-Exchange entities that will provide equivalent or more
stringent protection while aligning more closely to the functions the
non-Exchange entity is performing and the operating environment under
which the non-Exchange entity is performing. Because the definition for
non-Exchange entities is broad and includes a variety of entities, we
recognize that there can be variation between non-Exchange entities.
Different non-Exchange entity functions can result in variation in
both the amount and type of access to PII (as an example, a Certified
Application Counselor's access to consumer PII is different than the
access a consumer's agent or broker would have) and the technical
characteristics of the non-Exchange entity's environment (as an
example, some non-Exchange entities, such as Medicaid agencies, may
have a connection to the Data Services Hub, whereas others, such as
Navigators, do not). Additionally, some non-Exchange entities already
are required by law to meet other industry-recognized security
standards for the environment in which they will perform Exchange-
related functions. Currently there is no mechanism within the
regulation to take environment variations or already existing security
requirements into account, resulting in an operational burden for non-
Exchange entities that does not result in additional protections for
applicants.
[[Page 72355]]
As applied to non-Exchange entity privacy standards, the
introduction of this flexibility is not anticipated to result in any
weakening of Exchange privacy standards. Variation is not anticipated
in the stringency of the particular privacy standard but in how it is
implemented. As an example, a written policy and procedure document as
required by Sec. 155.260(d) regarding the collection, use, and
disclosure of PII may take a different form based on a non-Exchange
entity's duties and operations. A non-Exchange entity that is a QHP
issuer currently obligated to follow the HIPAA security rule might seek
to negotiate a contract with the Exchange under which it is permitted
to follow the HIPAA security rules in place of the specific security
standards followed by the Exchange. It would then be incumbent upon the
Exchange to evaluate whether this arrangement would meet all of the
criteria established for privacy and security standards under Sec.
155.260(b)(3). We intend for these standards to provide the same level
of protection and safeguards as the current Sec. 155.260(b) affords.
Currently Sec. 155.280 establishes the regulatory authority for
oversight and monitoring of Exchanges and non-Exchange entities with
regard to privacy and security standards. We anticipate additional
proposed rulemaking on oversight, monitoring and enforcement during
2014. We invite comment on alternative ways to address the challenge of
implementing effective enforcement while allowing the proposed
flexibility.
These proposed requirements in Sec. 155.260(b)(3) are intended to
provide a foundation that Exchanges must use to define privacy and
security standards for non-Exchange entities that afford a level of
protection equal to that provided by the standards the Exchanges adopt
for themselves. We have put forth three criteria that must be met by
the privacy and security standards to which an Exchange must bind non-
Exchange entities, and require that these standards take into specific
consideration the environment in which the non-Exchange entity is
operating.
The first criterion is set out in Sec. 155.260(b)(3)(i) and
requires that any privacy and security standards must be as protective
as the standards that the Exchange sets for itself and must be
consistent with all of the principles and requirements listed under
Sec. 155.260(a). This includes the principles of (a)(3), as well as
the requirements established by (a)(1) through (a)(6).
The second criterion proposed in Sec. 155.260(b)(3)(ii) requires
that any privacy and security standards must also comply with the
requirements for workforce compliance, written policies and procedures,
compliance with the IRS code, and the consequences of improper use and
disclosure of information established by Sec. 155.260(c), (d), (f) and
(g).
The third criterion proposed in Sec. 155.260(b)(3)(iii) requires
that the privacy and security standards to which non-Exchange entities
are bound take several factors into consideration. Section
155.260(b)(3)(iii)(A) requires that an Exchange take into consideration
the operational and technical environment in which the non-Exchange
entity is operating. These environments, and the standards themselves,
should be assessed in light of the requirement established by Sec.
155.260(a)(5) to monitor, periodically assess, and update the security
controls and related system risks to ensure the continued effectiveness
of those controls. Should the environment change, the standards should
change accordingly as required by proposed Sec. 155.260(b)(2)(iii) and
Sec. 155.260(b)(2)(iv). We would expect that an Exchange's contracts
and agreements with non-Exchange entities provide an opportunity for
such changes.
Section 155.260(b)(3)(iii)(B) requires standards be relevant and
applicable to the non-Exchange entity's duties and activities in
relation to the Exchange. The introduction of the concept of `relevant
and applicable' is intended to address the various responsibilities
assumed by non-Exchange entities, and the associated technical
infrastructures.
Although the proposed approach affords greater flexibility to
Exchanges, this flexibility carries with it an Exchange's
responsibility to perform an assessment of the non-Exchange entity's
duties, activities, and environment and the standards to which it will
bind non-Exchange entities to ensure that the standards satisfy Sec.
155.260 requirements. For example, assuming Sec. 155.260 is finalized
as proposed, the FFE will incorporate privacy and security standards
into non-Exchange entity contracts and agreements only after
determining that the standards satisfy the criteria proposed under
Sec. 155.260(b)(3)(i), (ii) and (iii), and thereby meet the
requirements of Sec. 155.260 and the Affordable Care Act. We expect to
publish guidance to provide additional details regarding the process
the FFE will follow to evaluate privacy and security standards to which
non-Exchange entities will be bound.
We seek comments on the proposed amendments to Sec. 155.260 and on
alternate ways to ensure protection for information while not imposing
irrelevant or unnecessarily burdensome requirements on non-Exchange
entities.
4. Annual Open Enrollment Period for 2015
In 45 CFR 155.410, as finalized in the Exchange Establishment Rule,
we set forth provisions for initial and annual open enrollment periods.
We now propose amending Sec. 155.410(e) and (f), which pertain to the
annual open enrollment period and effective date for coverage after the
annual open enrollment period.
In paragraph (e), we propose adding a paragraph that would change
the annual open enrollment period for the 2015 benefit year. We propose
that for all Exchanges, annual open enrollment would begin on November
15, 2014 and extend through January 15, 2015. This proposed change
would give health insurance issuers an additional month in 2014 before
they would need to begin accepting plan selections for the upcoming
plan year. It also staggers the start of open enrollment for the
Exchange from that for Medicare Advantage. It would give consumers the
ability to have coverage starting January 1, 2015, or if they need more
time, until January 15, 2015 to shop for, and select a QHP for the 2015
plan year. If finalized, all Exchanges would be expected to delay their
QHP certification dates by at least one month. This would give health
insurance issuers additional time to monitor 2014 enrollments, prior to
submitting their 2015 rates. First-year challenges in enrolling
individuals may mean higher than expected enrollment toward the end of
the initial open enrollment period which, under the current schedule,
coincides with the first day in which applications for 2015 can be
submitted to the FFE. This compressed schedule would add uncertainty to
setting rates for 2015 and potentially higher premiums without change.
This proposed change is applicable for only the 2015 coverage year. We
seek comments on this proposed amendment.
In paragraph (f), we propose adding a paragraph to address coverage
effective dates for plan selections made during the annual open
enrollment period for the 2015 benefit year. We propose that coverage
must be effective January 1, 2015, for plan selections received by the
Exchange on or before December 15, 2014. We propose that coverage must
be effective February 1, 2015, for plan selections received by the
Exchange from December 16, 2014 through January 15, 2015. In accordance
with 45 CFR 155.335(j), qualified individuals
[[Page 72356]]
already enrolled in a QHP through the Exchange in 2014 who maintain the
same eligibility would have their coverage continue into 2015, but they
would have the ability to change QHPs until January 15, 2015. We seek
comments regarding whether issuers should accept payments up until the
31st of a given month, in order to effectuate coverage by the first of
the following month. We also seek comment on whether there should be
retrospective coverage to January 1, 2015, for any individual who signs
up after December 15, 2014 in the open enrollment period to ensure
continuity of coverage.
5. Functions of a SHOP
For plan years beginning before January 1, 2015, qualified
employers participating in a Federally-facilitated SHOP (``FF-SHOP'')
are able to select a single QHP to offer to their employees. For plan
years beginning on or after January 1, 2015, employers participating in
the FF-SHOPs will also have the option to select a level of coverage as
described in section 1302(d)(1) of the Affordable Care Act, and make
all QHPs within that level available to their qualified employees
(``employee choice''). Additionally, the FF-SHOPs will begin performing
premium aggregation services under Sec. 155.705(b)(4) for plan years
beginning on or after January 1, 2015--corresponding with the beginning
of employee choice in the FF-SHOPs. Several of the amendments proposed
below would take effect when employee choice and premium aggregation
become available, including a requirement that employers make premium
payments to the FF-SHOPs according to a timeline and process set by
HHS, a standard premium pro-rating methodology in the FF-SHOPs
providing that groups will be charged for the portion of the month for
which an enrollee is enrolled, a prohibition on composite premiums in
the FF-SHOPs when an employer utilizes employee choice, methods for
employers in the FF-SHOPs to offer stand-alone dental coverage, and
flexibility for employers in the FF-SHOPs to define different premium
contributions for full-time employees and non-full-time employees.
We propose revising Sec. 155.705(b)(1), which lists the rules
regarding eligibility and enrollment to which the SHOP must adhere, to
include mention of additional provisions regarding termination of
coverage in the SHOPs and SHOP employer and employee eligibility
appeals that were finalized in the first final Program Integrity Rule.
This provision would become effective when this proposed rule is
finalized and becomes effective.
We also propose adding a new paragraph Sec. 155.705(b)(3) to
provide qualified employers with options to offer dental coverage after
employee choice becomes available in the FF-SHOPs. We propose that for
plan years beginning on or after January 1, 2015, a qualified employer
participating in an FF-SHOP would have two methods by which to offer
stand-alone dental plans (SADPs) to its employees and their dependents.
This proposal would provide employers with options for offering SADPs
while preserving the flexibility not to contribute to SADP coverage.
For example, an employer that elects to offer a single QHP that lacks
the pediatric dental benefit may want to ensure that its employees with
child dependents have the option to enroll in pediatric dental
coverage.
We considered several options for methods by which a qualified
employer participating in an FF-SHOP could offer SADPs to its employees
and their dependents: the employer could offer a single SADP, the
employer could offer all SADPs at a given dental AV level (under 45 CFR
156.150(b)), the employer could offer all SADPs in an FF-SHOP, or the
employer could offer a subset of SADPs available in an FF-SHOP. All of
these options would allow an employer flexibility to provide its
employees and their dependents with standalone dental coverage. The
single SADP option would enable an employer to choose the plan offered,
and may be more administratively appealing to an employer already used
to offering a single plan in the current market. This option would have
the benefit of administrative ease for an FF-SHOP and issuer, but it
would limit the selection for employees more than other options.
Allowing the option for qualified employers to offer all SADPs at a
given dental AV level option would also enable an employer to make
decisions about the type of plans offered to employees while retaining
some administrative simplicity by only requiring a choice between the
two dental AV levels (high and low) that were established for the 2014
benefit year. This option would also help advance the goal of increased
choice and competition and is similar to employee choice of QHPs where
an employer selects a metal tier and employees may select any QHP
within that tier. However, the proposed changes to Sec. 156.150 in
this proposed rule would remove the AV standards for stand-alone dental
plans; thus, this option would not be possible if Sec. 156.150 is
finalized as proposed.
Allowing qualified employers to offer all SADPs available in an FF-
SHOP would provide an employer with maximum flexibility to offer its
employees and their dependents the ability to choose an SADP that best
fits their needs. Additionally, it would allow an employer to make an
offer of coverage without needing to compare and select among plans or
tiers. This approach would most advance the goals of increased choice
and competition within the small group market, but might create
concerns among issuers about potential adverse selection arising from
higher risk employees electing to enroll in certain SADPs.
Finally, we considered an option that would allow an employer to
make an offer to its employees and their dependents from a defined
subset of SADPs in an FF-SHOP. In this option, an FF-SHOP would define
a subset of SADPs from which an employer could choose. For example, an
employer might be allowed to offer any two plans from the same issuer.
This option would allow an employer additional flexibility in offering
dental plans while maintaining some control over the particular plans
offered to its employees and their dependents. Although less
administratively simple, this option could provide some increased level
of choice for employers and their employees.
After considering the options described above, we are proposing
that a qualified employer in an FF-SHOP could offer its employees (and,
if desired, their dependents) either a single SADP or a choice of all
SADPs available in an FF-SHOP after employee choice becomes available
in the FF-SHOPs. We note that an employer could choose either option
under this proposal regardless of whether it offers one QHP or all QHPs
available in an FF-SHOP to its employees and their dependents under
Sec. 155.705(b)(3)(iv). We believe this proposal provides the best
balance of advancing the Affordable Care Act's goals of increased
choice and competition in the small group market, providing employers
with an administratively simple way to offer stand-alone dental
coverage, providing employees with increased dental coverage options,
and maintaining consistency with employee choice. We seek comment on
these options, including on the option of offering all plans at a
dental AV level if the proposal to eliminate dental AV levels is not
finalized.
We also propose to re-designate Sec. 155.705(b)(4)(ii) as
(b)(4)(iii) and to
[[Page 72357]]
add new paragraph (b)(4)(ii) to allow all SHOPs, both FF-SHOPs and
State SHOPs, to establish one or more standard processes for premium
calculation, payment, and collection after the SHOP makes premium
aggregation available. Many States do not have standardized prorating,
payment, and collection practices, and within a given State, issuers
may have varying practices. In this environment, a standard method of
handling premiums may be necessary for a SHOP to successfully and
efficiently implement and operate the premium aggregation services
described in Sec. 155.705(b)(4)(i).
We also propose provisions related to the processes FF-SHOPs would
establish for premium calculation, payment, and collection under
proposed new Sec. 155.705(b)(4)(ii). Consistent with Sec. 155.720(b),
which establishes that all SHOPs must establish a uniform enrollment
timeline and process, including establishment of effective dates of
employee coverage, for all QHP issuers and qualified employers to
follow, and consistent with Sec. 155.720(d), which establishes that
all SHOPs must follow the requirements set forth at Sec.
155.705(b)(4), we are proposing at Sec. 155.705(b)(4)(ii)(A) that,
after premium aggregation becomes available in the FF-SHOPs, employers
in the FF-SHOPs would be required to make all premium payments--initial
and subsequent--according to a timeline and process that HHS will
establish through guidance. We intend for this proposed timeline and
process to include all premium payments and considered whether to
include ``all'' in the regulation text, but we decided that including
the word ``all'' would be unnecessary. In developing this timeline and
process, HHS will consider its interest in operating and administering
the FF-SHOPs efficiently, as well as issuers' interests in ensuring
timely payment of premiums, and issuers' and employers' interests in
establishing a fair and workable premium payment process. We anticipate
that this payment timeline would require employers to make an initial
premium payment at least two days prior to the employer's desired
coverage effectuation date, in order to provide a reasonable window of
time for the relevant banks to process the payment transaction.
However, we solicit comments about whether such a time frame would be
reasonable for employers or issuers, about alternative time frames that
might be more appropriate, and about the payment timeline and process
for the FF-SHOPs generally, including the considerations HHS should
factor into the development of the payment timeline and process. We are
also proposing a conforming amendment to Sec. 156.285(c)(7)(iii),
discussed in greater detail below, to establish that an FF-SHOP issuer
would be required to effectuate coverage unless it has received an
enrollment cancellation from the FF-SHOP, and explain in the preamble
discussion related to that proposal that if the FF-SHOP has not
received an employer's initial premium payment in accordance with the
payment timeline and process established under proposed Sec.
155.705(b)(4)(ii)(A), the FF-SHOP will send the issuer an enrollment
cancellation.
At proposed Sec. 155.705(b)(4)(ii)(B), we also propose a
methodology for prorating premiums in FF-SHOPs after premium
aggregation becomes available in those SHOPs in plan years beginning on
or after January 1, 2015. Because it would be impractical for FF-SHOPs
to accommodate the existing variation in premium methodologies that
exists across States and issuers, we propose a standard methodology
such that groups will be charged for the portion of the month for which
the enrollee is enrolled. We considered several methods for prorating
partial month payment in the FF-SHOPs, including not charging for a
partial month's coverage, charging a full month's premium if coverage
is effective prior to the 15th of the month, or not charging any
premium if coverage is effective after the 15th of the month. We
propose that in the FF-SHOPs, premiums for coverage of less than 1
month will be prorated by multiplying the number of days of coverage in
the partial month by the premium for 1 month divided by the number of
days in the month. We believe this approach to be the fairest for both
consumers and issuers because the issuer will charge for only the
portion of coverage provided for a partial month. We invite comments
about this methodology, as well as comments about whether a
standardized methodology regarding prorating premiums for partial month
enrollment should be adopted across all individual market Exchanges as
well.
In the proposed 2014 Payment Notice, we proposed at Sec.
155.705(b)(11)(ii)(D) to permit a qualified employer participating in
an FF-SHOP to establish, to the extent allowed by Federal and State
law, different premium contribution percentages for different employee
categories. In the 2014 Payment Notice, we did not finalize this
proposal because we concluded that it would be inconsistent with the
uniformity provisions established in Internal Revenue Service Notice
2010-82, which requires employers to contribute a uniform percentage to
all employee premiums in order to claim a small business tax credit for
health insurance premiums paid.\21\ In this proposed rule, we propose
at paragraph (b)(11)(ii)(C) to provide FF-SHOPs, in plan years
beginning on or after January 1, 2015, with the option of permitting a
qualified employer to define a different percentage contribution for
full-time employees (as defined in Sec. 155.20 and section 4980H(c)(4)
of the Code) from the percentage contribution it defines for employees
that are not full-time employees under that definition, to the extent
permitted by applicable law. This proposal would also allow a FF-SHOP
to permit an employer to define different percentage contributions
toward premiums for dependent coverage for full-time and non-full-time
employees. We note that, to the extent permitted by applicable law, the
percentage contributions established for dependent coverage under this
proposal could be different from the premium contribution percentages
established for employee-only coverage, consistent with current
paragraph (b)(11)(ii)(C). Thus, an FF-SHOP under this proposal could
allow an employer to define up to four different contribution levels:
full-time employee-only, full-time employee dependent, non-full-time
employee-only, and non-full-time employee dependent.
---------------------------------------------------------------------------
\21\ See 78 FR 15502. IRS recently proposed regulations
addressing the uniform premium contribution requirement for 2014 at
78 FR 52719, 52721 (Aug. 26, 2013).
---------------------------------------------------------------------------
We note that under this proposal, a decision by an employer to
define different contribution levels for full-time and non-full-time
employees offered coverage through the SHOP may potentially have small
business tax credit implications. However, the IRS, not HHS administers
the small business tax credit. Therefore, if the proposal is finalized
as proposed, employers considering taking this option should consider
consulting with the IRS and/or their tax advisors about the
implications of such a decision. Even so, we believe that this proposal
would provide employers with additional flexibility to choose whether
offering different contribution levels would be in the best interest of
the business and its employees. Further, this additional flexibility
would bring the FF-SHOP more in line with current small group market
practices and provide an additional incentive for small employers to
participate in the FF-SHOP. Finally, providing for different
contribution
[[Page 72358]]
levels based on full-time or non-full-time status may encourage some
employers to offer coverage to employees who do not meet the Exchange
definition of a ``full-time employee.''
We also propose amending Sec. 155.705(b)(11)(ii)(D). When an
employer offering SHOP coverage elects to base premium contributions on
a composite premium, that premium is calculated based on the average
per-member premiums for the employees who initially enroll in coverage.
Under Sec. 155.705(b)(6)(ii), the average employee premium rate is
locked in for the entire plan year, regardless of whether any employees
enter or leave the group during the plan year. Additionally, as
described above, we are proposing in this rulemaking to amend Sec.
147.102(c) to establish that if an issuer offers a composite premium,
the premium amount would not be permitted to vary for any participant
during the plan year with respect to a particular plan, even if the
composition of the group changes. For example, if several older
employees joined the group or several employees terminated their
coverage, the composite premium would remain the same until renewal.
After employee choice becomes effective in the FF-SHOPs, if an employer
participating in an FF-SHOP elects to offer employees all plans at a
single metal level of coverage, that employer might have employees
enrolled in several different plans. In that circumstance, mid-year
changes to the group's composition without a corresponding change to
the composite rate may adversely affect issuers that gain a significant
number of older employees once a plan year has started, without a
resulting change in premiums to reflect the potentially higher risk.
Because any risk related to a change in the group's composition is
divided among issuers in an employee choice environment, they would be
taking on proportionately more risk than in a single plan environment
where the issuer would be assuming the risk--good and bad--for the
entire group. We believe this uncertainty may make issuers more
hesitant to offer QHPs in FF-SHOPs after employee choice is available
in them--which risks undermining the Affordable Care Act's goals of
increased choice and competition in the small group market.
Accordingly, we propose a limited scope prohibition on composite rating
in the FF-SHOPs when an employer elects to select a level of coverage
and make all QHPs within that level available to its employees. We
acknowledge that this proposal would create a limited exception to
Sec. 147.102(c)(3) and that it would preempt State laws requiring or
permitting composite rating in the small group market, but we believe
this proposal to be limited in scope and tailored to provide for
administrative efficiency and uniformity, system compatibility among
the FF-SHOPs, and increased competition and choice in the small group
market. Therefore, we propose amending Sec. 155.705(b)(11)(ii)(D) to
not allow an employer or State to require that employer premium
contributions in an FF-SHOP be based on a calculated composite premium
if the employer elects to offer its employees all QHPs within the
employer's selected level of coverage under Sec. 155.705(b)(3)(iv)(A),
that is, after employee choice is available in the FF-SHOPs and when an
employer elects that option. State-based SHOPs may set their own
policies. We are considering extending the prohibition on composite
rating to SADPs in the FF-SHOPs, and we invite comment on whether such
a prohibition should be adopted, how this policy might affect current
market practices on composite rating of dental plans, whether a
prohibition on composite rating should apply to all SADP offering
methods or just when an employer chooses to offer more than a single
SADP, and how such a prohibition would affect choice and competition in
the small group dental market. Finally, we seek comment on whether the
calculation of user fees for the FF-SHOP should be calculated based
upon composite premiums or premiums calculated on per-member buildup.
6. Eligibility Determination Process for SHOP
We propose to amend paragraph (c)(4) to replace a reference to
sections 1411(b)(2) and (c) of the Affordable Care Act with a reference
to Subpart D of 45 CFR part 155, and to add a reference to eligibility
verifications as well as to eligibility determinations. The proposed
changes would prohibit a SHOP from performing any individual market
eligibility determinations or verifications as described in Subpart D,
which, for example, includes making eligibility determinations for
advance payments of the premium tax credit and cost sharing reductions
in the individual market Exchange. HHS already interprets existing
regulations at Sec. 155.715(c)(3) and (4) and Sec. 155.730 to
prohibit SHOPs from performing these types of determinations or
verifications and from collecting through the SHOP application process
any information other than what is required to make SHOP eligibility
determinations or effectuate enrollment through the SHOP. However, we
wish to make the prohibitions explicit in regulation text. We propose
this amendment because the SHOPs are designed to assist small employers
and employees of small businesses in accessing health insurance
coverage, whereas the individual market Exchanges are designed to
assist individual consumers. We believe that this proposal would create
efficiencies for the SHOP and enable it to focus solely on small
businesses. Additionally, we believe the prohibitions in this proposal,
in conjunction with the proposed amendments to Sec. 155.730, would
help to protect SHOP consumers' privacy. This provision would become
effective when this proposed rule is finalized and becomes effective.
We propose amending paragraph (d) to address when SHOP eligibility
adjustment periods would be triggered. Under current paragraph (d)(1),
an eligibility adjustment period for an employer would be triggered
whenever the employer submits information on the SHOP single employer
application that is inconsistent with the eligibility standards
described in Sec. 155.710, which effectively means that the
inconsistency period is triggered whenever an employer would be
determined ineligible. Under current paragraph (d)(2), an eligibility
adjustment period would be triggered for employees if the SHOP receives
information on the employee's application that is inconsistent with the
information provided by the employer. We are proposing to provide
instead for eligibility adjustment periods for both employers and
employees only when there is an inconsistency between information
provided by an applicant and information collected through optional
verification methods under Sec. 155.715(c)(2).
A SHOP applicant who is determined ineligible could always resolve
the reasons for that negative eligibility determination and re-file the
application to obtain a favorable eligibility determination. As
written, the current eligibility adjustment periods could delay this
process in ways that might complicate the enrollment of all employees
being offered coverage by an employer, because they could delay the
SHOP's final eligibility determination for an employer or for
individual employees, in order to give the SHOP time to resolve issues
that may be relatively straightforward for employers or employees to
address without the SHOP's intervention, in a newly filed application.
However, if the SHOP has
[[Page 72359]]
opted, under Sec. 155.715(c)(2), to establish additional verification
methods, and has, as part of that process, decided to verify SHOP
applicant eligibility by checking applicant-provided information
against information obtained from a trusted third-party data source
(such as quarterly wage report data), the applicant might be denied
eligibility because of an inconsistency between the information the
SHOP received from that applicant and information contained in a third-
party data source. Such inconsistencies might be difficult for
applicants to identify and resolve on their own.
Our proposed amendments to the eligibility adjustment periods would
eliminate the potential for unnecessary delay created under the current
regulation, while providing SHOP applicants with an opportunity to
address inconsistencies between a submitted application and trusted
third-party data sources that a SHOP might utilize to verify
eligibility under the optional verification process established in
Sec. 155.715(c)(2). Under the proposal, the applicability of SHOP
eligibility adjustment periods would be limited to circumstances where
such a discrepancy occurs, and the applicant would be provided an
opportunity to submit documentation proving the information submitted
on the application is correct without having to initiate a formal
eligibility appeal. For example, if an employer provided its commonly
used business name on the application but that name varies slightly
from the registered business name listed in an unemployment insurance
data source used by a SHOP to verify eligibility under Sec.
155.715(c)(2), or if an employee provides a nickname on an application
that differs from his or her formal name in quarterly wage report data
source used by a SHOP to verify eligibility under Sec. 155.715(c)(2),
the applicants would be able to use the adjustment period to address
the inconsistencies between their applications and the third-party data
sources. If a SHOP does not collect information through optional
verification methods under Sec. 155.715(c)(2), the employer and
employee would not have to go through the eligibility adjustment period
before re-filing their applications, but would still have the right to
appeal an adverse eligibility determination under Sec. 155.740.
Accordingly, we propose to amend paragraphs (d)(1) and (d)(2) to
provide for eligibility adjustment periods when information submitted
on an application is inconsistent with information collected through an
optional verification process under Sec. 155.715(c)(2). This provision
would become effective when this proposed rule is finalized and becomes
effective. We seek comments on this proposal, including comments on
whether the current eligibility adjustment periods should remain in
place.
7. Application Standards for SHOP
HHS already interprets existing regulations at Sec. 155.715(c)(3)
and (c)(4) and Sec. 155.730 to prohibit SHOPs from collecting through
the SHOP application process any information other than what is
required to make SHOP eligibility determinations or effectuate
enrollment through the SHOP. We propose amendments to Sec. 155.730
that would expressly state this prohibition in regulation text.
Specifically, we propose to re-designate paragraph (g) as paragraph
(g)(1) and add new paragraph (g)(2) to provide that a SHOP is not
permitted to collect information on the single employer or single
employee application that is not necessary to determine SHOP
eligibility or effectuate enrollment through the SHOP. In conjunction
with the amendments we are proposing to Sec. 155.715(c)(4), which
would prohibit a SHOP from performing any individual market eligibility
determinations or verifications as described in Subpart D of 45 CFR
part 155, this proposal seeks to ensure that SHOPs are not collecting
information on the single employer or single employee applications that
is not pertinent to a determination of SHOP eligibility or effectuation
of enrollment. For example, a SHOP could not request through the single
employee application the income information necessary for determining
eligibility for advance payments of the premium tax credit in the
individual market Exchange. Limiting the information required of an
applicant helps to protect privacy and promote efficiency and
streamlining of the SHOP application process. This provision would
become effective when this proposed rule is finalized and becomes
effective.
E. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. Provisions Related to Cost Sharing
In this section, we propose several provisions and parameters for
the 2015 benefit year related to cost sharing.
a. Premium Adjustment Percentage
Section 1302(c)(4) of the Affordable Care Act directs the Secretary
to determine an annual premium adjustment percentage, which is used to
set the rate of increase for four parameters detailed in the Affordable
Care Act: The maximum annual limitation on cost sharing (defined at
Sec. 156.130(a)), the maximum annual limitation on deductibles for
plans in the small group market (defined at Sec. 156.130(b)), and the
assessable payment amounts under section 4980H(a) and (b) of the Code
(proposed at 26 CFR 54.4980H in the ``Shared Responsibility for
Employers Regarding Health Coverage,'' published in the January 2, 2013
Federal Register (78 FR 218)). Section 156.130(e) provides that the
premium adjustment percentage is the percentage (if any) by which the
average per capita premium for health insurance coverage for the
preceding calendar year exceeds such average per capita premium for
health insurance for 2013, and that this percentage will be published
annually in the HHS notice of benefit and payment parameters.
We propose to establish a methodology for estimating average per
capita premium for purposes of calculating the premium adjustment
percentage. In selecting this methodology, we considered the following
four criteria:
(1) Comprehensiveness--the premium adjustment percentage should be
calculated based on the average per capita premium for health insurance
coverage for the entire market, including the individual and group
markets, and both fully insured and self-insured group health plans;
(2) Availability--the data underlying the calculation should be
available by the summer of the year prior to the calendar year so that
the premium adjustment percentage can be published in the annual HHS
notice of benefit and payment parameters in time for issuers to develop
their plan designs;
(3) Transparency--the methodology for estimating the average
premium should be easily understandable and predictable; and
(4) Accuracy--the methodology should have a record of accurately
estimating average premiums.
Based on these criteria, we propose that the premium adjustment
percentage be calculated based on the projections of average per
enrollee private health insurance premiums from the National Health
Expenditure Accounts (NHEA), which is calculated by the CMS Office of
the Actuary. We considered several other sources of premium data,
including the Medical Expenditure Panel Survey (administered by the
Agency for Healthcare Research and Quality), the Employer Health
Benefits Survey (administered by the Kaiser
[[Page 72360]]
Family Foundation and the Health Research and Educational Trust), and
the Federal Employees Health Benefits Program. However, we believe the
NHEA projections, which are partially based on several of the other
data sources that we considered, best meet the selection criteria
described above and will provide the most accurate estimate of the
average per capita premium for the entire health insurance market. We
welcome comment on the criteria for selecting a methodology, any
additional sources of premium data that we should consider, and the
choice of methodology. As additional data on health insurance premiums
become available through the Exchanges and other sources, we plan to
review the accuracy of the NHEA projections, and if necessary, propose
any changes to the methodology for estimating the average premium
through the annual Payment Notice.
To calculate the premium adjustment percentage for the 2015
calendar year, we propose to use the most recent NHEA projections of
average per enrollee private health insurance spending for 2013 and
2014 ($5,128 and $5,435, respectively).\22\ Therefore, we are proposing
that the premium adjustment percentage for 2015 be (5,435-5,128)/5,128,
and we propose to round the result of this formula to the nearest
decimal point, which, in this case, would be 6.0 percent. We are also
proposing the following cost-sharing parameters for calendar year 2015,
based on our proposed premium adjustment percentage for 2015.
---------------------------------------------------------------------------
\22\ See https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology2012.pdf and Table 17 in https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf for
additional information.
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Maximum Annual Limitation on Cost Sharing for Calendar Year 2015.
Under Sec. 156.130(a)(2), for the 2015 calendar year, cost sharing for
self-only coverage may not exceed the product of the maximum annual
limitation on cost sharing for calendar year 2014 and the premium
adjustment percentage for 2015, and for other than self-only coverage,
the limit is twice the dollar limit for self-only coverage. Under Sec.
156.130(d), these amounts must be rounded to the next lowest multiple
of 50. Using the proposed premium adjustment percentage of 6.0 percent
and the 2014 maximum annual limitation on cost sharing of $6,350 for
self-only coverage, which was published by the IRS on May 2, 2013,\23\
we propose that the 2015 maximum annual limitation on cost sharing be
$6,750 for self-only coverage and $13,500 for other than self-only
coverage.
---------------------------------------------------------------------------
\23\ See https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------
Maximum Annual Limitation on Deductibles for Plans in the Small
Group Market for Calendar Year 2015. Under Sec. 156.130(b)(2), for the
2015 calendar year, the annual deductible for a health plan in the
small group market may not exceed, for self-only coverage, the product
of the maximum annual limitation on deductibles for calendar year 2014
and the premium adjustment percentage for 2015, and for other than
self-only coverage, the limit is twice the dollar limit for self-only
coverage. Under Sec. 156.130(d), these amounts must be rounded to the
next lowest multiple of 50. Using the proposed premium adjustment
percentage of 6.0 percent and the 2014 maximum annual limitation on
deductibles of $2,000 for self-only coverage, as specified in Sec.
156.130(b)(1)(i), we propose that the 2015 maximum annual limitation on
deductibles be $2,150 for self-only coverage and $4,300 for other than
self-only coverage.
b. Reduced Maximum Annual Limitation on Cost Sharing
Sections 1402(a) through (c) of the Affordable Care Act direct
issuers to reduce cost sharing for EHBs for eligible individuals
enrolled in a silver level QHP. In the 2014 Payment Notice, we set
forth standards related to the provision of these cost-sharing
reductions. Specifically, in 45 CFR part 156 subpart E, we specified
that QHP issuers must provide cost-sharing reductions by developing
plan variations, which are separate cost-sharing structures for each
eligibility category that change how the cost sharing required under
the QHP is to be shared between the enrollee and the Federal
government. At Sec. 156.420(a), we detailed the structure of these
plan variations and specified that QHP issuers must ensure that each
silver plan variation has an annual limitation on cost sharing no
greater than the applicable reduced maximum annual limitation on cost
sharing specified in the annual HHS notice of benefit and payment
parameters. Although the amount of the reduction in the maximum annual
limitation on cost sharing is specified in section 1402(c)(1)(A) of the
Affordable Care Act, section 1402(c)(1)(B)(ii) of the statute states
that the Secretary may adjust the cost-sharing limits to ensure that
the resulting limits do not cause the AVs of the health plans to exceed
the levels specified in 1402(c)(1)(B)(i) (that is, 73 percent, 87
percent or 94 percent, depending on the income of the enrollee(s)).
Accordingly, in the 2014 Payment Notice, we set forth a process for
determining the appropriate reductions in the maximum annual limitation
on cost sharing. First, we identified the maximum annual limitation on
cost sharing applicable to all plans that will offer the EHB package.
As noted above, we propose the 2015 maximum annual limitation on cost
sharing be $6,750 for self-only coverage and $13,500 for other than
self-only coverage. Second, we analyzed the effect on AV of the
reductions in the maximum annual limitation on cost sharing described
in the statute. Last, we adjusted the reductions in the maximum annual
limitation on cost sharing, if necessary, to ensure that the AV of a
silver plan variation will not exceed the AV specified in the statute.
Below, we describe our analysis for the 2015 benefit year and our
proposed results.
Reduced Maximum Annual Limitation on Cost Sharing for Benefit Year
2015. Consistent with our analysis in the 2014 Payment Notice, we
developed three model silver level QHPs and analyzed the impact on
their AVs of the reductions described in the Affordable Care Act to the
estimated maximum annual limitation on cost sharing for self-only
coverage ($6,750). However, using data collected for QHP certification
for 2014, we updated the model plan designs to ensure that they
continue to represent a range of plan designs that we expect issuers to
offer at the silver level of coverage through an Exchange. For 2015,
the model silver level QHPs would include a PPO with a typical cost-
sharing structure ($6,750 annual limitation on cost sharing, $1,700
deductible, and 20 percent in-network coinsurance rate), a PPO with a
lower annual limitation on cost sharing ($4,500 annual limitation on
cost sharing, $2,000 deductible, and 20 percent in-network coinsurance
rate), and an HMO ($6,750 annual limitation on cost sharing, $2,100
deductible, 20 percent in-network coinsurance rate, and the following
services with copays that are not subject to the deductible or
coinsurance: $500 inpatient stay per day, $350 emergency department
visit, $25 primary care office visit, and $50 specialist office visit).
All three model QHPs meet the AV requirements for silver health plans.
We then entered these model plans into the proposed 2015 AV
calculator developed by HHS and observed how
[[Page 72361]]
the reductions in the maximum annual limitation on cost sharing
specified in the Affordable Care Act affected the AVs of the plans. We
found that the reduction in the maximum annual limitation on cost
sharing specified in the Affordable Care Act for enrollees with a
household income between 100 and 150 percent of the Federal poverty
line (FPL) (2/3 reduction in the maximum annual limitation on cost
sharing), and 150 and 200 percent of the FPL (2/3 reduction), would not
cause the AV of any of the model QHPs to exceed the statutorily
specified AV level (94 and 87 percent, respectively). In contrast, the
reduction in the maximum annual limitation on cost sharing specified in
the Affordable Care Act for enrollees with a household income between
200 and 250 percent of FPL (1/2 reduction), would cause the AVs of two
of the model QHPs to exceed the specified AV level of 73 percent. As a
result, we propose that the maximum annual limitation on cost sharing
for enrollees in the 2015 benefit year with a household income between
200 and 250 percent of FPL be reduced by approximately 1/5, rather than
1/2. We further propose that the maximum annual limitation on cost
sharing for enrollees with a household income between 100 and 200
percent of the FPL be reduced by 2/3, as specified in the statute, and
as shown in Table 4. These proposed reductions in the maximum annual
limitation on cost sharing align with the 2014 reductions and should
adequately account for unique plan designs that may not be captured by
our three model QHPs. Applying the same parameters as those specified
for 2014 would reduce the administrative burden for issuers related to
designing new plans, and provide greater continuity for enrollees.
Furthermore, as noted in the preamble to the 2014 Payment Notice,
selecting a reduction for the maximum annual limitation on cost sharing
that is less than the reduction specified in the statute would not
reduce the benefit afforded to enrollees in aggregate because QHP
issuers are required to further reduce their annual limitation on cost
sharing, or reduce other types of cost sharing, if the required
reduction does not cause the AV of the QHP to meet the specified level.
We welcome comment on this analysis and the proposed reductions in the
maximum annual limitation on cost sharing for 2015. We note that for
2015, as described in Sec. 156.135(d), States are permitted to submit
for approval by HHS State-specific data sets for use as the standard
population to calculate AV. If States submit such data sets, we intend
to analyze their effects on the reductions we propose here, and we will
adjust the reductions in the maximum annual limitation on cost sharing
if necessary in the final rule.
Table 4--Reductions in Maximum Annual Limitation on Cost Sharing for 2015
----------------------------------------------------------------------------------------------------------------
Reduced maximum annual Reduced maximum annual
limitation on cost sharing limitation on cost sharing
Eligibility category for self-only coverage for for other than self-only
2015 coverage for 2015
----------------------------------------------------------------------------------------------------------------
Individuals eligible for cost-sharing reductions $2,250 $4,500
under Sec. 155.305(g)(2)(i) (that is, 100-150
percent of FPL)....................................
Individuals eligible for cost-sharing reductions $2,250 $4,500
under Sec. 155.305(g)(2)(ii) (that is, 150-200
percent of FPL)....................................
Individuals eligible for cost-sharing reductions $5,200 $10,400
under Sec. 155.305(g)(2)(iii) (that is, 200-250
percent of FPL)....................................
----------------------------------------------------------------------------------------------------------------
c. Design of Cost-sharing Reduction Plan Variations
In the 2014 Payment Notice, we established standards in Sec.
156.420(c)-(e) to ensure that each cost-sharing reduction plan
variation would always provide the most cost savings for which an
enrollee is eligible while providing the same benefits and provider
network as a plan without cost-sharing reductions. In this proposed
rule, we are proposing certain modifications to clarify how these
standards would apply to out-of-pocket spending required of an enrollee
for benefits other than essential health benefits (EHBs).
Following our implementation of Exchange operations for 2014, we
have learned that a number of issuers designed QHPs with cost-sharing
parameters that apply to both EHB and benefits that are not EHB. For
example, one issuer sought to establish a common deductible across all
benefits. For the zero cost sharing plan variation of this QHP, this
would result in a substantial deductible being applied entirely to
benefits that are not EHB. We are proposing to remove the standards in
Sec. 156.420(c) and (d) that require that a QHP and each of its plan
variations have the same out-of-pocket spending for benefits other than
EHB. Instead, we propose that the standard in Sec. 156.420(e)--that
cost sharing for an essential health benefit from a provider (including
a provider outside the plan's network) required of an enrollee in a
silver plan variation may not exceed the corresponding cost sharing
required in the standard silver plan or any other silver plan variation
of that plan with a lower AV--would also apply to out-of-pocket
spending required of enrollees in silver plan variations for a benefit
that is not an EHB. Similarly, we propose in Sec. 156.420(d) that the
out-of-pocket spending required of enrollees in the zero cost sharing
plan variation of a QHP for a benefit that is not an EHB from a
provider (including a provider outside the plan's network) may not
exceed the corresponding out-of-pocket spending required in the limited
cost sharing plan variation of the QHP, which in turn may not exceed
the corresponding out-of-pocket spending required in the QHP with no
cost-sharing reductions.
We believe these proposed modifications strike the appropriate
balance between protecting consumers and providing QHP issuers with
flexibility. Each cost-sharing reduction plan variation would continue
to provide the most cost savings for which an enrollee is eligible;
however, QHP issuers would be able to reduce out-of-pocket spending for
benefits that are not EHB for enrollees in plan variations. We believe
some issuers may want to provide such reductions so as to offer a
simpler cost-sharing design that is consistent across EHB and benefits
that are not EHBs. We note, however, that in accordance with section
1402(d)(4) of the Affordable Care Act, any reductions in out-of-pocket
spending for benefits that are not EHB would not be reimbursed by the
Federal government because payments for cost-sharing reductions only
apply to EHB.
We seek comment on this proposal, including on whether our proposal
should offer less flexibility.
[[Page 72362]]
d. Advance Payments of Cost-sharing Reductions
Section 1402(c)(3) of the Affordable Care Act directs a QHP issuer
to notify the Secretary of cost-sharing reductions made under the
statute, and directs the Secretary to make periodic and timely payments
to the QHP issuer equal to the value of those reductions. Section
1412(c)(3) of the Affordable Care Act permits advance payments of cost-
sharing reduction amounts to QHP issuers based upon amounts specified
by the Secretary. Under these authorities, we established a payment
approach in the 2014 Payment Notice under which monthly advance
payments made to issuers to cover projected cost-sharing reduction
amounts are reconciled after the end of the benefit year to the actual
cost-sharing reduction amounts.
To implement this approach, we specified in Sec. 156.430(a) that a
QHP issuer must provide to the Exchange, for approval by HHS, an
estimate of the dollar value of the cost-sharing reductions to be
provided over the benefit year, calculated in accordance with the
methodology specified by HHS in the annual HHS notice of benefit and
payment parameters. In the 2014 Payment Notice, we specified that the
estimates of the cost-sharing reductions must be calculated using data
that issuers submit under Sec. Sec. 156.420 and 156.470, including the
AV of the standard plan and plan variation, and the EHB portion of
expected allowed claims costs. If an issuer seeks advance payments for
the cost-sharing reductions provided under the limited cost sharing
plan variation of a health plan it offers, we specified that the issuer
must submit an estimate of the dollar value of the cost-sharing
reductions to be provided. As described in Sec. 156.430(b)(1), HHS
uses these estimates to determine the monthly advance payments for
cost-sharing reductions.
Based on our experience implementing this process for the 2014
benefit year, we propose certain modifications to Sec. Sec. 155.1030,
156.430, and 156.470. We believe these modifications will simplify the
process and improve the accuracy of the calculations. Specifically, we
are proposing to remove the requirement detailed in Sec. 156.430(a)
that issuers develop estimates of the dollar value of the cost-sharing
reductions to be provided, and instead propose to modify Sec.
155.1030(b)(3) to specify that the Exchange must use the methodology
specified in the annual HHS notice of benefit and payment parameters to
calculate advance payment amounts for cost-sharing reductions, and must
transmit the advance payment amounts to HHS, in accordance with Sec.
156.340(a). We anticipate that this transmission would occur using the
834 enrollment transaction. As proposed in Sec. 156.430(b)(1), HHS
will provide periodic advance payments to QHP issuers based on the
amounts transmitted by the Exchange.
For the 2015 benefit year, we are proposing that the Exchanges use
a methodology for calculating the advance payment amounts that will not
require QHP issuers to submit an estimate of the value of cost-sharing
reductions to be provided or the EHB portion of expected allowed claims
costs, as previously required under Sec. 156.470(a), nor will it
require Exchanges to transfer data on advance payment amounts to HHS
prior to the start of the benefit year. Specifically, we propose that
Exchanges calculate the monthly advance payment amount for a specific
policy as the product of (x) the total monthly premium for the specific
policy, and (y) a cost-sharing reduction plan variation multiplier. The
cost-sharing reduction plan variation multiplier would convert the
monthly premium into the appropriate monthly advance payment amount,
based on the following formula:
Cost-Sharing Reduction Plan Variation Multiplier = Factor to Remove
Administrative Costs * Factor to Convert to Allowed Claims Cost *
Induced Utilization Factor * (Plan Variation AV--Standard Plan AV)
Where,
Factor to Remove Administrative Costs = 0.8 for all plan
variations, because issuers in the individual market must have a
medical loss ratio of at least 80 percent, under Sec. 158.210(c);
Factor to Convert to Allowed Claims Costs = the quotient of 1
and the AV for the standard plan, not accounting for de minimis
variation;
Induced Utilization Factor = one of the following factors,
depending on the plan variation:
Table 5--Induced Utilization Factors for Plan Variations
------------------------------------------------------------------------
Induced utilization
Cost-sharing reduction plan variation factor
------------------------------------------------------------------------
73 percent AV silver plan variation............ 1.00
87 percent AV silver plan variation............ 1.12
94 percent AV silver plan variation............ 1.12
Limited cost sharing plan variation of bronze 1.15
QHP...........................................
Limited cost sharing plan variation of silver 1.12
QHP...........................................
Limited cost sharing plan variation of gold QHP 1.07
Limited cost sharing plan variation of platinum 1.00
QHP...........................................
Zero cost sharing plan variation of bronze QHP. 1.15
Zero cost sharing plan variation of silver QHP. 1.12
Zero cost sharing plan variation of gold QHP... 1.07
Zero cost sharing plan variation of platinum 1.00
QHP...........................................
------------------------------------------------------------------------
Standard Plan AV = the AV specified for each level of coverage
at Sec. 156.140(b), not accounting for de minimis variation (that
is, 60, 70, 80, or 90 percent for a bronze, silver, gold, or
platinum QHP, accordingly); and
Plan Variation AV = one of the following actuarial values,
depending on the plan variation, not accounting for de minimis
variation:
TABLE 6--Actuarial Values for Plan Variations
------------------------------------------------------------------------
Cost-Sharing Reduction Plan Variation Plan Variation AV
------------------------------------------------------------------------
73 percent AV silver plan variation....... 73 percent
87 percent AV silver plan variation....... 87 percent
94 percent AV silver plan variation....... 94 percent
Limited cost sharing plan variation of 87 percent
bronze QHP.
[[Page 72363]]
Limited cost sharing plan variation of 87 percent
silver QHP.
Limited cost sharing plan variation of 94 percent
gold QHP.
Limited cost sharing plan variation of 94 percent
platinum QHP.
Zero cost sharing plan variation of bronze 100 percent
QHP.
Zero cost sharing plan variation of silver 100 percent
QHP.
Zero cost sharing plan variation of gold 100 percent
QHP.
Zero cost sharing plan variation of 100 percent
platinum QHP.
------------------------------------------------------------------------
The proposed induced utilization factors are consistent with those
factors established in the 2014 Payment Notice. For the limited cost
sharing plan variations, we derived the induced utilization factors
based on the actuarial values proposed above, and the same assumptions
used to develop the induced utilization factors for the other plan
variations. We will propose updates to the induced utilization factors
for all plan variations in future rulemaking as more data becomes
available, and at that time will consider applying them to the risk
adjustment methodology that HHS will use when operating risk adjustment
on behalf of a State. We welcome comment on these induced utilization
factors.
The proposed methodology also utilizes the actuarial values of the
standard plans and plan variations, not accounting for de minimis
variation. Although this may slightly reduce the accuracy of the
calculations, we believe it would have little overall impact, and would
reduce administrative burden on Exchanges because Exchanges will not
need to develop specific multipliers for each QHP and associated plan
variations. However, this approach would require us to estimate an
actuarial value for each type of limited cost sharing plan variation.
We estimate that on average, the AV of the limited cost sharing plan
variations of bronze and silver QHPs will be 87 percent, and the AV of
the limited cost sharing plan variations of gold and platinum QHPs will
be 94 percent. We developed these estimates based on the data submitted
by QHP issuers seeking advance payments for limited cost sharing plan
variations that will be offered in benefit year 2014. We welcome
comment on these actuarial values.
Overall, we believe this proposed methodology would improve the
accuracy of the advance payments because it is based on the total
premium for each policy, which in accordance with the rating rules
described in Sec. Sec. 147.102 and 156.80, is based on expected
allowed claims costs, adjusted for the plan design and provider
network, the number of individuals covered by the policy, rating area,
age, and tobacco use. Although we acknowledge that there may be some
limitations to the multiplier (for example, the multiplier does not
make a plan-specific adjustment for the cost of non-EHB, or account
precisely for costs for large families with children not accounted for
in the premium), we believe that a very small number of QHPs would be
affected by these limitations, and any inaccuracies in the advance
payments would be corrected through the cost-sharing reduction
reconciliation process. We welcome comment on this proposed methodology
for the 2015 benefit year, and suggestions for alternative
methodologies, including whether the methodology for the 2014 benefit
year would be more appropriate.
We are also proposing conforming modifications to Sec. Sec.
155.1030(b)(1) and 156.470(a), to delete the obligation for QHP issuers
to submit, and Exchanges to review, the EHB allocation of the expected
allowed claims costs for the plans, because this data would not be used
in the proposed 2015 methodology for calculating cost-sharing reduction
advance payments.
Lastly, we are proposing to modify Sec. 155.1030(b)(4) to clarify
that in accordance with the proposed paragraph (b)(3), the Exchange
would not be required to submit issuers' advance payment estimates to
HHS for approval prior to the start of the benefit year. We believe
such an approval process would no longer be necessary because under the
proposed approach, the advance payments will be calculated based on the
cost-sharing reduction plan variation multiplier specified by HHS, and
the premium for the policy, which is reviewed by the Exchange, in
accordance with Sec. 155.1020. HHS would simply validate that the
advance payment amounts were calculated in accordance with the
methodology specified by HHS, prior to providing advance payments to
QHP issuers. This process will ensure the protection of Federal funds,
while also limiting the administrative burden on QHP issuers and
Exchanges. We welcome comment on these proposed modifications. In
future years, as more data becomes available, we will review the
methodology for calculating advance payments of cost-sharing
reductions, and will propose additional modifications if necessary.
2. Provisions on FFE User Fees
a. FFE User fee for the 2015 Benefit Year
Section 1311(d)(5)(A) of the Affordable Care Act contemplates an
Exchange charging assessments or user fees to participating health
insurance issuers to generate funding to support its operations. If a
State does not elect to operate an Exchange or does not have an
approved Exchange, section 1321(c)(1) of the Affordable Care Act
directs HHS to operate an Exchange within the State. In addition, 31
U.S.C. 9701 permits a Federal agency to establish a charge for a
service provided by the agency. Accordingly, at Sec. 156.50(c), we
specified that a participating issuer offering a plan through an FFE
must remit a user fee to HHS each month that is equal to the product of
the monthly user fee rate specified in the annual HHS notice of benefit
and payment parameters for the applicable benefit year and the monthly
premium charged by the issuer for each policy under the plan where
enrollment is through an FFE.
OMB Circular No. A-25R establishes Federal policy regarding user
fees, and specifies that a user charge will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public. As in benefit
year 2014, issuers seeking to participate in an FFE in benefit year
2015 will receive two special benefits not available to the general
public: (1) the certification of their plans as QHPs; and (2) the
ability to sell health insurance coverage through an FFE to individuals
determined eligible for enrollment in a QHP. These special benefits are
provided to participating issuers through the following Federal
activities in connection with the operation of FFEs:
Provision of consumer assistance tools.
Consumer outreach and education.
Management of a Navigator program.
Regulation of agents and brokers.
Eligibility determinations.
Administration of advance payments of the premium tax
credit and cost-sharing reductions.
Enrollment processes.
Certification processes for QHPs (including ongoing
compliance verification, recertification and decertification).
Administration of a SHOP Exchange.
Activities performed by the Federal government that do not provide
issuers
[[Page 72364]]
participating in an FFE with a special benefit will not be covered by
this user fee.
OMB Circular No. A-25R further states that user charges should
generally be set at a level so that they are sufficient to recover the
full cost to the Federal government of providing the service when the
government is acting in its capacity as sovereign (as is the case when
HHS operates an FFE). Accordingly, we propose to set the 2015 user fee
rate for all participating issuers at 3.5 percent. This rate is the
same as the 2014 user fee rate.\24\ Because we expect enrollment to
increase in 2015 as awareness of the Exchanges grows, and costs to
decrease as operations become more efficient, we believe this user fee
rate may allow HHS to recover the full cost to the Federal government
of providing the special benefits to issuers participating in an FFE in
2015.
---------------------------------------------------------------------------
\24\ OMB granted HHS an exception to the policy in Circular No.
A-25R, allowing HHS to set the user fee rate for 2014 at 3.5
percent, rather than a higher rate which would have allowed HHS to
recover full costs. This rate was chosen because we wished to
encourage issuers to offer plans on FFEs and to align with the
administrative cost structure of State-based Exchanges.
---------------------------------------------------------------------------
b. Adjustment of FFE User Fee
Section 2713(a)(4) of the PHS Act, as added by the Affordable Care
Act and incorporated into the Employee Retirement Income Security Act
(ERISA) and the Code, requires that non-grandfathered group health
plans and health insurance issuers offering non-grandfathered group or
individual health insurance coverage provide benefits for certain
women's preventive health services without cost sharing.\25\ The
Preventive Services Rule (78 FR 39870, July 2, 2013) established
accommodations with respect to the contraceptive coverage requirement
for health coverage established or maintained or arranged by eligible
organizations.\26\
---------------------------------------------------------------------------
\25\ The women's preventive health services referenced by PHS
Act section 2713(a)(4) are provided for in comprehensive guidelines
supported by the Health Resources and Services Administration
(HRSA). On August 1, 2011, HRSA adopted and released guidelines for
women's preventive health services based on recommendations of the
independent Institute of Medicine.
\26\ Under the Preventive Services Rule, an eligible
organization is an organization that: (1) Opposes providing coverage
for some or all of the contraceptive services required to be covered
under section 2713 of the PHS Act and the companion provisions of
ERISA and the Code on account of religious objections; (2) is
organized and operates as a nonprofit entity; (3) holds itself out
as a religious organization; and (4) self-certifies that it
satisfies the first three criteria.
---------------------------------------------------------------------------
Each organization seeking to be treated as an eligible organization
under the Preventive Services Rule is required to self-certify that it
meets the definition of an eligible organization. In the case of an
eligible organization with a self-insured plan, the self-certification
must be provided to the plan's third party administrator. A third party
administrator that receives a copy of the self-certification must
provide or arrange for separate payments for certain contraceptive
services for participants and beneficiaries in the plan without cost
sharing, premium, fee, or other charge to plan participants or
beneficiaries, or to the eligible organization or its plan. The third
party administrator can provide such payments on its own, or it can
arrange for an issuer or other entity to provide such payments. In
either case, the third party administrator can make arrangements with
an issuer offering coverage through an FFE to obtain reimbursement for
its costs (including an allowance for administrative costs and margin)
through an adjustment to the FFE user fee paid by the issuer.
At Sec. 156.50(d), we established standards related to the
administration of the user fee adjustment. Specifically, in Sec.
156.50(d)(3)(ii), we stated that the user fee adjustment will include
an allowance for administrative costs and margin that is no less than
10 percent of the total dollar amount of the payments for contraceptive
services, and that HHS would specify the allowance for a particular
calendar year in the annual HHS notice of benefit and payment
parameters.
For user fee adjustments sought in 2015 for the cost of payments
for contraceptive services provided in 2014, we propose an allowance
for administrative costs and margin that is equal to 15 percent of the
total dollar amount of the payments for contraceptive services defined
in Sec. 156.50(d)(3)(i).\27\ We propose this allowance based on our
analysis of the administrative costs that we expect each entity
involved in the arrangement to incur. For example, the third party
administrator will likely incur certain variable administrative costs,
including the cost of provider and medical management, and the cost of
processing payments to providers of the contraceptive services.
However, because payments for contraceptive services are not a separate
insurance product and because the third party administrator will have
an existing arrangement with the self-insured group health plan of the
eligible organization, we do not expect any additional costs related to
marketing, broker fees, enrollment, or billing. We accounted for the
cost of submitting data to HHS under Sec. 156.50(d)(2), and the cost
of exchanging data between entities involved in the arrangement. We
also added an allowance for margin in proportion to the total costs
that we expect each entity to incur. We seek comment on the allowance
for administrative costs and margin, including the appropriate
percentage and alternative methods for future determinations of the
allowance.
---------------------------------------------------------------------------
\27\ We note that the submission of the dollar amount of the
payments for contraceptive services is subject to the oversight
standards detailed at 45 CFR 156.50(d)(7), as well as the False
Claims Act, 31 U.S.C. 3729-3733.
---------------------------------------------------------------------------
3. AV Calculation for Determining Level of Coverage
Section 2707(a) of the PHS Act and Section 1302 of the Affordable
Care Act direct non-grandfathered health insurance coverage in the
individual and small group markets, including QHPs, to ensure that
plans meet a level of coverage specified in section 1302(d)(1) of the
Affordable Care Act and codified at Sec. 156.140(b). On February 25,
2013, HHS published the EHB Rule implementing section 1302(d) of the
Affordable Care Act, which sets forth the requirement that, to
determine the level of coverage for a given metal tier level, the
calculation of AV be based upon the provision of EHB to a standard
population. Section 156.135(a) establishes that AV is to be calculated
using the AV Calculator developed and made available by HHS.
The AV Calculator uses national claims data to reflect plans of
various levels of generosity as the underlying standard population.
This standard population is represented in the calculator as tables of
aggregated data called continuance tables. The AV methodology document
that was incorporated by reference in the EHB Rule provides an overview
of the development of these continuance tables and the AV Calculator
logic.
As stated in the EHB Rule, HHS does not anticipate making annual
changes to the AV Calculator logic or the underlying standard
population reflected in the continuance tables. However, HHS recognizes
that certain routine changes will on occasion need to be made to
facilitate the AV Calculator's ongoing operation by ensuring that it
can accommodate changes in the marketplace or product design over time
and due to the changing cost of providing health care services. Here,
we propose to provide for authority to update certain aspects of the AV
Calculator on a regular basis, but no more frequently than annually,
based on changes to applicable standards or the availability of new
data that could
[[Page 72365]]
make the AV Calculator more accurate. These types of changes include:
(1) Updating the annual limit on cost sharing and related functions
in the calculator: Section 1302(c) of the Affordable Care Act, codified
at Sec. 156.130, imposes an annual limit on cost sharing on non-
grandfathered plans in the individual and small group markets. We note
that, in accordance with section 1302(c)(4) of the Affordable Care Act
and Sec. 156.130(e), starting in 2015, HHS will publish the premium
adjustment percentage in the annual HHS notice of benefit and payment
parameters for purposes of calculating the required indexing of the
annual limit on cost sharing. Because this limit is included in the AV
Calculator and impacts the range of the AV Calculator, we propose to
update the AV Calculator to include an estimated annual limit on cost
sharing. In order to allow issuers the most time possible to develop
plans, HHS may make available prior to the annual HHS notice of benefit
and payment parameters the AV Calculator that would project an
estimated annual limit on cost sharing for the given plan year. Issuers
would still be required to adhere to the annual limit on cost sharing
that is published in the applicable HHS notice of benefit and payment
parameters. The intention in using an estimated annual limit on cost
sharing in the AV Calculator is to ensure flexibility of the AV
Calculator for issuers. Since we may make the AV Calculator available
prior to the finalization of the annual limit on cost sharing for a
given plan year, we are proposing to use an estimated annual limit on
cost sharing in the AV Calculator, to ensure that the final AV
Calculator does not contain an annual limit on cost sharing that is
lower than the finalized one. Accordingly, in the proposed 2015 AV
Calculator, we propose an estimated annual limit on cost sharing of
$6,850, compared to the proposed annual limit for cost sharing for
2015, which is $6,750.
(2) Updating the continuance tables to reflect more current
enrollment data: Starting in 2016, HHS expects to have sets of actual
enrollment data from 2014 and to receive the subsequent year's data on
an annual basis thereafter. These data could be used to reweight the
standard population in the continuance tables that run the AV
Calculator to more accurately reflect true enrollment trends and as a
result project claims spending. We anticipate that during the first
several years of operation, the demographic mix of the enrolled
population will likely change and may need to be reweighted in the AV
Calculator annually. After a few years, the population may stabilize
and begin matching the claims data to the point where reweighing the AV
Calculator may not be necessary on an annual basis.
We propose to analyze the most recently available data on the
enrolled population every year, starting in 2016, and in cases where we
determine that the enrolled population has materially changed, we
propose to reweight the continuance tables in the AV Calculator to
continue to accurately reflect enrollment data. We are proposing to
consider a material change in gender or age in the enrolled population
as more than a 5 percent change. We propose to determine this change
based on a combined measurement of the effects of shifts in gender or
age statistics. We solicit comment on this 5 percent standard and
whether it should be a higher or lower percentage, as well as how this
change should be determined. For the proposed 2015 AV Calculator, we
did not have actual enrollment data to analyze and therefore, we are
not proposing to reweight the calculator based on enrollment data at
this time.
(3) Updating the algorithms behind the AV Calculator to adapt to
new industry practices and plan designs: As discussed in the EHB Rule,
because the AV Calculator is intended to account for the vast majority
of plan designs in the market, in order to ensure that the AV
Calculator will be available to plans and issuers, it will likely need
to be periodically adapted. To do this, we are proposing to make
technical, non-substantive updates to the AV Calculator algorithms as
industry practices change and as technology advances, including adding
features to the AV Calculator. For example, for the proposed 2015 AV
Calculator, we are able to make improvements to the algorithms to allow
for additional functionality to apply the deductible first and then
copayments. Adding this feature would allow the calculator to be
applicable for more types of plans and would not substantively affect
other plan designs using the AV calculator. Such an adaptation of the
AV Calculator to allow more types of plan designs to use the calculator
without adjustment and to accommodate new types of plan designs in the
market would be the basis for making these non-substantive changes. The
standard that we propose to apply in making such adaptations would be
to have the minimum impact possible on the outcomes produced by the AV
Calculator generally while still allowing it to be adaptable to the new
types of plan designs and allowing more types of plan designs to use
the AV Calculator. We propose to make such adaptations under the
provisions of this proposed rule if the adaptations can be based on
actuarially sound principles and these adaptions would only involve
minor modifications to the AV Calculator that would result in only a
limited or no impact on the majority of plan designs that use the AV
Calculator. We invite public comment on suggestions for ways in which
this standard could best be achieved.
To identify new industry practices and technical advances, we
propose to consult annually with the American Academy of Actuaries to
determine what new adaptations are needed in the AV Calculator as the
basis for those changes. Under Sec. 156.135(b), the American Academy
of Actuaries' members play a critical role in determining the AV of
plan designs that are not compatible with the AV Calculator and would
have insight into adjustments that are needed in the AV Calculator to
meet the needs of the involving market and to allow more plan designs
to use the AV Calculator. We also propose taking into consideration
stakeholder feedback on adjustments to the AV Calculator that are
submitted to the CMS Actuarial Value email address at
actuarialvalue@cms.hhs.gov. To accomplish this goal, we propose
aggregating this information annually and assessing which modifications
would benefit the most issuers, are feasible in the AV Calculator, and
will not substantively impact other functions of the calculator. If an
algorithm change meets these criteria, and standards set forth above,
we would consider incorporating it into the AV Calculator's algorithms.
Changes that are made to the algorithms would be described in the AV
Calculator Methodology that would be released with any updated AV
Calculator.
(4) Updating the continuance tables to reflect more current claims
data: HHS is proposing to update the claims data underlying the
continuance tables, including refreshing the national claims database
data with new data, as well as trending the AV Calculator to account
for changes in the unit prices, utilization and intensity of services
used. A trending factor could be a historical trend factor making use
of actual premiums that reflect utilization and unit price increases, a
factor based on emerging trends changing the demographic, or be based
on the premiums of the new product designs with unique features. Data
on these changes in insurance could be used to develop a trending
factor that could be applied to the claims data to make adjustments in
the continuance tables of the AV Calculator. For future plan years,
[[Page 72366]]
we propose to use two sources of data, one to reflect the individual
market and one to reflect the small group market, to develop a single
trend factor that could be applied to the AV Calculator. For the
individual market, we propose to use the premium rate data and/or the
standard population data compared from year to year, and for the small
group market, we proposed to use similar premium rate data and/or the
standard population data compared from year to year to develop a
trending factor that we could apply to the claims data in the AV
Calculator, adjusted for key changes, such as the reduction in
transitional reinsurance that will occur from 2014 through 2016. In
years when we are planning to update the claims data from the national
claims database system in the AV Calculator, we are proposing to trend
the AV Calculator based on the new claims data with the dataset
currently being used in the calculator to ensure that the trend factor
and claims data are reconciled.
In considering the factors in adjusting the claims data and
trending the calculator, we recognize the importance of market
stability for both issuers and consumers from year-to-year. At the same
time, we recognize the importance of the AV Calculator reflecting the
current market. By pursuing the approach of not updating the claims
data every year, we would be providing greater stability in an emerging
market. For these reasons, we are proposing to update the baseline
claims data no more than every 3 and no less than every 5 years. This
proposal of no more than every 3 years reflects the duration of the
transitional reinsurance program and the temporary risk corridors
program.
We are also proposing to consider trending the AV calculator every
year and in cases, where the trend factor is cumulatively more than 5
percent different from the previous time the AV Calculator was updated,
we would implement the trend factor. By considering whether to trend
the AV Calculator every year, we would be helping to ensure that the AV
Calculator more accurately reflects the current market and to avoid
having any steep ``cliff'' changes in the AV Calculator every few
years. Under the methodology proposed above, we are proposing to trend
the AV Calculator on premium data and/or the standard population data
in years when the underlying claims data are not being updated in the
AV Calculator, and in years where the claims data are being updated, we
are proposing to trend the calculator based on the updated claims data.
We seek comments on this proposed approach, including our proposed
approach to updating the claims data. We are proposing to provide
details of our consideration of the trending factor each year in the AV
Methodology. For 2015, we do not propose to trend the AV Calculator
since the necessary 2 years of data were not available to make the
adjustment per our proposed policy.
(5) Updating the AV Calculator user interface: HHS is proposing to
update the AV Calculator user interface as needed to improve the user's
experience. An example of this type of change, which we included in the
proposed 2015 AV Calculator, is adding the ability for the user to save
AV calculations. The 2014 AV Calculator did not incorporate this
function, but based on comments received, we recognized the importance
for users to have this feature. In the future, we anticipate that there
will be other ways in which we could continue to make improvements to
the AV Calculator's user interface to assist users and we anticipate
that we will continue to receive feedback from various stakeholders to
inform future proposed improvements to the AV Calculator user
experience. HHS may consider making changes when an improvement would
be useful to a broad group of users of the AV Calculator, would not
affect the function of the AV Calculator, and would be technically
feasible. These changes would simplify the process for providing users
with features that could help save time and improve processes.
When making updates to the AV Calculator in accordance with this
proposed rule, we propose to update the AV Calculator through guidance
that will be posted on our CCIIO Web site. This guidance will include
an updated AV Calculator Methodology to explain the changes that were
made to the AV Calculator, along with the updated AV Calculator. We
also expect that we would make any updates that will affect the AV
Calculator in advance of the benefit year for which issuers are using
the AV Calculator, with the intention of making the AV Calculator
available no later than the end of the first quarter of the preceding
the benefit year.
We are soliciting comments on all of the above types of updates and
the accompanying criteria that would be used to identify the need for
and to implement these updates. Outside of the above types of updates,
we are also soliciting comments on whether other types of updates
should be considered routinely for the AV calculator. To clarify, we
are proposing that, to comply with Sec. 156.135(a), issuers would be
required to use the AV Calculator published by HHS for a given benefit
year or, in cases where a State has obtained HHS approval to use State
specific data in the AV Calculator, issuers would be required to use
that AV Calculator HHS has published for the given benefit year,
adjusted to use the State's data (State AV Calculator). The purpose of
requiring that the issuers use the AV Calculator of the given benefit
year or the State AV Calculator is to ensure that the AV calculation is
being more accurately calculated on the most recent data each year and
that there is only one AV Calculator (or State AV Calculator)
applicable for each benefit year. We are also soliciting comments on
the proposed 2015 AV Calculator and AV Calculator methodology that
would supersede the 2014 versions of these documents. In accordance
with our proposed policy, we provide an explanation of the changes that
were made in the proposed 2015 AV Calculator in the proposed 2015 AV
Methodology. For the 2015 AV Calculator, HHS is only proposing to make
minor changes to the design and inputs into the AV Calculator. While
plans' AV calculations may be impacted by the updated AV Calculator,
our testing has shown that this impact will be limited for the vast
majority of plans and that only in certain cases will plans see a
significant change in AV. We encourage stakeholders to test the
proposed 2015 AV Calculator and submit technical comments on it during
the comment period.
In the preamble to the EHB Rule, we discussed the calculation of AV
for health plans with family cost-sharing features. In addition we
provided guidance in the ``2014 Letter to Issuers on Federally-
facilitated and State Partnership Exchanges'' \28\ on accounting for
family plans for 2014. Since the AV Calculator claims data are based on
individual claims data that did not include family cost-sharing
information, HHS is seeking the necessary empirical data to develop the
code that can incorporate family plans into future versions of the AV
Calculator. We are now seeking comment on how to account for these
family plan designs and we are particularly interested in information
regarding potential data source options.
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\28\ ``Letter to Issuers on Federally-facilitated and State
Partnership Exchanges,'' April 5, 2013, available at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf.
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4. National Annual Limit on Cost Sharing for Stand-Alone Dental Plans
in an Exchange
The EHB Rule established an annual limit on cost sharing for the
pediatric dental essential health benefit offered by
[[Page 72367]]
stand-alone dental plans (SADPs) in the Exchanges that is separate from
the annual limit on cost sharing that applies to QHPs that offer
comprehensive medical benefits. The EHB Rule established that Exchanges
should set a ``reasonable'' annual limit on cost sharing for SADPs. The
CMS Letter to Issuers on Federally-facilitated and State Partnership
Exchanges, published on April 5, 2013, established that CMS's
interpretation of a reasonable SADP annual limit on cost sharing for
the FFEs is $700 for an SADP with one child enrollee and $1,400 for an
SADP with two or more children enrollees.
We propose a revised policy for the 2015 benefit year and beyond in
response to significant public interest in establishing a policy that
is consistent across Exchanges and that minimizes a consumer's total
annual limit on cost sharing. HHS also seeks to minimize the
differences between a consumer's total annual limit on cost sharing
when purchasing essential health benefits through a QHP that includes
coverage of the pediatric dental essential health benefits or through a
combination of a QHP and an SADP. Thus, we are proposing in this rule
an amendment to Sec. 156.150 that would establish an annual limit on
cost sharing for SADPs that would be applicable in all Exchanges. For
the 2015 benefit year, the new proposed paragraph (a)(1) would impose
an annual limit on cost sharing for the pediatric dental EHB when
offered through an SADP of $300 for one covered child and $400 for two
or more covered children. We request comment on the proposed annual
limits on cost sharing, and specifically whether a higher or lower
limit would be appropriate for the pediatric dental EHB. Further, due
to the limited variation in cost sharing with a decreased annual limit
on cost sharing, we propose removing the actuarial value requirement
SADPs offered through the Exchanges by deleting paragraph (b) of Sec.
156.150. We request comment on the removal of the AV standard as well.
We understand that under the current rules, some State Exchanges
have interpreted a reasonable annual limit on cost sharing to be higher
than what is proposed in this proposed rule. For example, at least two
State Exchanges have established an annual limit on cost sharing for
SADPs of $1,000 for one covered child and $2,000 for two or more
covered children. We therefore request comment on whether the annual
limit on cost sharing should be consistent nationally, which would be
more straightforward for consumers and issuers, or set by each
Exchange, which allows for State flexibility to adjust to specific
market standards and whether the limits proposed here are appropriate.
As stated above, we propose to establish the $300/$400 annual limit on
cost-sharing as a national maximum annual limit on cost sharing
applicable in all Exchanges. For those States that currently have
annual limits on cost sharing of $1,000/$2,000, we request comment on
whether there should be a more gradual decrease in the annual limit in
cost sharing that would ultimately reach the national level, but would
result in a less significant one-time decrease.
HHS considered several other alternatives to minimize a consumer's
total annual limit on cost sharing when purchasing the pediatric dental
EHB through a SADP, including: Requiring issuers of SADPs to consider
the annual limit on cost sharing to be met once the consumer reaches
the annual limit on cost sharing for the QHP; requiring issuers of QHPs
without the pediatric dental EHB to reduce the annual limit on cost
sharing by the amount of annual limit on cost sharing permitted for
SADPs; and, requiring issuers of QHPs and SADPs to track out of pocket
costs for a shared consumer and jointly consider a consumer's out of
pocket commitments to be met once a total number has been reached. We
note that HHS is generally concerned with the administrative costs of
implementing a policy that requires coordination of claims to a single
annual limit on cost sharing. We seek comments on these alternatives.
5. Additional Standards Specific to SHOP
We propose to add new paragraph (a)(4)(i) to Sec. 156.285 to
provide that a qualified employer in the SHOP that becomes a large
employer would continue to be rated as a small employer. Under section
1304(b)(4)(D) of the Affordable Care Act, a small employer that ceases
to be a small employer by reason of an increase in the number of
employees continues to be treated as a small employer for purposes of
Subtitle D of Title I of the statute. Included within Subtitle D are
the provisions governing the SHOP and the premium stabilization rules.
However, the fair health insurance premium provisions at section 2701
are not contained in Title D. To assure consistency of pricing within
the SHOP,\29\ we propose to require a QHP offered through the SHOP to
comply with the rating rules described in Sec. 147.102. We note that
nothing in this proposal prevents such an employer from choosing to buy
a guaranteed issue new policy (without small group rating rules) in the
large group market outside of the SHOP.
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\29\ In the 2014 Payment Notice (78 FR 15418), we provided that
risk adjustment would not apply to a plan unless it was subject to
certain market reform rules, including the rating rules. Elsewhere
in this proposed rule, at Sec. 153.510(f), we propose a similar
approach with respect to risk corridors. Our proposed approach here
for the SHOP would provide that a SHOP QHP that grows into a large
group plan would continue to receive the protections of the risk
adjustment and risk corridors programs.
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We believe that, when employee choice becomes available in FF-SHOPs
for plan years beginning on or after January 1, 2015, allowing
composite rating when an employer chooses to offer all plans within a
metal tier under Sec. 155.705(b)(3)(iv)(A) could result in issuers
becoming more hesitant to offer QHPs in an employee choice
environment--undermining the ACA's goals of increased choice and
competition. As discussed in more detail above with regard to proposed
Sec. 155.705(b)(11)(ii)(D), composite rating when an employer takes
advantage of employee choice could result in an issuer taking on
proportionately more risk from mid-year changes to the employer's
roster than in a single plan environment and, therefore, deny an issuer
the premiums that would otherwise be due in a per-member premium
calculation for the group. We proposed in Sec. 155.705(b)(11)(ii)(D)
to prohibit composite rating in the FF-SHOPs when an employer chooses a
level of coverage and make all QHPs within that level available to its
employees, and we propose in Sec. 156.285(a)(4)(ii) to subject issuers
to the same prohibition, to assure that issuers understand that
composite billing is not allowed in the FF-SHOPs when employee choice
becomes available and an employer selects a level of coverage and not a
single plan. As with proposed Sec. 155.705(b)(11)(ii)(D), we are
considering extending the prohibition on composite rating to SADPs in
the FF-SHOPs, and we invite comment on whether such a prohibition
should be adopted, how this policy might affect current market
practices on composite rating of dental plans, whether a prohibition on
composite rating should apply to all SADP offering methods or just when
an employer chooses to offer more than a single SADP, and how such a
prohibition would affect choice and competition in the small group
dental market. We acknowledge that this proposal provides a limited
exception to Sec. 147.102(c)(3) and note that this proposal would
preempt State law in
[[Page 72368]]
this context, but we believe this proposal to be limited in scope and
tailored to provide for administrative efficiency and uniformity,
system compatibility among the FF-SHOPs, and increased competition and
choice in the small group market.
If the proposed amendments to Sec. 155.705(b)(4) summarized above
are finalized as proposed, all SHOPs would be permitted to establish
standard methods for premium payment under Sec. 155.705(b)(4), as part
of carrying out the premium aggregation function, and HHS would
establish through guidance a process and timeline for employers to
follow when remitting premium payments to the FF-SHOPs once premium
aggregation becomes available in the FF-SHOPs. We anticipate that after
premium aggregation becomes available in the FF-SHOPs, an FF-SHOP would
transmit premium payments--both initial and subsequent--to issuers on a
regular schedule and anticipate that this would be no more frequently
than once a week. We recognize that under this approach, an issuer
might not receive an employer's initial premium payment from the FF-
SHOP prior to the coverage effective date even though the employer has
remitted payment to the FF-SHOP consistent with the HHS-established
timeline. We understand that issuers may be concerned about
effectuating coverage prior to receiving payment from a FF-SHOP. To
address this concern, if the FF-SHOP has not received the initial
premium payment in accordance with the payment timeline and process
established in accordance with proposed Sec. 155.705(b)(4)(ii)(A), the
FF-SHOP will send an enrollment cancellation transaction to the issuer
to ensure that coverage is not effectuated. Accordingly, we propose
that if the issuer does not receive an enrollment cancellation
transaction, it should effectuate coverage. We considered whether an
FF-SHOP could, alternatively, send an issuer a notice confirming that
it should effectuate coverage when the FF-SHOP received an employer's
initial premium payment but the issuer would not receive that payment
prior to the coverage effective date. However, it would be simpler
administratively and operationally for issuers to assume they should
effectuate coverage and proceed to effectuate coverage unless an FF-
SHOP cancels the enrollment. Therefore, we propose adding Sec.
156.285(c)(7)(iii) to establish that a QHP issuer offering a QHP
through an FF-SHOP would be required to enroll a qualified employee
unless it receives a cancellation notice from the FF-SHOP. We note that
this operational scenario would arise only in the case of an employer's
initial premium payment. For regular monthly payments from a
participating SHOP employer, the requirements of the payment timeline
and process established in accordance with proposed Sec.
155.705(b)(4)(ii)(A) and the termination provisions of Sec. 155.735
would apply. We seek through this proposal to balance issuers' concerns
about receiving payment with the need for timely FF-SHOP enrollment and
operational efficiency. We welcome comment on the proposed approach, as
well as on the alternative approach discussed above which we considered
but rejected, and encourage commenters to suggest additional
alternatives.
6. Meaningful Difference Standard for QHPs in the FFEs
Section 1311(e)(1)(B) of the Affordable Care Act, codified at Sec.
155.1000(c)(2), sets forth the standard that the Exchange may certify a
health plan as a QHP if it determines that making the plan available
through the Exchange is in the interests of qualified individuals and
qualified employers in the State or States in which such Exchange
operates. Therefore, as a means of ensuring that all QHPs offered
through an FFE are in the interest of qualified individuals and
qualified employers, we propose that, to be certified as a QHP in an
FFE, a plan must be considered ``meaningfully different'' from all
other plans offered by the same issuer through the same Exchange, and
we propose a standard for what is meant by the term ``meaningfully
different.''
Based on feedback from stakeholders and HHS' experience from
administering the Medicare program, HHS believes that it is in the
interests of consumers to have an Exchange with meaningfully different
plan choices, as meaningful difference has important benefits to
consumers, such as ensuring the ability to readily differentiate and
compare plan choices, leading to informed decisions.\30\ A single
issuer offering a number of plans that lack meaningful difference could
take virtual ``shelf space'' from other competitors and stifle
competition. Therefore, conducting a review for meaningful difference
will ensure that consumers are able to make informed selections among
an ample--but manageable--number of QHPs, while allowing for plan
innovation. The approach outlined below for a meaningful difference
requirement would allow time for HHS to see how the market develops,
assess the consumer need for a more specific meaningful difference
standard, and consider options to meet this potential need. HHS does
not intend to set numerical limits on the number of QHPs that may be
offered; rather, the proposed approach would serve to avoid having an
issuer offering multiple QHPs that appear the same through an Exchange.
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\30\ Research suggests that consumers may prefer more limited
arrays of choices. See Iyengar, S.; Lepper, M. Journal of
Personality and Social Psychology, Vol. 79(6), Dec 2000, 995-1006.
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In Sec. 156.298(a), we propose that the FFEs and FF-SHOPs will
impose a meaningful difference requirement when approving a QHP
application for certification of multiple QHPs within a service area
and level of coverage in the Exchange from a single issuer. Due to the
special characteristics of the stand-alone dental plan market, HHS
proposes not to require meaningful difference as a condition for
certification among stand-alone dental plans at this time. HHS seeks
comment on this approach. We propose, in Sec. 156.298(b), that a plan
within a service area and metal tier (bronze, silver, gold, or
platinum, and catastrophic coverage) is considered meaningfully
different from other plans if a reasonable consumer (the typical
consumer buying health insurance coverage) would be able to identify at
least two material differences among eight key characteristics between
the plan and other plans to be offered by the same issuer. The key
characteristics are proposed in paragraphs (b)(1)-(b)(7), and would
include (1) Cost sharing; (2) provider networks; (3) covered benefits
(including prescription drugs); (4) plan type (for example, HMO or
PPO); (5) premiums; (6) health savings account eligibility; and (7)
self-only, non-self-only, or child-only coverage offerings. At a
minimum, two or more of the characteristics proposed at Sec.
156.298(b) must be different in order to pass the meaningful difference
test. Therefore, within a service area and level of coverage in an
Exchange, if two plans submitted by a single issuer seeking QHP
certification vary among their cost sharing and covered benefits
features but have the same premiums, the plans may be deemed as having
met the meaningful difference test.
Furthermore, to ensure that consumers have an adequate number of
plan options across all metal levels of coverage, we propose at Sec.
156.298(c), that if HHS determines that the plan offerings at a
particular metal level (including catastrophic plans) within a county
are limited, plans submitted for certification at that level within
that county will not be subject to the meaningful difference
requirement.
[[Page 72369]]
To provide flexibility for issuers that merge with or acquire
another issuer that is a separate legal entity, HHS proposes in Sec.
156.298(d), a 2-year meaningful difference transition period starting
from the date on which a QHP issuer (acquiring entity) obtains or
merges with another issuer. We propose in paragraph (d) that during the
first 2 plan years after a merger or acquisition, the acquiring entity
can offer plans that were recently obtained or merged from another
issuer that do not meet the meaningful difference standard. After the
2-year transition period, HHS may approve a QHP application for
certification that is being offered by the acquiring entity only if HHS
finds that the plan's benefit package or costs are meaningfully
different from other QHPs offered by the acquiring entity and the plan
meets all other certification requirements. We believe that this
transition timeframe provides ample time for issuers to ensure that
benefit packages being offered are meaningfully different without
stifling market transactions.
We seek comment on the proposed approach to reviewing meaningful
difference for QHP certification and whether this standard should be
expanded to all Exchanges, including State Exchanges. We also seek
comment on whether this authority granted to the Exchange by section
1311(e)(1) of the Affordable Care Act, to act in the interests of
qualified individuals and qualified employers, should be used by the
Secretary, in conjunction with the authority granted by section
1311(e)(2) of the Affordable Care Act, to limit an issuer's
participation in the FFEs should there be significantly different rate
increases for its QHPs and non-QHPs. While the transitional policy
regarding renewals of certain coverage announced in November 2013 and
described earlier in this preamble was intended to allow for continuity
of coverage, it was not intended to promote adverse selection through
significantly higher rates for QHPs.
7. Quality Standards: Establishment of Patient Safety Standards for QHP
Issuers
Section 1311(h)(1)(A) of the Affordable Care Act specifies that,
beginning on January 1, 2015, a QHP may contract with hospitals with
greater than 50 beds only if the hospitals meet certain patient safety
standards, including use of a patient safety evaluation system (PSES)
as described in part C of Title IX of the PHS Act, and a comprehensive
hospital discharge program. A PSES means the collection, management, or
analysis of information for reporting to or by a patient safety
organization (PSO).\31\ Section 1311(h)(1)(B) of the Affordable Care
Act specifies that a QHP may contract with health care providers that
implement health care quality mechanisms, if any are required by the
Secretary in regulations. Section 1311(h)(2) of the Affordable Care Act
provides the Secretary with the authority and flexibility to establish
reasonable exceptions to these requirements and section 1311(h)(3) of
the Affordable Care Act allows the Secretary to issue regulations to
modify the number of beds described in section 1311(h)(1)(A).
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\31\ See https://www.pso.ahrq.gov/regulations/fnlrule01.pdf.
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As discussed in the National Strategy for Quality Improvement in
Health Care (National Quality Strategy), HHS seeks to improve the
overall quality of health care by making health care more patient-
centered, reliable, accessible, and safe.\32\ One of the main
priorities of the National Quality Strategy is making care safer by
reducing harm caused in the delivery of care. In addition, section
1311(h) of the Affordable Care Act aims to strengthen quality
improvement and patient safety for consumers in Exchanges. To
effectively balance the priorities for making quality health care
accessible and safe in the Exchanges, we propose to implement these
patient safety standards for QHP issuers over time, under the
Secretary's authority in section 1311(h)(2) of the Affordable Care Act.
We believe that implementing all of the requirements described in
section 1311(h) by January 1, 2015 could result in a shortage of
qualified hospitals and providers available for contracting with QHPs.
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\32\ See Report to Congress: National Strategy for Quality
Improvement in Health Care available at https://www.healthcare.gov/law/resources/reports/quality03212011a.html.
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Currently, there are 79 listed PSOs nationwide operating in 29
States and the District of Columbia.\33\ PSOs carry out a variety of
patient safety activities with the goal to improve patient safety and
the quality of health care delivery. PSOs are able to collect,
aggregate, and analyze patient safety events and information that is
protected under privilege and confidentiality standards. However, it is
not entirely clear that there is sufficient capacity to enable all
hospitals subject to this provision to contract with a PSO at this
time. HHS recognizes the continuously-growing capacity of the PSO
program and the potential to accommodate U.S. hospitals subject to
Sec. 156.1110 within the proposed phase-in period. HHS recognizes the
significant burden and time constraints for hospitals to enter into
agreements with PSOs for appropriate services to improve patient
safety, especially for particular hospital settings and populations.
HHS also recognizes the significant resources that QHP issuers would
need to invest to track such initiatives, such as ensuring that the
hospitals and health care providers the QHP issuer contracts with have
appropriate agreements with PSOs and adequate hospital discharge
planning activities. Consequently, we believe that this proposed rule
would provide an opportunity for QHP issuers to meaningfully comply
with section 1311(h) of the Affordable Care Act and consider how PSOs
will work with their network hospitals and health care providers. This
proposal would also provide time for hospitals and healthcare providers
to demonstrate to a QHP issuer that they meet the patient safety
standards in accordance with section 1311(h). Moreover, we believe that
this proposed approach to implementation of section 1311(h) would
ensure that QHP issuers have sufficient hospitals and health care
providers to contract with, while providing consumers with access to
health care that meets adequate safety and quality standards.
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\33\ See https://www.pso.ahrq.gov/listing/geolist.htm.
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In phase one, which would become effective for QHP issuer plan
years beginning on or after January 1, 2015, the patient safety
standards proposed in Sec. 156.1110 would apply to hospitals, as
defined in section 1861(e) of the Social Security Act,\34\ that are
Medicare-certified, and to Medicaid-only hospitals which have been
issued a Medicaid-only CMS Certification Number (CCN). These standards
would apply to such hospitals that have been certified for greater than
50 beds. For the reasons described above, HHS is not proposing
requirements regarding the patient safety standards described in
section 1311(h)(1)(B) at this time. HHS is currently in the process of
researching the establishment of appropriate quality and patient safety
standards for QHP issuers contracting with health care providers as
described in section 1311(h)(1)(B).
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\34\ Section 1861(e) of the Social Security Act: https://www.ssa.gov/OP_Home/ssact/title18/1861.htm.
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In Sec. 156.1110(a), we propose that a QHP issuer may contract
with hospitals that have more than 50 beds, only if they are Medicare-
certified or have been issued a Medicaid-only CCN, both of which are
subject to Medicare Hospital Conditions of Participation (CoPs)
[[Page 72370]]
standards found in 42 CFR part 482.\35\ Specifically, such hospitals
must develop, implement, and maintain an effective, ongoing, hospital-
wide, data-driven quality assessment and performance improvement (QAPI)
program, as described in 42 CFR 482.21. In addition, a hospital that is
Medicare-certified or participates in the Medicaid program must have in
effect a discharge planning process that applies to all patients, as
described in 42 CFR 482.43. HHS believes that the standards of QAPI and
discharge planning in the Medicare hospital CoPs represent the most
efficient way to balance the need to have a sufficient number of
hospitals available for QHP issuers to contract with, and the statutory
intent of section 1311(h) to provide for adequate patient safety
standards. In addition, based on our preliminary research, the vast
majority of hospitals with greater than 50 beds are Medicare-certified
or are Medicaid-only hospitals and must comply with the health and
patient safety standards in the Medicare hospital CoPs. Hospitals may
be deemed to meet the CoP standards if accredited per section 1865 of
the Social Security Act. Therefore, the proposed approach would not
significantly limit hospital participation in QHP networks and would
provide consumers access to health care services from an adequate
number of hospitals through QHPs in the Exchanges.
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\35\ Hospital Conditions of Participation: https://www.cms.gov/Regulations-and-Guidance/Legislation/CFCsAndCoPs/Hospitals.html.
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In Sec. 156.1110(b), we propose to direct QHP issuers to maintain
documentation, including but not limited to the CCN for each hospital.
Since both Medicare-certified hospitals and Medicaid-only hospitals are
issued CCNs, such documentation would demonstrate that a QHP issuer's
contracted hospital is Medicare-certified or has a Medicaid-only CCN
and are subject to the Medicare hospital CoP standards as required in
paragraph (a). We believe that collecting and maintaining data such as
the CCN would not be burdensome for QHP issuers. In Sec. 156.1110(c),
we propose that a QHP issuer must make this documentation available to
the Exchange, upon request by the Exchange, and in a time and manner
specified by the Exchange. We intend to include all Exchange types when
referring to the Exchange in Sec. 156.1110, including a State-based
Exchange. We anticipate using the data collected as part of information
used to evaluate and oversee QHP issuers in FFEs. We note that multi-
State plans, as defined in Sec. 155.1000(a), are subject to these
provisions. OPM would determine the time and manner for multi-State
plans to submit the documentation.
In Sec. 156.1110(d), we propose that a QHP issuer must ensure that
each of its QHPs meets the patient safety standards in accordance with
paragraph (a) of this section for plan or policy years beginning on or
after January 1, 2015. We anticipate that this first phase of
implementation of QHP-related quality standards would be for 2 years
beginning January 1, 2015 or until we issue further regulations based
on a reassessment of the Exchange market, whichever is later.
We seek comment regarding our proposal to apply Medicare hospital
CoP standards for implementation of section 1311(h) of the Affordable
Care Act. We also request comment on the proposed 2-year time period
for the first phase of implementation. Additionally, we propose to
maintain the statutory distinction between hospitals with 50 or fewer
beds and hospitals with more than 50 beds, but we request comment for
phase one implementation on whether HHS should adjust the number of
hospital beds to be greater or less than the standard under section
1311(h)(3) of the Affordable Care Act. We also seek comment regarding
whether the proposed standards in Sec. 156.1110 should be applicable
to hospitals other than Medicare-certified and Medicaid-only hospitals.
We further request comment on whether any other documentation would be
reasonable to require QHP issuers to collect and maintain to meet the
proposed standards described in Sec. 156.1110(c).
For the next phase of implementation, we are considering requiring
QHP issuers to ensure that their contracted hospitals have agreements
with PSOs and comprehensive hospital discharge programs, and that their
health care providers implement health care quality activities. We
recognize the various important patient safety initiatives, including
discharge planning activities, with which hospitals, health care
providers, and issuers are already involved. In future rulemaking, we
intend to consider whether and which reasonable exceptions under
section 1311(h)(2) of the Affordable Care Act should be made. We seek
comment on:
What core aspects should be included in hospital patient
safety programs.
What a comprehensive hospital discharge planning program
should require for each patient.
What health care quality improvement activities should be
implemented by health care providers.
Specifically, we request comment on how QHP issuers could
effectively track patient safety information, such as hospital
agreements with a PSO, related to their contracted hospitals and
provider networks. We also seek comment regarding specific, comparable
activities that may be included as reasonable exceptions to the patient
safety standards, in accordance with section 1311(h)(2) of the
Affordable Care Act.
8. Financial Programs
a. Netting of Payments and Charges
In the 2014 Payment Notice, HHS established a monthly payment and
collections cycle for the advance payments of the premium tax credit,
cost-sharing reductions, and FFE user fees, and an annual payment and
collections cycle for the premium stabilization programs and
reconciliation of cost-sharing reductions. For 2014, to streamline our
payments and collections process, we propose in Sec. 156.1215(a) that
each month we would determine amounts owed to or by a QHP issuer by
netting amounts owed by the QHP issuer to the Federal government
against payments due to the QHP issuer for advance payments of the
premium tax credit, advance payments of cost-sharing reductions, and
payment of FFE user fees. In addition to this netting across these
programs, as further described below, the monthly calculation of
amounts due would also reflect current information related to
enrollment for past months, including information related to excess
payments previously made. Finally, we propose that amounts owed to or
by a QHP issuer would be netted across all entities operating under the
same taxpayer identification number (TIN). This process would permit
HHS to calculate amounts owed each month, and pay or collect those
amounts from issuers more efficiently. When netting occurs, HHS would
demand amounts due only when there is a balance due to the Federal
government.
In addition to the monthly payment flows under the programs
described above, a number of annual payment flows will begin in 2015
for the risk adjustment program, the reinsurance program, the risk
corridors program, and cost-sharing reduction reconciliation. To
streamline payment and charge flows from all of these programs--advance
payments of the premium tax credit, advance payments and reconciliation
of cost-sharing reductions, FFE user fees, and the premium
stabilization programs--we propose in Sec. 156.1215(b)
[[Page 72371]]
that HHS may net amounts owed to the Federal government against
payments due to an issuer (or an affiliated issuer under the same TIN)
under these programs in 2015 and later years. We believe that this
process will enable HHS to operate a monthly payment cycle that will be
efficient for both issuers and HHS.
In Sec. 156.1215(c), we propose that any amount owed to the
Federal government by an issuer and its affiliates for advance payments
of the premium tax credit, advance payments of and reconciliation of
cost-sharing reductions after netting be the basis for calculating a
debt owed to the Federal government. We propose that payments and
collections under all of these programs would occur under an integrated
monthly payment and collection cycle.
We seek comment on these proposals, including on the appropriate
payment timeframes for these charges so that amounts may be netted and
invoiced as part of an orderly, monthly payment cycle.
b. Confirmation of HHS Payment and Collections Reports
As discussed in the preamble to Sec. 156.1210 of the second final
Program Integrity Rule, HHS anticipates sending a monthly payment and
collections report--the HIX 820--to issuers describing the advance
payments of the premium tax credit and advance payments of cost-sharing
reductions that an issuer is to receive on behalf of eligible
enrollees, and the FFE user fee charges that the issuer must pay. These
amounts are based on enrollments previously confirmed by the issuer as
part of the enrollment transaction process and the resultant HIX 820
discrepancy reporting process described in Sec. 156.1210. Under Sec.
156.1210 (a), an issuer must respond to the payment and collections
report within 15 calendar days of receipt of the report by either
confirming the report or notifying HHS if there is a discrepancy
between the data provided in the payment and collections report and the
data that the issuer has. Under Sec. 156.1210(b), if an issuer reports
a discrepancy in a payment and collections report later than 15
calendar days after receipt of the report, HHS will work with the
issuer to resolve the discrepancy as long as the late reporting was not
due to misconduct on the part of the issuer. As described below, any
resolution to such an identified discrepancy would be reflected in a
later payment and collections report and the invoice generated under
that later report would not affect the debt established by the invoice
generated in connection with the earlier report.
We propose that an issuer that notifies HHS of a discrepancy under
Sec. 156.1210 will trigger an administrative discrepancy resolution
process. Following the end of the benefit year, if the issuer remains
dissatisfied with the results of that process, the issuer may make a
request for reconsideration as proposed below in Sec. 156.1220(a).
We intend that this discrepancy resolution process would permit HHS
to work with issuers to resolve outstanding discrepancies in a
cooperative manner. Because of the number and timing of the daily flows
of enrollment and premium-related data and confirmations between HHS,
the Exchange, and the issuer, we anticipate that there would be
frequent adjustments to the enrollment counts and therefore the amounts
of the advance payments of the premium tax credit, advance payments of
cost-sharing reductions, and FFE user fees. To decrease the
administrative burden on issuers, HHS, and the Exchanges, and in
recognition of the number and timing of the data flows involved, we
propose not to retroactively adjust previous months' payment and
collections reports and amounts previously due. Consistent with our
approach in the Medicare Advantage program, the invoice for a
particular month would be calculated on the monthly payment cycle. We
propose that the amount thus invoiced for a particular month, which
would reflect netted amounts as described above, constitute an amount
owed to the Federal government. As more accurate data become available
to HHS, the Exchange, and the issuer, we propose that this later
information not reduce or increase the previous determination of an
amount owed. Rather, the information would be captured in subsequent
months and reflected in subsequent payment cycles, and reflected in
later invoices.
Thus, an issuer would be required to pay the full amount of any
invoice issued in connection with a payment and collection report for a
month even if the issuer notes a discrepancy that may later be resolved
as a credit in a later invoice.
Therefore, we propose to add paragraph (c) to Sec. 156.1210 to
provide that discrepancies in payment and collections reports
identified to HHS under that section would be addressed in subsequent
payment and collections reports, and would not be used to change debts
determined pursuant to invoices generated under previous payment and
collections reports.
We seek comment on this approach.
c. Administrative Appeals
We propose an administrative appeals process designed to address
any unresolved discrepancies for advance payments of the premium tax
credit, advance payments of cost-sharing reductions, FFE user fee
payments, payments and charges for the premium stabilization programs,
cost-sharing reduction reconciliation payments and charges, and any
assessments under Sec. 153.740(b) of a default risk adjustment charge.
This administrative appeals process is similar to that utilized to
address payment disputes in the Medicare Part D program, in which an
appeal to a CMS hearing officer, and then the Administrator of CMS, if
desired, may be filed after a request for reconsideration.
In Sec. 156.1220(a), we propose that an issuer may file a request
for reconsideration of what the issuer believes is a processing error
by HHS,\36\ HHS's incorrect application of the relevant methodology, or
HHS's mathematical error only with respect to: (1) Advance payments of
the premium tax credit, advance payment of cost-sharing reductions and
FFE user fee charges; (2) risk adjustment payments or charges for a
benefit year, including an assessment of risk adjustment user fees; (3)
reinsurance payments for a benefit year; (4) a risk adjustment default
charge for a benefit year; (5) a reconciliation payment or charge for
cost-sharing reductions for a benefit year; or (6) risk corridors
payments or charges for a benefit year. For a dispute regarding advance
payments of the premium tax credit, advance payments of cost-sharing
reductions, or FFE user fee amounts for a benefit year, we propose that
a request for reconsideration must be filed within 30 calendar days
after the issuer receives a final reconsideration notification
specifying the aggregate amount of advance payments of the premium tax
credit, advance payments of cost-sharing reductions, and FFE user fees
for the applicable benefit year. We anticipate that this final
reconsideration notification would be provided in the summer of the
year following the benefit year. We believe that the constant flow of
enrollment data for payments under these programs will lead to
difficulty in finalizing a precise, final calculation for a benefit
year, and propose to finalize payments under these programs
[[Page 72372]]
including for purposes of appeal by the late summer of the following
year. We are considering permitting reconsideration only for material
errors. We seek comment on this proposal, including on the minimum
materiality threshold that should be required to seek reconsideration.
For example, we are considering a minimum materiality threshold of 1
percent or 5 percent of total payments made to the issuer for the year
for advance payments of the premium tax credit, advance payments of
cost-sharing reductions, and FFE user fees, or a minimum dollar amount
such as $10,000.
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\36\ We note that under proposed Sec. 156.1220(a)(3)(i)-(ii),
an issuer may not submit data for consideration in the appeal if the
data was not submitted prior to the applicable data submission
deadline, but may submit documentary evidence that certain data was
timely submitted.
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For a dispute regarding a risk adjustment payment or charge,
including an assessment of risk adjustment user fees, a reinsurance
payment, a default risk adjustment charge, a cost-sharing reduction
reconciliation payment or charge, or a risk corridors payment or
charge, we propose that a request for reconsideration must be filed
within 30 calendar days of receipt of the applicable notification of
payments and charges provided by HHS. We believe that because the
interim and final dedicated distributed data environment reporting
process proposed at Sec. 153.710(d) and (e) would permit an issuer an
extended period of time in which to review risk adjustment and
reinsurance data and because the cost-sharing reduction reconciliation
and risk corridors payments or charges are based on data provided by
the issuer, 30 calendar days should be sufficient for an issuer to
review the notification and make a request for reconsideration. We seek
comment on this timeline.
In Sec. 156.1220(a)(3)(i), we propose that the request for
reconsideration specify the findings or issues that the issuer
challenges and the reasons for the challenge. In Sec.
156.1220(a)(3)(ii), we propose that a reconsideration with respect to a
processing error by HHS, HHS's incorrect application of the relevant
methodology, or HHS's mathematical error may be requested only if, to
the extent the issue could have been previously identified by the
issuer to HHS under Sec. 153.710(d)(2) or (e)(2), it was so identified
and remains unresolved. Similarly, in Sec. 156.1220(a)(3)(iii), we
propose that a reconsideration with respect to advance payments of the
premium tax credit, advance payments of cost-sharing reductions, and
FFE user fees may be requested only if, to the extent the issue could
have been previously identified by the issuer to HHS under Sec.
156.1210, it was so identified and remains unresolved. We propose to
clarify that an issuer may request reconsideration if it previously
identified an issue under Sec. 156.1210 after the 15-calendar-day
deadline, but late discovery of the issue was not due to misconduct on
the part of the issuer.
In Sec. 156.1220(a)(3)(iv), we propose that the issuer may include
in the request for reconsideration additional documentary evidence that
HHS should consider. Such documents may not include data that was to
have been filed by the applicable data submission deadline, but may
include evidence of the timely submission of such documents.
In Sec. 156.1220(a)(4), we propose that in conducting the
reconsideration, HHS would review the payment determination, the
evidence and findings upon which it was based, and any additional
documentary evidence submitted by the issuer. HHS would also have the
discretion to review any other evidence it believes is relevant in
deciding the reconsideration (and would provide the issuer a reasonable
opportunity to review and rebut the evidence), and would then inform
the issuer of the final decision in writing. We propose that an issuer
would be required to prove its case by a preponderance of the evidence
with respect to issues of fact.
In Sec. 156.1220(a)(5), we propose that a reconsideration decision
would be final and binding for decisions regarding the advance payments
of the premium tax credit, advance payments of cost-sharing reductions,
and FFE user fees. A reconsideration with respect to other matters
would be subject to the outcome of a request for informal hearing filed
in accordance with proposed Sec. 156.1220(b). Because the monthly
iterative discrepancy report process is available until the
reconsideration notice is sent and because of the simplicity of the
calculation of advance payments of the premium tax credit, advance
payments of cost-sharing reductions, or FFE user fees, we believe that
providing one level of administrative appeal for advance payments of
the premium tax credit, advance payments of cost-sharing reductions,
and FFE user fees is sufficient. We propose in Sec. 156.1220(b) that
an issuer that elects to challenge the reconsideration decision for the
final risk adjustment payment or charge, including an assessment of
risk adjustment user fees; reinsurance payment; default risk adjustment
charge; cost-sharing reduction reconciliation payment or charge; or
risk corridors payment or charge for a benefit year provided under
paragraph (a) of proposed Sec. 156.1220 would be entitled to an
informal hearing before a CMS hearing officer. In Sec. 156.1220(b)(1),
we propose that a request for an informal hearing be made in writing
and filed with HHS within 15 calendar days of the date the issuer
receives the reconsideration decision. In Sec. 156.1220(b)(2), we
propose that the request for an informal hearing must include a copy of
the reconsideration decision and must specify the findings or issues in
the decision that the issuer is challenging and its reasons for the
challenge. We also propose that HHS may submit for review by the CMS
hearing officer a statement of the reasons supporting the
reconsideration decision.
In Sec. 156.1220(b)(3)(i), we propose that the issuer receive a
written notice of the time and place of the informal hearing at least
15 calendar days before the scheduled date. In Sec.
156.1220(b)(3)(ii), we propose that the CMS hearing officer would
neither receive testimony nor accept any new evidence that was not
presented with the reconsideration request or in any statement provided
by HHS. We propose that the scope of the CMS hearing officer's review
would be limited to the statements provided by the issuer and HHS and
the record that was before HHS in making the reconsideration
determination. We would require that the issuer prove its case by clear
and convincing evidence with respect to issues of fact and would permit
the issuer to be represented by counsel in the informal hearing.
In Sec. 156.1220(b)(4), we propose that, following the informal
hearing, the CMS hearing officer would send the decision and the
reasons for the decision to the issuer. We propose that this decision
would be final and binding, but subject to any Administrator's review
initiated in accordance with proposed Sec. 156.1220(c).
We propose in Sec. 156.1220(c)(1) that if the CMS hearing officer
upholds the reconsideration decision, the issuer may request a review
by the Administrator of CMS within 15 calendar days of receipt of the
CMS hearing officer's decision. The request for a review by the
Administrator of CMS must specify the findings or issues in the
decision that the issuer is challenging, and the reasons for the
challenge. We propose that HHS may submit for review by the
Administrator of CMS a statement supporting the decision of the CMS
hearing officer.
In Sec. 156.1220(c)(2), we propose that the Administrator of CMS
or a delegate would review the hearing officer's decision, any written
documents submitted by HHS or the issuer, as well as any other
information included in the record of the CMS hearing officer's
[[Page 72373]]
decision, and would determine whether to uphold, reverse, or modify the
CMS hearing officer's decision. We propose that the issuer would be
required to prove its case by clear and convincing evidence with
respect to issues of fact. We propose that the Administrator's
determination would be considered final and binding.
We believe that the administrative appeals process outlined above
would give issuers reasonable opportunity for reconsideration and
review of their payments and charges. Furthermore, building on
established procedures utilized by HHS in Medicare Part D will provide
a structure for administrative appeals with which issuers are already
familiar. We seek comment on the proposed reconsideration and
administrative appeals process.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-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. This
proposed rule contains information collection requirements (ICRs) that
are subject to review by OMB. A description of these provisions is
given in the following paragraphs with an estimate of the annual
burden, summarized in Table 6. 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 proposed rule that contain ICRs. We
generally used data from the Bureau of Labor Statistics to derive
average labor costs (including capital costs, overhead, and fringe
benefits) for estimating the burden associated with the ICRs.
A. ICRs Related to HHS Audits of State-operated Reinsurance Programs
(Sec. 153.270)
In Sec. 153.270, we propose that HHS or its designee may conduct a
financial and programmatic audit of a State-operated reinsurance
program to assess compliance with reinsurance program requirements. We
also propose that, if an audit results in a finding of material
weakness or significant deficiency, a State must ensure that the
applicable reinsurance entity provides a written corrective action plan
to HHS for approval within 60 calendar days of the issuance of the
final audit report. The burden associated with meeting this third party
disclosure requirement includes the burden for a State that establishes
a reinsurance program to ensure that its applicable reinsurance entity
and any relevant contractors, subcontractors, or agents cooperate with
and take appropriate actions in connection with any audit, and the
burden associated with preparing and submitting a corrective action
plan to HHS for approval. Because only two States will operate
reinsurance in the 2014 benefit year, this collection is exempt from
the PRA under 44 U.S.C. 3502(3)(A)(i), and we are not seeking approval
from OMB for this information collection requirement. We discuss the
impact associated with HHS audits of State-operated reinsurance
programs in the Regulatory Impact Analysis section of this proposed
rule.
B. ICRs Regarding Issuer and Entity Administrative Burden Related to
Audits for the Premium Stabilization Programs (Sec. 153.405(i); Sec.
153.540(a); Sec. 153.410(d); Sec. 153.620(c))
We propose that HHS or its designee would have the authority to
audit QHP issuers, contributing entities, and issuers of risk
adjustment covered plans or reinsurance-eligible plans to assess
compliance with the requirements of subparts E, F, G and H of part 153,
as applicable. As mentioned earlier in this proposed rule, where
possible, we intend to align the risk corridors audit process with the
audits conducted for the MLR program. Therefore, we believe that the
issuer burden associated with the risk corridors audit is already
accounted for as part of the Supporting Statement for the MLR program
approved under OMB control number 0938-1164.
For issuers of risk adjustment covered plans and issuers of
reinsurance-eligible plans, these provisions would result in a third
party disclosure requirement for issuers to prepare and compile the
financial and programmatic information necessary to comply with the
audit. For each onsite review, we estimate that it will take an average
of 40 hours for administrative work to assemble the requested
information, 19.5 hours to review the information for completeness, and
30 minutes to submit the information to HHS in preparation for an
onsite review. We estimate that an onsite review would require an
additional 2 hours to schedule the onsite activities with the
compliance reviewer (at an hourly wage rate of $53.75), 4 hours for
introductory meeting, 8 hours to tour reviewers onsite, 10 hours of
interview time, 2 hours to walk through processes with the reviewer,
and 4 hours for concluding meetings, resulting in a total of
approximately 60 hours of preparation time and an additional 30 hours
of onsite time for each issuer. We estimate that it will take 90 hours
at a cost of approximately $4,838 for each issuer to make information
available to HHS for an onsite review. Because we have not finalized
our audit protocols, it is difficult to accurately estimate an audit
rate. However, we believe that it would be reasonable to assume that
approximately 120 issuers, representing roughly 5 percent of issuers of
risk adjustment covered plans or reinsurance-eligible plans would be
audited. Therefore, we estimate an aggregate burden of 10,800 hours and
$580,500 for issuers as a result of this requirement.
For contributing entities, we estimate that the disclosure burden
would be substantially less because the audit would be simpler. We
estimate the burden to be approximately one-quarter of that of an
issuer of a risk adjustment covered plan or a reinsurance-eligible
plan, or approximately 22.5 hours at a cost of approximately $1,209 for
each contributing entity. Similarly, because we have not finalized the
audit protocols, it is difficult to accurately estimate an audit rate.
However, we estimate that approximately 1 percent of contributing
entities would be audited, representing 226 contributing entities.
Therefore, we estimate an aggregate burden of 5,085 hours, or $273,319,
as a result of this proposed requirement. We will revise the
information collection currently approved under OMB Control Number
0938-1155 with an October 31, 2015 expiration date to account for this
additional burden.
C. ICRs Regarding Potential Adjustments for Transitional Plans (Sec.
153.500-Sec. 153.540)
For the 2014 benefit year, we are considering adjustments to the
premium stabilization programs that would help to further mitigate any
unexpected losses for QHP issuers with plans that are affected by the
transitional policy. To effectuate potential adjustments, we must
estimate the State-specific effect on average claims costs. We
therefore
[[Page 72374]]
propose to require all issuers participating in the individual and
small group markets in a State to submit to HHS a member-month
enrollment count for transitional plans and non-transitional plans in
the individual and small group markets. This submission would occur in
2015 prior to the risk corridors July 31, 2015 data submission
deadline. HHS would analyze that enrollment data, and publish the
State-specific adjustments that issuers would use in the risk corridors
calculations for the 2014 benefit year. To reduce the burden on
issuers, we are considering coordinating this data collection with
other data collections for the premium stabilization programs. We
request comment on data collection methods and the potential effect on
issuers' administrative costs.
We estimate that there will be approximately 2,400 issuers in the
individual and small group market in the 2014 benefit year, and that it
would take an insurance analyst approximately 30 minutes (at an hourly
wage rate of $38.49) to estimate enrollment in transitional plans and
non-transitional plans and submit this information to HHS. Therefore,
we estimate a cost of approximately $19.25 for each issuer, and an
aggregate cost of $46,200 for all individual and small group market
issuers (though this cost may be lower depending upon the data
collection method we adopt). Because we anticipate collecting this
information in 2015, and because we expect to issue additional
clarifying guidance on this proposed policy, will seek OMB approval and
solicit public comment on this information collection requirement at a
future date.
D. ICRs Regarding Risk Corridors Data Validation (Sec. 153.530 and
Sec. 153.540)
For the 2014 benefit year, we propose to collect risk corridors
data by using the same form as is used for MLR data collection, at the
same time (July 31st of the year following the applicable benefit
year). We intend to modify the MLR collection form for benefit year
2015, approved under OMB control number 0938-1164, to add reporting
elements (for example, QHP-specific premium amounts) that are required
under the risk corridors data submission requirements under Sec.
153.530. We intend to include these data elements in an amendment to
the information collection approved under OMB control number 0938-1164
for MLR data submission that we will publish for public comment and
advance for OMB approval in the future.
Because the MLR program and the risk corridors program will require
similar data, we estimate that submitting the data elements required
for the risk corridors program will impose limited additional burden on
issuers. We estimate that it will take each QHP issuer approximately
1.5 hours, representing 1 hour for an insurance analyst (at an hourly
wage rate of $38.49) and 30 minutes for a senior manager (at an hourly
wage rate of $77), to input and review data that is specific to the
risk corridors program in the MLR and risk corridors reporting form for
benefit year 2015. We estimate that 1,200 QHP issuers will submit risk
corridors data for the 2014 benefit year in the 2015 risk corridors and
MLR reporting cycle. Therefore, we estimate an aggregate burden of
1,800 hours (at a total cost of approximately $92,394) for QHP issuers
as a result of this requirement. We will revise the information
collection currently approved OMB Control Number 0938-1155 with an
October 31, 2015 expiration date to account for this additional burden.
In Sec. 153.540(b), we propose that HHS may impose CMPs on QHP
issuers on a State Exchange that do not comply with the risk corridors
requirements in Subpart F. We note that we would impose any CMP in
accordance with the procedures set forth in 45 CFR156.805. Although the
processes set forth in Sec. 156.805 would result in information
collection requirements that are subject to PRA, we expect to impose
CMPs on fewer than 10 entities in a year. Therefore, we believe that
this collection is exempt from the PRA under 44 U.S.C. 3502(3)(A)(i).
E. ICRs Regarding Data Validation Requirements When HHS Operates Risk
Adjustment (Sec. 153.630)
In Sec. 153.630(b)(1), we propose that an issuer of a risk
adjustment covered plan must engage one or more independent auditors to
perform an initial validation audit of a sample of its risk adjustment
data selected by HHS. This provision also proposes that the issuer
provide HHS with the identity of the initial validation auditor, and
attest to the absence of conflicts of interest between the initial
validation auditor (or the members of its audit team, owners,
directors, officers, or employees) and the issuer (or its owners,
directors, officers, or employees), in a timeframe and manner to be
specified by HHS. We previously estimated the cost to issuers to
conduct an initial validation audit in the 2014 Payment Notice and the
associated information collection request approved under OMB Control
Number 0938-1155 with an October 1, 2015 expiration date. Therefore,
the burden associated with this reporting requirement is the time and
effort necessary to report the auditor's identity to HHS. We estimate
it will take an insurance operations analyst (at an hourly wage rate of
$38.49) and a senior manager (at an hourly wage rate of $77) each
approximately 15 minutes to prepare and send an electronic report to
HHS. Therefore, for 2,400 risk adjustment covered issuers, the
aggregate burden associated with this requirement is 1,200 hours, at an
approximate cost of $69,300.
In Sec. 153.630(b)(8), we propose that the initial validation
auditor measure and report to the issuer and HHS, in a manner and
timeframe specified by HHS, the inter-rater reliability rates among its
reviewers. Also in this provision, we propose that the initial
validation auditor to achieve a minimum consistency measure of 95
percent for demographic, enrollment, and health status review outcomes.
We believe establishing standards for inter-rater reliability among
reviewers is standard practice in the industry and will not result in
extra cost for the initial validation auditor. Therefore, the burden
associated with this reporting requirement is the time and effort for
the initial validation auditor to report the inter-rater reliability
rate to the issuer and to HHS. We estimate it will take an insurance
operations analyst (at an hourly wage rate of $38.49) and a senior
manager (at an hourly wage rate of $77) each approximately 15 minutes
to report the inter-rater reliability rate to the issuer and to HHS.
Therefore, assuming that 2,400 issuers of risk adjustment covered plans
each engage one independent auditor to perform the initial validation
audit, the aggregate burden associated with this requirement is 1,200
hours, at an approximate cost of $69,300. We will revise the
information collection currently approved under OMB Control Number
0938-1155 with an October 31, 2015 expiration date to account for this
additional burden.
F. ICRs Regarding Quarterly Data Submissions (Sec. 153.700(a))
Section 153.700 provides that issuers of a risk adjustment covered
plan or a reinsurance-eligible plan must establish a dedicated
distributed data environment and provide data access to HHS, in a
manner and timeframe specified by HHS, for any HHS-operated risk
adjustment and reinsurance program. In this proposed rule, we clarify
this timeframe, proposing that an issuer must make good faith efforts
to make complete, current enrollment and claims files accessible
through its
[[Page 72375]]
dedicated distributed data environments no less frequently than
quarterly, once the issuer's dedicated distributed data environment is
established.
Based on HHS's most recent estimate of fully insured issuers in the
individual and small group markets, we estimate that 2,400 issuers will
be subject to the requirement to establish a dedicated data environment
to either receive reinsurance payments or make risk adjustment
transfers. Although we are clarifying in this proposed rule that
issuers must make this data available to HHS on a quarterly basis, the
aggregate burden associated with this requirement is already accounted
for under the Premium Stabilization Rule Supporting Statement that is
approved under OMB control number 0938-1155 with an October 31, 2015
expiration date. We will revise that supporting statement to specify
that issuers must comply with this information collection requirement
on a quarterly basis.
G. ICRs Related to Confirmation of Dedicated Distributed Data
Environment Reports (Sec. 153.700(d) and (e))
We propose in Sec. 153.710(d) that within 30 calendar days of the
date of an interim dedicated distributed data environment report from
HHS, an issuer of a reinsurance-eligible or risk adjustment covered
plan must either confirm to HHS that the information in the interim
reports for the risk adjustment and reinsurance programs accurately
reflect the data to which the issuer has provided access to HHS through
its dedicated distributed data environment in accordance with Sec.
153.700(a) for the timeframe specified in the report, or describe to
HHS any inaccuracy it identifies in the interim report. Similar to the
interim report process, we propose in Sec. 153.710(e) that the issuer
either confirm to HHS that the information in the final dedicated
distributed data environment report accurately reflects the data to
which the issuer has provided access to HHS through its dedicated
distributed data environment in accordance with Sec. 153.700(a) for
the benefit year specified in the report, or describe to HHS any
inaccuracy it identifies in the final dedicated distributed data
environment report within 15 calendar days of the date of the report.
We estimate that 2,400 issuers of risk adjustment covered plans and
reinsurance-eligible plans will be subject to this requirement, and
that issuers will compare enrollee condition codes with risk scores and
analyze claims costs to confirm information in the interim and final
dedicated distributed data environment reports. On average, we estimate
that it will take an insurance operations analyst (at an hourly wage
rate of $38.49) approximately 2 hours to respond to an interim report
and 6 hours to respond to the final dedicated distributed data
environment report. Therefore, we estimate an aggregate burden of
19,200 hours and $739,008 for 2,400 issuers as a result of this
requirement. We will revise the information collection currently
approved under OMB Control Number 0938-1155 with an October 31, 2015
expiration date to account for this additional burden.
H. ICRs Regarding Privacy and Security of Personally Identifiable
Information (Sec. 155.260(a))
In Sec. 155.260(a), we propose that an Exchange may submit to the
Secretary a proposed use or disclosure of eligibility and enrollment
PII. The Exchange submitting such a request must provide a detailed
description of the use or disclosure and how the proposed use or
disclosure will ensure the efficient operation of the Exchanges
consistent with section 1411(g)(2)(A) of the Affordable Care Act. The
requesting Exchange must also describe how the information to be used
or disclosed will be protected in compliance with the privacy and
security standards established by the Exchange. We estimate fewer than
10 states will submit such proposals on a yearly basis. While this
reporting requirement is subject to the PRA, we believe the associated
burden is exempt under 5 CFR 1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i),
since fewer than 10 entities would be affected. Therefore, we are not
seeking approval from OMB for these information collection
requirements. We seek comment on this estimate from states that are
contemplating any uses of eligibility and enrollment PII for which they
would submit such a proposal.
I. ICRs Regarding Quality Standards: Establishment of Patient Safety
Standards for QHP Issuers (Sec. 156.1110)
In Sec. 156.1110, we describe the information collection,
recordkeeping, and disclosure requirements that a QHP issuer must meet
to demonstrate compliance with these proposed patient safety standards.
The burden estimate associated with these standards includes the time
and effort required for QHPs to maintain and submit hospital CMS
Certification Numbers and any other information to the Exchange that
demonstrates that each of its contracted hospitals with greater than 50
beds meets the patient safety standards required in Sec. 156.1110(a).
In the near future, HHS intends to publish a rule proposing more
specific quality standards for Exchanges and QHPs and will solicit
public comment. At that time and per requirements outlined in the PRA,
we intend to estimate the burden on QHPs to comply with the patient
safety provisions of Sec. 156.1110. Until that time, we are soliciting
comments on the burden for QHPs to maintain and submit such
documentation to demonstrate meeting the patient safety standards
proposed here.
J. ICRs Regarding Administrative Appeals (Sec. 156.1220)
In Sec. 156.1220, we propose an administrative appeals process to
address unresolved discrepancies for advance payment of the premium tax
credit, advance payment and reconciliation of cost-sharing reductions,
FFE user fees, and the premium stabilization programs, as well as any
assessment of a default risk adjustment charge under Sec. 153.740(b).
In Sec. 156.1220(a), we propose that an issuer may file a request
for reconsideration to contest a processing error by HHS, HHS's
incorrect application of the relevant methodology, or HHS's
mathematical error for the amount of: (1) Advance payment of the
premium tax credit, advance payment of cost-sharing reductions or
Federally-facilitated user fees charge for a particular month; (2) risk
adjustment payments or charges for a benefit year, including an
assessment of risk adjustment user fees; (3) reinsurance payments for a
benefit year; (4) a risk adjustment default charge for a benefit year;
(5) a reconciliation payment or charge for cost-sharing reductions for
a benefit year; or (6) risk corridors payments or charges for a benefit
year. While the hours involved in a request for reconsideration may
vary, for the purpose of this burden estimate we estimate that it will
take an insurance operations analyst 1 hour (at an hourly wage rate of
$38.49) to make the comparison and submit a request for reconsideration
to HHS. We estimate that 24 issuers, representing approximately 1
percent of all issuers that may be eligible for reinsurance payments,
risk adjustment payments or charges (including any assessment of risk
adjustment user fees or a default risk adjustment charge), advance
payment and reconciliation of cost-sharing reductions, advance payment
of the premium tax credit, and FFE user fees, will submit a request for
reconsideration, resulting in a total aggregate burden of approximately
$924.
[[Page 72376]]
We will revise the information collection currently approved OMB
Control Number 0938-1155 with an October 31, 2015 expiration date to
account for this additional burden.
In Sec. 156.1220(b), we propose that an issuer that is
dissatisfied with the reconsideration decision regarding: (1) Risk
adjustment payments and charges, including an assessment of risk
adjustment user fees; (2) reinsurance payments; (3) default risk
adjustment charge; (4) reconciled cost-sharing reduction amounts; or
(5) risk corridors payments or charges, provided under paragraph (a) of
Sec. 156.1220, is entitled to an informal hearing before a CMS hearing
officer, if a request is made in writing within 15 calendar days of the
date the issuer receives the reconsideration decision. Further review
is available from the Administrator of CMS. However, we believe these
processes will occur extremely infrequently. Since collections from
fewer than 10 entities are exempt from the PRA under 44 U.S.C.
3502(3)(A)(i), we are not seeking PRA approval for this information
collection requirement.
Table 7--Annual Reporting, Recordkeeping and Disclosure Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly labor Total labor Total
Number of Burden per Total annual cost of cost of capital/ Total cost
Regulation Section(s) respondents Responses response burden reporting reporting maintenance ($)
(hours) (hours) ($) ($) costs ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 153.405........................ 226 226 22.50 5,085 53.75 273,319 0 273,319
Sec. 153.410; Sec. 153.620........ 120 120 90.00 10,800 53.75 580,500 0 580,500
Sec. 153.500-Sec. 153.540-........ 2,400 2,400 0.50 1,200 38.49 46,200 ............ 46,200
Sec. 153.540........................ 1,200 1,200 1.50 1,200 51.33 92,394 0 92,394
Sec. 153.630(b)(1).................. 2,400 2,400 0.50 1,200 57.75 69,300 0 69,300
Sec. 153.630(b)(8).................. 2,400 2,400 0.50 1,200 57.75 69,300 0 69,300
(Sec. 153.700(d) and (e))........... 2,400 2,400 8.00 19,200 38.49 739,008 0 739,008
Sec. 156.1220....................... 24 24 1.00 24 38.49 924 0 924
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................. \a\ 3,970 ............ ............ ............ ............ 1,870,945 0 1,870,945
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ ICRs associated with Sec. 153.500, Sec. 153.630(b)(1), Sec. 153.630(b)(8) and Sec. 153.700(d) and (e) apply to the same respondents, so the
total number of unique respondents is 3,970.
We have submitted an information collection request to OMB for
review and approval of the ICRs contained in this proposed rule. The
requirements are not effective until approved by OMB and assigned a
valid OMB control number.
To obtain copies of the supporting statement and any related forms
for the paperwork collections referenced above, access CMS's Web site
at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html or email your request,
including your address, phone number, OMB number, and CMS document
identifier, to Paperwork@cms.hhs.gov, or call the Reports Clearance
Office at 410-786-1326.
If you comment on these information collection 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, Attention: CMS Desk Officer,
CMS-9972-F. Fax: (202) 395-5806; or Email: OIRA_submission@omb.eop.gov.
V. 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.
VI. Regulatory Impact Statement (or Analysis)
A. Statement of Need
This proposed rule proposes standards related to the premium
stabilization programs (risk adjustment, reinsurance, and risk
corridors) that will protect issuers from the potential effects of
adverse selection and protect consumers from increases in premiums due
to issuer uncertainty. The Premium Stabilization Rule and 2014 Payment
Notice provided detail on the implementation of these programs,
including the specific parameters applicable to these programs. This
proposed rule also proposes additional standards with respect to
composite rating, privacy and security of personally identifiable
information, the open enrollment period for 2015, the actuarial value
calculator, the annual limitation on cost sharing for stand-alone
dental plans, the meaningful difference standard for qualified health
plans offered through a Federally-facilitated Exchange, patient safety
standards for issuers of qualified health plans, the Small Business
Health Options Program, cost sharing parameters, cost-sharing
reductions, and FFE user fees.
B. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act
of 1995 (March 22, 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 Orders 12866 and 13563 direct 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
[[Page 72377]]
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility. A
regulatory impact analysis (RIA) must be prepared for rules with
economically significant effects ($100 million or more in any 1 year).
OMB has determined that this proposed rule is ``economically
significant'' within the meaning of section 3(f)(1) of Executive Order
12866, because it is likely to have an annual effect of $100 million in
any 1 year. Accordingly, we have prepared a RIA that presents the costs
and benefits of this proposed rule.
Although it is difficult to discuss the wide-ranging effects of
these provisions in isolation, the overarching goal of the premium
stabilization and Exchange-related provisions and policies in the
Affordable Care Act is to make affordable health insurance available to
individuals who do not have access to affordable employer-sponsored
coverage. The provisions within this proposed rule are integral to the
goal of expanding coverage. For example, the premium stabilization
programs decrease the risk of financial loss that health insurance
issuers might otherwise expect in 2015 and the advance payments of the
premium tax credit and cost-sharing reduction programs assist low- and
moderate-income consumers and Indians in purchasing health insurance.
The combined impacts of these provisions affect the private sector,
issuers, and consumers, through increased access to health care
services including preventive services, decreased uncompensated care,
lower premiums, establishment of patient safety standards, and
increased plan transparency. Through the reduction in financial
uncertainty for issuers and increased affordability for consumers,
these provisions are expected to increase access to health coverage.
In this RIA, we discuss the requirements in this proposed rule
related to cost sharing and FFE user fees, as well as new oversight
provisions for the premium stabilization programs.
C. Impact Estimates of the Payment Notice Provisions and Accounting
Table
In accordance with OMB Circular A-4, Table 8 below depicts an
accounting statement summarizing HHS's assessment of the benefits,
costs, and transfers associated with this regulatory action.
This proposed rule implements standards for programs that will have
numerous effects, including providing consumers with affordable health
insurance coverage, reducing the impact of adverse selection, and
stabilizing premiums in the individual and small group health insurance
markets and in an Exchange. We are unable to quantify certain benefits
of this proposed rule--such as increased patient safety and improved
health and longevity due to increased insurance enrollment--and certain
costs--such as the cost of providing additional medical services to
newly-enrolled individuals. The effects in Table 8 reflect qualitative
impacts and estimated direct monetary costs and transfers resulting
from the provisions of this proposed rule for contributing entities,
States, Exchanges, and health insurance issuers. The annualized
monetized costs described in Table 8 reflect direct administrative
costs (including costs associated with labor, capital, overhead, and
fringe benefits) to States and health insurance issuers as a result of
the proposed provisions, and include administrative costs estimated in
the Collection of Information section of this proposed rule. We note
estimated transfers in Table 8 do not reflect any user fees paid by
insurance issuers for FFEs because we cannot estimate those fee totals.
We also note that, while we are proposing a 2015 reinsurance
contribution rate that is lower than the 2014 reinsurance contribution
rate, total reinsurance administrative expenses, including the
reinsurance contribution rate, will increase from 2014 to 2015.
Table 8--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
*Increased enrollment in the individual market leading to improved access to health care for the previously
uninsured, especially individuals with medical conditions, which will result in improved health and
protection from the risk of catastrophic medical expenditures.
*A common marketing standard covering the entire insurance market, reducing adverse selection and increasing
competition.
*Robust oversight of programs that use Federal funds to ensure proper use of taxpayer dollars.
*Access to higher quality health care through the establishment of patient safety standards
*Increasing coverage options for small employers and part-time employees while mitigating the effect of
adverse selection.
----------------------------------------------------------------------------------------------------------------
Costs: Estimate Year Discount Period
(in dollar rate covered
millions) (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year) 1.75 2013 7 2014-2017
---------------------------------------------------
1.82 2013 3 2014-2017
----------------------------------------------------------------------------------------------------------------
Qualitative:
*Costs incurred by issuers and contributing entities to comply with provisions in the proposed rule.
*Costs incurred by States for complying with audits of State-operated reinsurance programs.
----------------------------------------------------------------------------------------------------------------
Transfers: Estimate Year Discount Period
(in dollar rate covered
millions) (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year) 11.59 2013 7 2014-2017
---------------------------------------------------
12.04 2013 3 2014-2017
----------------------------------------------------------------------------------------------------------------
[[Page 72378]]
*Transfers reflect incremental cost increases from 2014-2015 for reinsurance administrative expenses and the
risk adjustment user fee, which are transfers from contributing entities and health insurance issuers to the
Federal government.
*Unquantified: Lower premium rates in the individual market due to the improved risk profile of the insured,
competition, and pooling.
----------------------------------------------------------------------------------------------------------------
This RIA expands upon the impact analyses of previous rules and
utilizes the Congressional Budget Office's (CBO) analysis of the
Affordable Care Act's impact on Federal spending, revenue collection,
and insurance enrollment. The CBO's estimates remain the most
comprehensive for provisions pertaining to the Affordable Care Act, and
include Federal budget impact estimates for provisions that HHS has not
independently estimated. The CBO's May 2013 baseline projections
estimated that 22 million enrollees will enroll in Exchange coverage by
2016, including approximately 18 million Exchange enrollees who will be
receiving subsidies.\37\ Participation rates among potential enrollees
are expected to be lower in the first few years of Exchange
availability as employers and individuals adjust to the features of the
Exchanges. Table 9 summarizes the effects of the risk adjustment and
reinsurance programs on the Federal budget from fiscal years 2014
through 2017, with the additional, societal effects of this proposed
rule discussed in this RIA. We do not expect the provisions of this
proposed rule to significantly alter CBO's estimates of the budget
impact of the risk adjustment and reinsurance programs that are
described in Table 9. For this RIA, we are shifting the estimates for
the risk adjustment and reinsurance programs to reflect the 4-year
period from fiscal years 2014 through 2017, because CBO's scoring of
the risk adjustment and reinsurance programs assumed that payments and
charges would begin in 2014, when in fact these payments and charges
will begin in 2015. CBO did not separately estimate the program costs
of risk corridors, but assumed aggregate collections from some issuers
would offset payments made to other issuers. We note that transfers
associated with the risk adjustment and reinsurance programs were
previously estimated in the Premium Stabilization Rule; therefore, to
avoid double-counting, we do not include them in the accounting
statement for this proposed rule (Table 8).
---------------------------------------------------------------------------
\37\ ``Updated Estimates for the Insurance Coverage Provisions
of the Affordable Care Act,'' Congressional Budget Office, May 2013.
---------------------------------------------------------------------------
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations on enrollment and premiums.
Based on these internal analyses, we anticipate that the quantitative
effects of the provisions proposed in this rule are consistent with our
previous estimates in the 2014 Payment Notice for the impacts
associated with the cost-sharing reduction program, the advance
payments of the premium tax credit program, the premium stabilization
programs, and FFE user fee requirements for health insurance issuers.
Table 9--Estimated Federal Government Outlays and Receipts for the Risk Adjustment and Reinsurance Programs From
FY 2013-2017, in Billions of Dollars
----------------------------------------------------------------------------------------------------------------
Year 2013 2014 2015 2016 2017 2013-2017
----------------------------------------------------------------------------------------------------------------
Risk Adjustment and Reinsurance Program -- 6 17 18 20 61
Payments.....................................
Risk Adjustment and Reinsurance Program -- 13 16 18 18 65
Collections \*\..............................
----------------------------------------------------------------------------------------------------------------
* Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over
time. Source: Congressional Budget Office. 2012. Letter to Hon. John Boehner. July 24, 2012.
Risk Adjustment
The risk adjustment program is a permanent program created by the
Affordable Care Act that transfers funds from lower risk, non-
grandfathered plans to higher risk, non-grandfathered plans in the
individual and small group markets, inside and outside the Exchanges.
In subparts D and G of the Premium Stabilization Rule and the 2014
Payment Notice, we established standards for the administration of the
risk adjustment program.
A State approved or conditionally approved by the Secretary to
operate an Exchange may establish a risk adjustment program, or have
HHS do so on its behalf. As described in the 2014 Payment Notice, if
HHS operates risk adjustment on behalf of a State, it will fund its
risk adjustment program operations by assessing a risk adjustment user
fee on issuers of risk adjustment covered plans. For the 2015 benefit
year, we estimate that the total cost for HHS to operate the risk
adjustment program on behalf of States for 2015 will be approximately
$27.3 million, and that the per capita risk adjustment user fee would
be less than $1.00 per year for HHS to operate the risk adjustment
program on behalf of States for 2015.
In this proposed rule, we propose in Sec. 153.620(c) that HHS or
its designee may audit an issuer of a risk adjustment covered plan,
when HHS operates risk adjustment on behalf of a State, to assess the
issuer's compliance with the requirements of subparts G and H of 45 CFR
part 153. As discussed above, HHS intends to fund risk adjustment
operations (not including Federal personnel costs), including risk
adjustment program integrity and audit functions, by collecting a per
capita user fee from issuers of risk adjustment covered plans.
Therefore, we believe that the costs to the Federal government
associated with the risk adjustment audit activities in this proposed
rule would be covered through the risk adjustment user fee, and that
there would be no impact for the Federal government as a result of the
proposed audit provisions. The proposed audit provision would result in
additional costs for issuers of risk adjustment covered plans related
to gathering information and preparing for an audit. We discuss the
administrative costs associated with this proposed requirement for
issuers in the Collection of Information section of this proposed rule.
[[Page 72379]]
Although this proposed rule would result in some additional
administrative burden for issuers of risk adjustment covered plans as a
result of the proposed requirements for risk adjustment data validation
and submission of discrepancy reports in response to interim and final
dedicated distributed data environment reports, we note that much of
the impact associated with establishing a dedicated distributed data
environment and a risk adjustment data validation process has
previously been estimated in the Premium Stabilization Rule and the
2014 Payment Notice. We do not believe that provisions contained within
this proposed rule substantially alter the previous estimates. We
describe these administrative costs in the Collection of Information
Requirements section of this proposed rule.
Reinsurance
The Affordable Care Act directs that a transitional reinsurance
program be established in each State to help stabilize premiums for
coverage in the individual market from 2014 through 2016. In the 2014
Payment Notice, we expanded upon the standards set forth in subparts C
and E of the Premium Stabilization Rule and established the 2014
uniform reinsurance payment parameters and national contribution rate.
In this proposed rule, we set forth the 2015 uniform reinsurance
payment parameters and contribution rate, and oversight provisions
related to the operation of the reinsurance program.
Section 153.220(c) provides that HHS will publish the uniform per
capita reinsurance contribution rate for the upcoming benefit year in
the annual HHS notice of benefit and payment parameters. Section
1341(b)(3)(B)(iii) of the Affordable Care Act specifies that $10
billion for reinsurance contributions is to be collected from
contributing entities in 2014 (the reinsurance payment pool), $6
billion in 2015, and $4 billion in 2016. Additionally, sections
1341(b)(3)(B)(iv) and 1341(b)(4) of the Affordable Care Act direct that
$2 billion in funds is to be collected for contribution to the U.S.
Treasury in 2014, $2 billion in 2015, and $1 billion in 2016. Finally,
section 1341(b)(3)(B)(ii) of the Affordable Care Act allows for the
collection of additional amounts for administrative expenses. Taken
together, these three components make up the total dollar amount to be
collected from contributing entities for each of the 3 years of the
reinsurance program under the uniform per capita contribution rate.
If HHS operates the reinsurance program on behalf of a State, HHS
would retain $0.14 as an annual per capita fee to fund HHS's
performance of all reinsurance functions. If a State establishes its
own reinsurance program, HHS would transfer $0.07 of the per capita
administrative fee to the State for purposes of administrative expenses
incurred in making reinsurance payments, and retain the remaining $0.07
to offset the costs of contribution collection.
To safeguard the use of Federal funds in the transitional
reinsurance program, we propose in Sec. 153.270(a) that HHS or its
designee may conduct a financial and programmatic audit of a State-
operated reinsurance program to assess compliance with the requirements
of subparts B and C of 45 CFR part 153. As discussed above, HHS intends
to fund reinsurance operations (not including Federal personnel costs),
including program integrity and audit functions, by collecting as part
of the uniform contribution rate, administrative expenses associated
with operating the reinsurance program from all reinsurance
contributing entities. Therefore, we believe that the costs to the
Federal government associated with the reinsurance audit activities in
this proposed rule would be covered through the reinsurance
contribution rate, and that there would be no net budget impact for the
Federal government as a result of the proposed audit provisions.
Because this proposed audit requirement would direct a State that
establishes a reinsurance program to ensure that its applicable
reinsurance entity and any relevant contractors, subcontractors, or
agents cooperate with an audit, and would direct the State to provide
to HHS for approval a written corrective action plan; implement the
plan; and provide to HHS written documentation of the corrective
actions once taken, if the audit resulted in a finding of material
weakness or significant deficiency, the proposed requirement would
impose a cost on States operating reinsurance. We believe that State-
operated reinsurance programs would already electronically maintain the
information necessary for an audit as part of their normal business
practices and as a result of the maintenance of records requirement set
forth in Sec. 153.240(c), no additional time or effort will be
necessary to develop and maintain audit information. We estimate that
it will take a compliance analyst (at an hourly wage rate of $53.75) 40
hours to gather the necessary information required for an audit, 5
hours to prepare a corrective action plan based on the audit findings
and 64 hours to implement and document the corrective actions taken if
necessary. We also estimate a senior manager (at an hourly wage rate of
$77) will take 5 hours to oversee the transmission of audit information
to HHS and to review the corrective action plan prior to submission to
HHS, and 16 hours to oversee implementation of any corrective actions
taken. Therefore, we estimate a total administrative cost of
approximately $7,476 for each State-operated reinsurance program as a
result of this proposed audit requirement. For the two States that will
operate reinsurance for the 2014 benefit year, we estimate an aggregate
burden of approximately $14,952 as a result of this requirement.
Although we have estimated the cost of a potential audit in this RIA,
we note that we will not audit all State-operated reinsurance programs,
and may not audit any of these programs.
In Sec. 153.405(i) and Sec. 153.410(d), we propose that HHS may
audit contributing entities and issuers of reinsurance-eligible plans
to assess compliance with reinsurance program requirements. We discuss
the costs to contributing entities and issuers of reinsurance-eligible
plans as a result of this proposed requirement in the Collection of
Information section of this proposed rule. We intend to combine issuer
audits for the premium stabilization programs whenever practicable to
reduce the financial burden of these audits on issuers. Consequently,
we anticipate that, because issuers of reinsurance-eligible plans may
also be subject to risk adjustment requirements, we would conduct these
audits in a manner that avoids overlapping review of information that
is required for both programs.
Risk Corridors
The Affordable Care Act creates a temporary risk corridors program
for the years 2014, 2015, and 2016 that applies to QHPs, as defined in
Sec. 153.500. The risk corridors program creates a mechanism for
sharing risk for allowable costs between the Federal government and QHP
issuers. The Affordable Care Act establishes the risk corridors program
as a Federal program; consequently, HHS will operate the risk corridors
program under Federal rules with no State variation. The risk corridors
program will help protect against inaccurate rate setting in the early
years of the Exchanges by limiting the extent of issuer losses and
gains.
As mentioned elsewhere in this proposed rule, for the 2014 benefit
year, we are proposing an adjustment to the risk corridors formula that
would help
[[Page 72380]]
to further mitigate potential QHP issuers' unexpected losses that are
attributable to the effects of the transition policy. This proposed
adjustment may increase the total amount of risk corridors payments
that the Federal government will make to QHP issuers, and reduce the
amount of risk corridors receipts; however, we are considering a number
of approaches that would limit the impact of the policy on the Federal
budget. Because of the difficulty associated with predicting State
enforcement of 2014 market rules and estimating the enrollment in
transitional plans and in QHPs, we cannot estimate the magnitude of
this impact on aggregate risk corridors payments and charges at this
time. We also estimate that this proposed adjustment would result in
direct administrative costs for individual and small group market
issuers that are discussed in the Collection of Information section of
this proposed rule.
To ensure the integrity of risk corridors data reporting, we
propose in Sec. 153.540(a) to establish HHS authority to conduct post-
payment audits of QHP issuers. We are contemplating several ways to
reduce issuer burden, such as conducting the risk corridors audits
using the existing MLR audit process or conducting risk corridors
audits under an overall issuer audit program. Therefore, as described
in the Collection of Information section of this proposed rule, we
believe that the cost for issuers that would result from this proposed
audit requirement is already accounted for as part of the MLR audit
process.
We also propose in Sec. 153.540(c) to extend our CMP authority
under sections 1321(a)(1) and (c)(2) of the Affordable Care Act to all
QHP issuers that fail to provide timely, accurate, and complete data
necessary for risk corridors calculations, or that otherwise do not
comply with the standards in subpart F of 45 CFR part 153. We propose
to assess CMPs on QHP issuers in State Exchanges in accordance with the
same enforcement and sanction procedures that apply to QHP issuers on
an FFE under Sec. 156.805.
As set forth in Sec. 156.805(c), HHS will impose a maximum penalty
amount of $100 per day on a QHP issuer for each violation, for each
individual adversely affected by the non-compliance. As noted in the
preamble to Sec. 153.540 in this proposed rule, for violations of
subpart F where the number of individuals adversely affected by the
non-compliance cannot be determined, we propose giving HHS the
authority to estimate the number of individuals likely to be adversely
affected by the non-compliance. We note that CMPs will be imposed only
for serious issues of non-compliance. We expect to provide technical
assistance to issuers, as appropriate, to assist them in maintaining
compliance with the applicable standards. We also plan to coordinate
with States and the MLR program in our oversight and enforcement
activities to avoid inappropriately duplicating enforcement efforts.
Consequently, we anticipate that CMPs will be rare, and that the impact
of this proposed requirement on QHP issuers will be negligible.
Provisions Related to Cost Sharing
The Affordable Care Act provides for the reduction or elimination
of cost sharing for certain eligible individuals enrolled in QHPs
offered through the Exchanges. This assistance will help many low- and
moderate-income individuals and families obtain health insurance--for
many people, cost sharing is a barrier to obtaining needed health
care.\38\
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\38\ Brook, Robert H., John E. Ware, William H. Rogers, Emmett
B. Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A.
Goldberg, Kathleen N. Lohr, Patricia Camp and Joseph P. Newhouse.
The Effect of Coinsurance on the Health of Adults: Results from the
RAND Health Insurance Experiment. Santa Monica, CA: RAND
Corporation, 1984. Available at: https://www.rand.org/pubs/reports/R3055.
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To support the administration of the cost-sharing reduction
program, we set forth in this proposed rule the reductions in the
maximum annual limitation on cost sharing for silver plan variations
and a modified methodology for calculating advance payments for cost-
sharing reductions. For benefit year 2015, we propose to require the
same reductions in the maximum annual limitation on cost sharing as
were finalized for benefit year 2014. We note that we are proposing
certain modifications to the methodology for calculating advance
payments for cost-sharing reductions, but we do not believe these
changes will result in a significant economic impact. Therefore, we do
not believe the provisions related to cost-sharing reductions in this
proposed rule will have an impact on the program established by and
described in the 2014 Payment Notice.
We also proposed a methodology for estimating average per capita
premium, and proposed the premium adjustment percentage for the 2015
benefit year. Section 156.130(e) provides that the premium adjustment
percentage is the percentage (if any) by which the average per capita
premium for health insurance coverage for the preceding calendar year
exceeds such average per capita premium for health insurance for 2013,
and that this percentage will be published annually in the HHS notice
of benefit and payment parameters. The annual premium adjustment
percentage that is issued sets the rate of increase for four parameters
detailed in the Affordable Care Act: the annual limitation on cost
sharing (defined at Sec. 156.130(a)), the annual limitation on
deductibles for plans in the small group (defined at Sec. 156.130(b)),
and the section 4980H(a) and section 4980H(b) assessable payment
amounts (proposed at 26 CFR 54.4980H in the ``Shared Responsibility for
Employers Regarding Health Coverage,'' published in the Federal
Register January 2, 2013 (78 FR 218)). We believe that the proposed
premium adjustment percentage is well within the parameters used in the
modeling of the Affordable Care Act, and do not expect that these
proposed provisions will alter CBO's May 2013 baseline estimates of the
budget impact.
Annual Open Enrollment Period
We propose amendments to Sec. 155.410(e) and (f) to amend the
dates for the annual open enrollment period and related coverage
effective dates. These proposed amendments would benefit issuers at no
additional cost, as Exchanges would delay their QHP certification dates
by at least one month, giving issuers additional time. Because open
enrollment dates would be moved forward, Exchanges would still have the
same amount of time for the QHP certification process, and we do not
anticipate that this would come at an additional cost to Exchanges.
Consumers would have the benefit of a more beneficial open enrollment
period, without any additional demand placed on them.
Calculation of Plan Actuarial Value
Issuers may incur minor administrative costs associated with
altering cost-sharing parameters of their plan designs to ensure
compliance with AV requirements when utilizing the AV calculator from
year-to-year. These requirements are established in the EHB Rule and
are in accordance with the proposed provisions in this proposed rule.
Since issuers have extensive experience in offering products with
various levels of cost sharing and since these modifications are
expected to be relatively minor for most issuers, HHS expects that the
process for computing AV with the AV Calculator will not demand many
additional resources.
[[Page 72381]]
User Fees
To support the operation of FFEs, we require in Sec. 156.50(c)
that a participating issuer offering a plan through an FFE must remit a
user fee to HHS each month equal to the product of the monthly user fee
rate specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year and the monthly premium
charged by the issuer for each policy under the plan where enrollment
is through an FFE. For the 2015 benefit year, we propose a monthly user
fee rate equal to 3.5 percent of the monthly premium. We do not have an
aggregate estimate of the collections from the user fee at this time
because we do not yet have a count of the number of States in which HHS
will run an FFE or FF-SHOP in 2015.
SHOP
The SHOPs facilitate the enrollment of eligible employees of small
employers into small group health insurance plans. A qualitative
analysis of the costs and benefits of establishing a SHOP was included
in the RIA published in conjunction with the Exchange Establishment
Rule.\39\ This RIA addresses the additional costs and benefits of the
proposed modifications in this proposed rule to the SHOP sections of
the Exchange Establishment Rule.
---------------------------------------------------------------------------
\39\ Available at: https://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf
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In this proposed rule, we propose revising paragraph Sec.
155.705(b)(1), which lists the rules regarding eligibility and
enrollment to which the SHOPs must adhere, to include mention of
additional provisions regarding termination of coverage in SHOPs and
SHOP employer and employee eligibility appeals that were finalized in
the first final Program Integrity Rule. We propose that an employer in
the FF-SHOPs would have the option to offer its employees either a
single SADP or a choice of all SADPs available in an FF-SHOP for plan
years beginning on or after January 1, 2015. In Sec.
155.705(b)(11)(ii)(D) we propose prohibiting an employer in an FF-SHOP
from basing its contribution on composite rates when employee choice
becomes available and the employer elects to offer its employees all
plans in a metal tier selected by the employer.
We also propose amendments to Sec. 155.705(b)(4) that would allow
SHOPs performing premium aggregation to establish a standard method for
premium calculation, payment, and collection. We propose that in the
FF-SHOPs, after premium aggregation becomes available in plan years
beginning on or after January 1, 2015, employers would be required to
remit premiums to the FF-SHOP in accordance with a payment timeline and
process established by HHS through guidance, and that premiums for
coverage of less than 1 month would be prorated by multiplying the
number of days of coverage in the partial month by the premium for 1
month divided by the number of days in the month. In developing the
premium payment timeline and process, HHS will consider its interest in
operating and administering the FF-SHOPs efficiently, as well as
issuers' interests in ensuring timely payment of premiums, and issuers'
and employers' interests in establishing a fair and workable premium
payment process. We believe the proposed approach to prorating to be
the fairest for both consumers and issuers because an enrollee will pay
for the portion of coverage provided for a partial month.
We also propose amendments to Sec. 155.705(b)(11) that would
provide additional flexibility to an employer's ability to define a
percentage contribution toward premiums under the employer selected
reference plan in the FF-SHOPs. Although we proposed and rejected a
similar approach in the 2014 Payment Notice because we concluded it was
inconsistent with the uniformity provisions established in Internal
Revenue Service Notice 2010-82, which require employers to contribute a
uniform percentage to employee premiums in order to claim a small
business tax credit, we believe small employers are best able to
determine whether offering different contribution levels would be in
the best interest of the business and its employees. We believe that
this additional flexibility would bring the FF-SHOPs more in line with
current small group market practices and provide an additional
incentive for small employers to participate in the FF-SHOPs.
Additionally, we believe that providing a mechanism that would allow
different contribution levels based on full-time or non-full-time
status may encourage some employers to offer coverage to non-full-time
employees.
In Sec. 155.715, we propose amendments that would provide for SHOP
eligibility adjustment periods for both employers and employees only
when there is an inconsistency between information provided by an
applicant and information collected through optional verification
methods under Sec. 155.715(c)(2) rather than when an employer submits
information on the SHOP single employer application that is
inconsistent with the eligibility standards described in Sec. 155.710
or when the SHOP receives information on the employee's application
that is inconsistent with the information provided by the employer, as
current paragraph Sec. 155.715(d) provides. We also propose to amend
paragraph (c)(4) to replace a reference to sections 1411(b)(2) and (c)
of the Affordable Care Act with a reference to Subpart D of 45 CFR part
155, and to add a reference to eligibility verifications as well as to
eligibility determinations. The proposed changes would prohibit a SHOP
from performing any individual market Exchange eligibility
determinations or verifications as described in Subpart D, which, for
example, includes making eligibility determinations for advance
payments of the premium tax credit and cost sharing reductions in the
individual market Exchange.
In Sec. 155.730 we propose to provide that SHOPs are not permitted
to collect information from applicants, employers, or employees in the
SHOP if that information is not necessary to determine SHOP eligibility
or effectuate enrollment through a SHOP. Limiting the information
required of an applicant helps to protect consumer privacy and promote
efficiency and streamlining of the SHOP application process.
In Sec. 155.220, we propose for plan years beginning on or after
January 1, 2015 to allow SHOPs, in States that permit this activity
under State law, to permit enrollment in a SHOP QHP through the
Internet Web site of an agent or broker under the standards set forth
in Sec. 155.220(c)(3). Permitting an employer to complete QHP
selection through the Internet Web site of an agent or broker is an
additional potential enrollment channel that would provide small
employers with another avenue to the SHOPs.
In Sec. 156.285, we propose that when premium aggregation becomes
available in FF-SHOPs for plan years beginning on or after January 1,
2015, if an issuer does not receive an enrollment cancellation
transaction from the FF-SHOP, it should effectuate coverage even if the
issuer would not receive an employer's initial premium payment from the
FF-SHOP prior to the coverage effective date. We also propose that a
qualified employer in the SHOP that becomes a large employer would
continue to be rated as a small employer and propose to prohibit
issuers from composite billing in the FF-SHOPs when employee choice
becomes available and an employer selects a level of coverage and not a
single plan.
We do not expect the proposed policies related to the SHOP to
create
[[Page 72382]]
any new significant costs for small businesses, employees, or the FF-
SHOPs.
Patient Safety
The proposed patient safety requirements would be implemented in
phases, to ensure that QHP issuers contract with hospitals that meet
adequate safety and quality standards in their networks. The proposed
rule would require QHP issuers to collect and maintain CCNs for each of
its contracted hospitals that are certified for more than 50 beds. It
also would require that this documentation, if requested by the
Exchange, be submitted in a form and manner specified by the Exchange.
QHP issuers would already have established procedures and relationships
to contract with hospitals including obtaining hospital identification
information. Therefore, HHS believes that there would not be a
significant additional cost for a QHP issuer to collect and maintain
CCNs. QHP issuers would incur costs to submit this information, if
requested, to the Exchange. We discuss the burden associated with
submitting this information in the Collection of Information section of
this proposed rule.
D. Regulatory Alternatives Considered
We considered a number of alternatives to our proposed approach to
program integrity for the premium stabilization programs. For example,
although we finalized in previous rulemaking our framework for the risk
adjustment data validation program to be used when we operate risk
adjustment on behalf of a State, the preamble to this proposed rule
discusses and seeks comment on a number of alternative approaches to
the detailed methodology proposed here. For example, we have suggested
a number of options for confidence intervals and whether to use tests
of statistical significance in determining plan average risk score
adjustments. We have also suggested an expedited second validation
audit approach to permit more time for inter-auditor discussions and
appeals. We have suggested a number of ways to calculate a default risk
adjustment charge for an issuer that fails to provide initial
validation audits.
In the preamble discussion of our proposed modifications to the
risk adjustment methodology, we considered not providing for an induced
demand adjustment for Medicaid expansion plan variations, but we
believe that not doing so would underestimate the risk in those plans,
potentially leading to higher premiums in those plans.
In Sec. 153.270, we propose that HHS may audit State-operated
reinsurance programs to ensure appropriate use of Federal funds. We
also considered not proposing that HHS have such authority. However, we
believe that because HHS will collect reinsurance contributions and
because a State's issuers' reinsurance requests affect the availability
of reinsurance funds for issuers in other States, we think it is
critical for HHS to have the authority to perform these audits, so that
issuers and States are confident that they will receive the correct
allocation of the reinsurance payments. We also considered proposing
that HHS have the authority to audit a State-operated risk adjustment
program. However, we decided not to do so because those programs do not
take in Federal funds and those programs have little impact on the
health insurance markets in other States.
We considered not proposing that HHS have the authority to assess
CMPs on QHP issuers for non-compliance with the risk corridors
standards. This would reduce the burden on QHP issuers on State
Exchanges and would have reduced Federal oversight costs. However, we
determined that similar standards and oversight were appropriate for
all issuers of QHPs, regardless of whether the QHPs were offered
through FFEs or State Exchanges, in order to ensure compliance with the
risk corridors program and the proper use of Federal funds.
In the preamble discussion of the 2015 reinsurance payment
parameters, we also considered, when setting forth the proposed 2015
reinsurance payment parameters, a set of uniform reinsurance payment
parameters that would have substantially raised the attachment point or
lowered the reinsurance cap, but believe those uniform reinsurance
payment parameters would have raised the complexity of estimating the
effects of reinsurance for issuers.
As detailed in the preamble discussion regarding our proposed
approach to estimating cost-sharing reduction amounts in connection
with reinsurance calculations, we considered a number of alternative
approaches to this estimation. Finally, we considered a number of
different approaches to the discrepancy and administrative appeals
process proposed in Sec. 153.710 and Sec. 156.1220. Some of these
approaches would have provided for lengthier and more formal
administrative appeals processes, including for advance payments of the
premium tax credit, advance payment for cost-sharing reductions, and
FFE user fees in 2014. We did not adopt that approach for these 2014
programs, and instead rely on operational discrepancy reports and one-
level of administrative appeals--a request for reconsideration, because
we believe that this approach will be simpler and less expensive, and
will permit operations specialists, issuers and HHS to resolve most
problems more quickly. We considered relying solely on a simpler
operational discrepancy report process for the premium stabilization
programs and cost-sharing reductions reconciliation in 2015--but
decided that due to the complexity of the calculations involved in
these programs and the potential magnitude of the payment flows,
issuers would prefer that these calculations be subject to more formal
administrative processes.
Multiple alternatives were considered to the proposed SHOP
approaches and are discussed in detail above.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
requires agencies to prepare an initial regulatory flexibility analysis
to describe the impact of the proposed rule on small entities, unless
the head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The RFA generally defines a ``small entity'' as (1) A proprietary firm
meeting the size standards of the Small Business Administration (SBA),
(2) a not-for-profit organization that is not dominant in its field, or
(3) a small government jurisdiction with a population of less than
50,000. States and individuals are not included in the definition of
``small entity.'' HHS uses a change in revenues of more than 3 to 5
percent as its measure of significant economic impact on a substantial
number of small entities.
In this proposed rule, we propose provisions for the risk
adjustment, reinsurance, and risk corridors programs, which are
intended to stabilize premiums as insurance market reforms are
implemented and Exchanges facilitate increased enrollment. Because we
believe that insurance firms offering comprehensive health insurance
policies generally exceed the size thresholds for ``small entities''
established by the SBA, we do not believe that an initial regulatory
flexibility analysis is required for such firms.
For purposes of the RFA, we expect the following types of entities
to be affected by this proposed rule:
Health insurance issuers.
[[Page 72383]]
Group health plans.
Reinsurance entities.
We believe that health insurance issuers and group health plans
would be classified under the North American Industry Classification
System (NAICS) code 524114 (Direct Health and Medical Insurance
Carriers). According to SBA size standards, entities with average
annual receipts of $35.5 million or less would be considered small
entities for these NAICS codes. Issuers could possibly be classified in
621491 (HMO Medical Centers) and, if this is the case, the SBA size
standard would be $30 million or less.
In this proposed rule, we proposed requirements on employers that
choose to participate in a SHOP Exchange. The SHOPs are limited by
statute to employers with at least one but not more than 100 employees.
For this reason, we expect that many employers who would be affected by
the proposals would meet the SBA standard for small entities. We do not
believe that the proposals impose requirements on employers offering
health insurance through the SHOP that are more restrictive than the
current requirements on small employers offering employer sponsored
insurance. Additionally, as discussed in the RIA, we believe the
proposed policy will provide greater choice for both employees and
employers. We believe the processes that we have established constitute
the minimum amount of requirements necessary to implement the SHOP
program and accomplish our policy goals, and that no appropriate
regulatory alternatives could be developed to further lessen the
compliance burden.
We believe that a substantial number of sponsors of self-insured
group health plans could qualify as ``small entities.'' This proposed
rule provides HHS with the authority to audit these entities. However,
we do not believe that the burden of these audits is likely to reflect
more than 3 to 5 percent of such an entity's revenues.
F. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a proposed rule that includes any
Federal mandate that may result in expenditures in any 1 year by a
State, local, or Tribal governments, in the aggregate, or by the
private sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2013, that threshold is approximately $141 million.
Although we have not been able to quantify the user fees that will be
associated with this proposed rule, the combined administrative cost
and user fee impact on State, local, or Tribal governments and the
private sector may be above the threshold. Earlier portions of this RIA
constitute our UMRA analysis.
G. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule that imposes
substantial direct costs on State and local governments, preempts State
law, or otherwise has Federalism implications. Because States have
flexibility in designing their Exchange and Exchange-related programs,
State decisions will ultimately influence both administrative expenses
and overall premiums. States are not required to establish an Exchange
or risk adjustment or reinsurance program. For States electing to
operate an Exchange, risk adjustment or reinsurance program, much of
the initial cost of creating these programs will be funded by Exchange
Planning and Establishment Grants. After establishment, Exchanges will
be financially self-sustaining, with revenue sources at the discretion
of the State. Current State Exchanges charge user fees to issuers.
In HHS's view, while this proposed rule did not impose substantial
direct requirement costs on State and local governments, this
regulation has Federalism implications due to direct effects on the
distribution of power and responsibilities among the State and Federal
governments relating to determining standards relating to health
insurance that is offered in the individual and small group markets.
Each State electing to establish an Exchange must adopt the Federal
standards contained in the Affordable Care Act and in this proposed
rule, or have in effect a State law or regulation that implements these
Federal standards. However, HHS anticipates that the Federalism
implications (if any) are substantially mitigated because under the
statute, States have choices regarding the structure and governance of
their Exchanges and risk adjustment and reinsurance programs.
Additionally, the Affordable Care Act does not require States to
establish these programs; if a State elects not to establish any of
these programs or is not approved to do so, HHS must establish and
operate the programs in that State.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have Federalism
implications or limit the policy making discretion of the States, HHS
has engaged in efforts to consult with and work cooperatively with
affected States, including participating in conference calls with and
attending conferences of the National Association of Insurance
Commissioners, and consulting with State insurance officials on an
individual basis.
Throughout the process of developing this proposed rule, HHS has
attempted to balance the States' interests in regulating health
insurance issuers, and Congress' intent to provide access to Affordable
Insurance Exchanges for consumers in every State. By doing so, it is
HHS's view that we have complied with the requirements of Executive
Order 13132.
H. Congressional Review Act
This proposed rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to Congress and the Comptroller General for
review.
List of Subjects
45 CFR Part 144
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
45 CFR Part 153
Administrative practice and procedure, Adverse selection, Health
care, Health insurance, Health records, Organization and functions
(Government agencies), Premium stabilization, Reporting and
recordkeeping requirements, Reinsurance, Risk adjustment, Risk
corridors, Risk mitigation, State and local governments.
45 CFR Part 155
Administrative practice and procedure, Health care access, Health
insurance, Reporting and recordkeeping requirements, State and local
governments, Cost-sharing reductions, Advance payments of premium tax
credit, Administration and calculation of advance payments of the
premium tax credit, Plan variations, Actuarial value.
[[Page 72384]]
45 CFR Part 156
Administrative appeals, Administrative practice and procedure,
Administration and calculation of advance payments of premium tax
credit, Advertising, Advisory Committees, Brokers, Conflict of
interest, Consumer protection, Cost-sharing reductions, Grant programs-
health, Grants administration, Health care, Health insurance, Health
maintenance organization (HMO), Health records, Hospitals, American
Indian/Alaska Natives, Individuals with disabilities, Loan programs-
health, Organization and functions (Government agencies), Medicaid,
Payment and collections reports, Public assistance programs, Reporting
and recordkeeping requirements, State and local governments, Sunshine
Act, Technical assistance, Women, and Youth.
For the reasons set forth in the preamble, the Department of Health
and Human Services proposes to amend 45 CFR parts 147, 153, 155, and
156, and proposes to further amend 45 CFR parts 144, 153, and 156, as
amended October 30, 2013, at 78 FR 65091, effective December 30, 2013,
as set forth below:
PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE
0
1. The authority citation for part 144 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.
0
2. Section 144.103 is amended by revising the first sentence in
paragraph (1) of the definition of ``Policy year'' to read as follows:
Sec. 144.103 Definitions.
* * * * *
Policy year * * *
(1) A grandfathered health plan offered in the individual health
insurance market and student health insurance coverage, the 12-month
period that is designated as the policy year in the policy documents of
the individual health insurance coverage. * * *
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
3. The authority citation for part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
4. Section 147.102 is amended by revising paragraph (c)(3) to read as
follows:
Sec. 147.102 Fair health insurance premiums.
* * * * *
(c) * * *
(3) Application to small group market. In the case of the small
group market, the total premium charged to the group is determined by
summing the premiums of covered participants and beneficiaries in
accordance with paragraph (c)(1) or (2) of this section, as applicable.
Nothing in this section precludes a State from requiring issuers to
offer, or an issuer from voluntarily offering, to a group premiums that
are based on average enrollee premium amounts, provided that the total
group premium is the same total amount derived in accordance with
paragraph (c)(1) or (2) of this section, as applicable. In such case,
effective for plan years beginning on or after January 1, 2015, an
issuer must ensure that average enrollee premium amounts calculated
based on applicable employee enrollment at the beginning of the plan
year do not vary for any participant or beneficiary during the plan
year.
* * * * *
0
5. Section 147.145 is amended by revising paragraph (b)(1)(ii) to read
as follows:
Sec. 147.145 Student health insurance coverage.
* * * * *
(b) * * *
(1) * * *
(ii) For purposes of section 2702 of the Public Health Service Act,
a health insurance issuer that offers student health insurance coverage
is not required to accept individuals who are not students or
dependents of students in such coverage, and, notwithstanding the
requirements of Sec. 147.104(b), is not required to establish open
enrollment periods or coverage effective dates that are based on a
calendar policy year or to offer policies on a calendar year basis.
* * * * *
PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT
0
6. The authority citation for part 153 continues to read as follows:
Authority: Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24
Stat. 119.
0
7. Section 153.20 is amended by revising the definition of
``contributing entity'' and adding a definition of ``major medical
coverage'' to read as follows:
Sec. 153.20 Definitions.
* * * * *
Contributing entity means--
(1) A health insurance issuer; or
(2) For the 2014 benefit year, a self-insured group health plan
(including a group health plan that is partially self-insured and
partially insured, where the health insurance coverage does not
constitute major medical coverage), whether or not it uses a third
party administrator; and for the 2015 and 2016 benefit years, a self-
insured group health plan (including a group health plan that is
partially self-insured and partially insured, where the health
insurance coverage does not constitute major medical coverage) that
uses a third party administrator in connection with claims processing
or adjudication (including the management of appeals) or plan
enrollment. A self-insured group health plan that is a contributing
entity is responsible for the reinsurance contributions, although it
may elect to use a third party administrator or administrative
services-only contractor for transfer of the reinsurance contributions.
* * * * *
Major medical coverage means, for purposes only of the requirements
related to reinsurance contributions under section 1341 of the
Affordable Care Act, health coverage for a broad range of services and
treatments provided in various settings that provides minimum value in
accordance with Sec. 156.145 of this subchapter.
* * * * *
0
8. Section 153.230 is amended by revising paragraph (d) to read as
follows:
Sec. 153.230 Calculation of reinsurance payments made under the
national contribution rate.
* * * * *
(d) Uniform adjustment to national reinsurance payments. If HHS
determines that all reinsurance payments requested under the national
payment parameters from all reinsurance-eligible plans in all States
for a benefit year will not be equal to the amount of all reinsurance
contributions collected for reinsurance payments under the national
contribution rate in all States for an applicable benefit year, HHS
will determine a uniform pro rata adjustment to be applied to all such
requests for reinsurance payments for all States. Each applicable
reinsurance entity, or HHS on behalf of a State, must reduce or
increase the reinsurance payment amounts for the applicable
[[Page 72385]]
benefit year by any adjustment required under this paragraph (d).
0
9. Section 153.235 is amended by removing and reserving paragraph (b).
Sec. 153.235 Allocation and distribution of reinsurance
contributions.
* * * * *
(b) [Reserved]
0
10. Section 153.270 is added to subpart C to read as follows:
Sec. 153.270 HHS audits of State-operated reinsurance programs.
(a) Audits. HHS or its designee may conduct a financial and
programmatic audit of a State-operated reinsurance program to assess
compliance with the requirements of this subpart or subpart B of this
part. A State that establishes a reinsurance program must ensure that
its applicable reinsurance entity and any relevant contractors,
subcontractors, or agents cooperate with any audit under this section.
(b) Action on audit findings. If an audit results in a finding of
material weakness or significant deficiency with respect to compliance
with any requirement of this subpart or subpart B, the State must
ensure that the applicable reinsurance entity:
(1) Within 60 calendar days of the issuance of the final audit
report, provides a written corrective action plan to HHS for approval;
(2) Implements that plan; and
(3) Provides to HHS written documentation of the corrective actions
once taken.
0
11. Section 153.400 is amended by revising paragraph (a)(1)
introductory text and adding paragraphs (a)(1)(v) and (vi) to read as
follows:
Sec. 153.400 Reinsurance contribution funds.
(a) * * *
(1) In general, reinsurance contributions are required for major
medical coverage that is considered to be part of a commercial book of
business, but are not required to be paid more than once with respect
to the same covered life. In order to effectuate that principle, a
contributing entity must make reinsurance contributions for lives
covered by its self-insured group health plans and health insurance
coverage except to the extent that:
* * * * *
(v) Such plan or coverage applies to individuals with primary
residence in a territory that does not operate a reinsurance program.
(vi) In the case of employer-provided group health coverage:
(A) Such coverage applies to individuals with individual market
health insurance coverage for which reinsurance contributions are
required; or
(B) Such coverage is supplemental or secondary to group health
coverage for which reinsurance contributions must be made for the same
covered lives.
* * * * *
0
12. Section 153.405 is amended by revising paragraphs (c) and (e)(3)
and adding paragraph (i) to read as follows:
Sec. 153.405 Calculation of reinsurance contributions.
* * * * *
(c) Notification and payment. (1) Following submission of the
annual enrollment count described in paragraph (b) of this section, HHS
will notify the contributing entity of the reinsurance contribution
amount allocated to reinsurance payments and administrative expenses to
be paid for the applicable benefit year.
(2) In the fourth quarter of the calendar year following the
applicable benefit year, HHS will notify the contributing entity of the
portion of the reinsurance contribution amount allocated for payments
to the U.S. Treasury for the applicable benefit year.
(3) A contributing entity must remit reinsurance contributions to
HHS within 30 days after the date of a notification.
* * * * *
(e) * * *
(3) Using the number of lives covered for the most current plan
year calculated based upon the ``Annual Return/Report of Employee
Benefit Plan'' filed with the Department of Labor (Form 5500) for the
last applicable time period. For purposes of this paragraph (e)(3), the
number of lives covered for the plan year for a plan offering only
self-only coverage equals the sum of the total participants covered at
the beginning and end of the plan year, as reported on the Form 5500,
divided by 2, and the number of lives covered for the plan year for a
plan offering self-only coverage and coverage other than self-only
coverage equals the sum of the total participants covered at the
beginning and the end of the plan year, as reported on the Form 5500.
* * * * *
(i) Audits. HHS or its designee may audit a contributing entity to
assess its compliance with the requirements of this subpart.
0
13. Section 153.410 is amended by adding paragraph (d) to read as
follows:
Sec. 153.410 Requests for reinsurance payment.
* * * * *
(d) Audits. HHS or its designee may audit an issuer of a
reinsurance-eligible plan to assess its compliance with the
requirements of this subpart and subpart H. The issuer must ensure that
its relevant contractors, subcontractors, or agents cooperate with any
audit under this section. If an audit results in a finding of material
weakness or significant deficiency with respect to compliance with any
requirement of this subpart or subpart H, the issuer must complete all
of the following:
(1) Within 30 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval.
(2) Implement that plan.
(3) Provide to HHS written documentation of the corrective actions
once taken.
0
14. Section 153.510 is amended by adding paragraph (f) to read as
follows:
Sec. 153.510 Risk corridors establishment and payment methodology.
* * * * *
(f) Eligibility under health insurance market rules. The provisions
of this subpart apply only for plans offered by a QHP issuer in the
SHOP or the individual or small group market, as determined according
to the employee counting method applicable under State law, that are
subject to the following provisions: Sec. Sec. 147.102, 147.104,
147.106, 147.150, 156.80, and subpart B of part 156 of this subchapter.
0
15. Section 153.540 is added to subpart F to read as follows:
Sec. 153.540 Compliance with risk corridors standards.
(a) Audits. HHS or its designee may audit a QHP issuer to assess
its compliance with the requirements of this subpart. HHS will conduct
an audit in accordance with the procedures set forth in Sec.
158.402(a) through (e) of this subchapter.
(b) Enforcement actions. If an issuer of a QHP on a State-based
Exchange fails to comply with the requirements of this subpart, HHS may
impose civil money penalties in accordance with the procedures set
forth in Sec. 156.805 of this subchapter.
0
16. Section 153.620 is amended by adding paragraph (c) to read as
follows:
Sec. 153.620 Compliance with risk adjustment standards.
* * * * *
(c) Audits. HHS or its designee may audit an issuer of a risk
adjustment covered plan to assess its compliance with the requirements
of this subpart and subpart H of this part. The issuer must ensure that
its relevant contractors, subcontractors, or agents cooperate with any
audit under this section. If an audit results in a finding
[[Page 72386]]
of material weakness or significant deficiency with respect to
compliance with any requirement of this subpart or subpart H of this
part, the issuer must complete all of the following:
(1) Within 30 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval.
(2) Implement that plan.
(3) Provide to HHS written documentation of the corrective actions
once taken.
0
17. Section 153.630 is amended by revising paragraph (b)(1) and adding
paragraphs (b)(5) through (10) to read as follows:
Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.
* * * * *
(b) * * *
(1) An issuer of a risk adjustment covered plan must engage one or
more independent auditors to perform an initial validation audit of a
sample of its risk adjustment data selected by HHS. The issuer must
provide HHS with the identity of the initial validation auditor, and
must attest to the absence of conflicts of interest between the initial
validation auditor (or the members of its audit team, owners,
directors, officers, or employees) and the issuer (or its owners,
directors, officers, or employees), in a timeframe and manner to be
specified by HHS.
* * * * *
(5) An initial validation audit must be conducted by medical coders
certified as such and in good standing by a nationally recognized
accrediting agency.
(6) An issuer must provide the initial validation auditor and the
second validator auditor with all relevant source enrollment
documentation, all claims and encounter data, and medical record
documentation from providers of services to each enrollee in the
applicable sample without unreasonable delay and in a manner that
reasonably assures confidentiality and security in transmission.
(7) The risk score of each enrollee in the sample must be validated
by--
(i) Validating the enrollee's enrollment data and demographic data
through review of source enrollment documentation;
(ii) Validating enrollee health status through review of all
relevant medical record documentation. Medical record documentation
must originate from the provider of the services and align with dates
of service for the medical diagnoses, and reflect permitted providers
and services. For purposes of this section, ``medical record
documentation'' means clinical documentation of hospital inpatient or
outpatient treatment or professional medical treatment from which
enrollee health status is documented and related to accepted risk
adjustment services that occurred during a specified period of time.
Medical record documentation must be generated under a face-to-face or
telehealth visit documented and authenticated by a permitted provider
of services;
(iii) Validating medical records according to industry standards
for coding and reporting; and
(iv) Having a senior reviewer confirm any enrollee risk adjustment
error discovered during the initial validation audit. For purposes of
this section, a ``senior reviewer'' is a reviewer certified as a
medical coder by a nationally recognized accrediting agency who
possesses at least 5 years of experience in medical coding.
(8) The initial validation auditor must measure and report to the
issuer and HHS, in a manner and timeframe specified by HHS, its inter-
rater reliability rates among its reviewers. The initial validation
auditor must achieve a consistency measure of at least 95 percent for
demographic, enrollment, and health status review outcomes.
(9) Enforcement actions: If an issuer of a risk adjustment covered
plan fails to engage an initial validation auditor or to submit the
results of an initial validation audit to HHS, HHS may impose civil
money penalties in accordance with the procedures set forth in Sec.
156.805 of this subchapter.
(10) Default data validation charge: If an issuer of a risk
adjustment covered plan fails to engage an initial validation auditor
or to submit the results of an initial validation audit to HHS, HHS
will impose a default risk adjustment charge.
* * * * *
0
18. Section 153.710 is amended by adding paragraphs (d), (e), (f), and
(g) to read as follows:
Sec. 153.710 Data requirements.
* * * * *
(d) Interim dedicated distributed data environment reports. Within
30 calendar days of the date of an interim dedicated distributed data
environment report from HHS, the issuer must, in a format specified by
HHS, either:
(1) Confirm to HHS that the information in the interim report
accurately reflects the data to which the issuer has provided access to
HHS through its dedicated distributed data environment in accordance
with Sec. 153.700(a) for the timeframe specified in the report; or
(2) Describe to HHS any discrepancy it identifies in the interim
dedicated distributed data environment report.
(e) Final dedicated distributed data environment report. Within 15
calendar days of the date of the final dedicated distributed data
environment report from HHS, the issuer must, in a format specified by
HHS, either:
(1) Confirm to HHS that the information in the final report
accurately reflects the data to which the issuer has provided access to
HHS through its dedicated distributed data environment in accordance
with Sec. 153.700(a) for the benefit year specified in the report; or
(2) Describe to HHS any discrepancy it identifies in the final
dedicated distributed data environment report.
(f) Unresolved discrepancies. If a discrepancy first identified in
an interim or final dedicated distributed data environment report in
accordance with paragraphs (d)(2) or (e)(2) of this section remains
unresolved after the issuance of the notification of risk adjustment
payments and charges or reinsurance payments under Sec. 153.310(e) or
Sec. 153.240(b)(1)(ii), respectively, an issuer of a risk adjustment
covered plan or reinsurance-eligible plan may make a request for
reconsideration regarding such discrepancy under the process set forth
in Sec. 156.1220(a).
(g) Risk corridors and medical loss ratio reporting. (1)
Notwithstanding any discrepancy report made under paragraph (d)(2) or
(e)(2) of this section, or any request for reconsideration under Sec.
156.1220(a) with respect to any risk adjustment payment or charge,
including an assessment of risk adjustment user fees; reinsurance
payment; cost-sharing reconciliation payment or charge; or risk
corridors payment or charge, unless the dispute has been resolved, an
issuer must report, for purposes of the risk corridors and medical loss
ratio programs:
(i) The risk adjustment payment to be made or charge assessed,
including an assessment of risk adjustment user fees, by HHS in the
notification provided under Sec. 153.310(e);
(ii) The reinsurance payment to be made by HHS in the notification
provided under Sec. 153.240(b)(1)(ii);
(iii) A cost-sharing reduction amount equal to the amount of the
advance payments of cost-sharing reductions paid to the issuer by HHS
for the benefit year; and
(iv) For medical loss ratio report only, the risk corridors payment
to be made or charge assessed by HHS as reflected
[[Page 72387]]
in the notification provided under Sec. 153.510(d).
(2) An issuer must report any adjustment made following any
discrepancy report made under paragraph (d)(2) or (e)(2) of this
section, or any request for reconsideration under Sec. 156.1220(a)
with respect to any risk adjustment payment or charge, including an
assessment of risk adjustment user fees; reinsurance payment; cost-
sharing reconciliation payment or charge; or risk corridors payment or
charge; or following any audit, where such adjustment has not be
accounted for in a prior risk corridors or medical loss ratio report,
in the next following risk corridors or medical loss ratio report.
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
19. Authority citation for part 155 is revised to read as follows:
Authority: Title I of the Affordable Care Act, sections 1301,
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334,
1402, 1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C.
18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and
18081-18083).
0
20. Section 155.106 is amended by revising paragraph (a)(2) to read as
follows:
Sec. 155.106 Election to operate an Exchange after 2014.
(a) * * *
(2) Have in effect an approved, or conditionally approved, Exchange
Blueprint and operational readiness assessment at least 6.5 months
prior to the Exchange's first effective date of coverage; and
* * * * *
0
21. Section 155.220 is amended by adding paragraph (i) as follows:
Sec. 155.220 Ability of States to permit agents and brokers to assist
qualified individuals, qualified employers, or qualified employees
enrolling in QHPs.
* * * * *
(i) For plan years beginning on or after January 1, 2015, in States
that permit this activity under state law, a SHOP may permit agents and
brokers to use an Internet Web site to assist qualified employers and
facilitate enrollment of qualified employees in a QHP through the
Exchange, under paragraph (c)(3) of this section.
0
22. Section 155.260 is amended by revising paragraphs (a)(1), (a)(2)
and (b) to read as follows:
Sec. 155.260 Privacy and security of personally identifiable
information.
(a) * * *
(1) Where the Exchange creates or collects personally identifiable
information for the purposes of determining eligibility for enrollment
in a qualified health plan; determining eligibility for other insurance
affordability programs, as defined in Sec. 155.20; or determining
eligibility for exemptions from the individual responsibility
provisions in section 5000A of the Code, the Exchange may only use or
disclose such personally identifiable information to the extent such
information is necessary:
(i) For the Exchange to carry out the functions described in Sec.
155.200;
(ii) For the Exchange to carry out other functions not described in
paragraph (a)(1)(i) of this section, which the Secretary determines to
be in compliance with section 1411(g)(2)(A) of the Affordable Care Act
and for which an individual provides consent for his or her information
to be used or disclosed; or
(iii) For the Exchange to carry out other functions not described
in paragraphs (a)(1)(i) and (ii) of this section, for which an
individual provides consent for his or her information to be used or
disclosed, and which the Secretary determines are in compliance with
section 1411(g)(2)(A) of the Affordable Care Act under the following
substantive and procedural requirements:
(A) Substantive requirements. The Secretary may approve other uses
and disclosures of personally identifiable information created or
collected as described in paragraph (a)(1) of this section that are not
described in paragraphs (a)(1)(i) or (a)(1)(ii) of this section,
provided that HHS determines that the information will be used only for
the purposes of and to the extent necessary in ensuring the efficient
operation of the Exchange consistent with section 1411(g)(2)(A) of the
Affordable Care Act, and that the uses and disclosures are also
permissible under relevant law and policy.
(B) Procedural requirements for approval of a use or disclosure of
personally identifiable information. To seek approval for a use or
disclosure of personally identifiable information created or collected
as described in paragraph (a)(1) of this section that is not described
in paragraphs (a)(1)(i) or (a)(1)(ii), the Exchange must submit the
following information to HHS:
(1) Identity of the Exchange and appropriate contact persons;
(2) Detailed description of the proposed use or disclosure, which
must include, but not necessarily be limited to, a listing or
description of the specific information to be used or disclosed and an
identification of the persons or entities that may access or receive
the information;
(3) Description of how the use or disclosure will ensure the
efficient operation of the Exchange consistent with section
1411(g)(2)(A) of the Affordable Care Act; and
(4) Description of how the information to be used or disclosed will
be protected in compliance with privacy and security standards that
meet the requirements of this section or other relevant law, as
applicable.
(2) The Exchange may not create, collect, use, or disclose
personally identifiable information unless the creation, collection,
use, or disclosure is consistent with this section.
* * * * *
(b) Application to non-Exchange entities. (1) Non-Exchange
entities. A non-Exchange entity is any individual or entity that:
(i) Gains access to personally identifiable information submitted
to an Exchange; or
(ii) Collects, uses, or discloses personally identifiable
information gathered directly from applicants, qualified individuals,
or enrollees while that individual or entity is performing functions
agreed to with the Exchange.
(2) Prior to any person or entity becoming a non-Exchange entity,
Exchanges must execute with the person or entity a contract or
agreement that includes:
(i) A description of the functions to be performed by the non-
Exchange entity;
(ii) A provision(s) binding the non-Exchange entity to comply with
the privacy and security standards and obligations adopted in
accordance with paragraph (b)(3) of this section, and specifically
listing or incorporating those privacy and security standards and
obligations;
(iii) A provision requiring the non-Exchange entity to monitor,
periodically assess, and update its security controls and related
system risks to ensure the continued effectiveness of those controls in
accordance with paragraph (a)(5) of this section;
(iv) A provision requiring the non-Exchange entity to inform the
Exchange of any change in its administrative, technical, or operational
environments defined as material within the contract; and
(v) A provision that requires the non-Exchange entity to bind any
downstream entities to the same privacy and security standards and
obligations
[[Page 72388]]
to which the non-Exchange entity has agreed in its contract or
agreement with the Exchange.
(3) When collection, use or disclosure is not otherwise required by
law, the privacy and security standards to which an Exchange binds non-
Exchange entities must:
(i) Be consistent with the principles and requirements listed in
paragraphs (a)(1) through (a)(6) of this section, including being at
least as protective as the standards the Exchange has established and
implemented for itself in compliance with paragraph (a)(3) of this
section;
(ii) Comply with the requirements of paragraphs (c), (d), (f) and
(g) of this section; and
(iii) Take into specific consideration:
(A) The environment in which the non-Exchange entity is operating;
(B) Whether the standards are relevant and applicable to the non-
Exchange entity's duties and activities in connection with the
Exchange; and
(C) Any existing legal requirements to which the non-Exchange
entity is bound in relation to its administrative, technical, and
operational controls and practices, including but not limited to, its
existing data handling and information technology processes and
protocols.
* * * * *
0
23. Section 155.410 is amended by revising paragraphs (e) and (f) to
read as follows:
Sec. 155.410 Initial and annual open enrollment periods.
* * * * *
(e) Annual open enrollment period. For benefit years beginning--
(1) On January 1, 2015, the annual open enrollment period begins
November 15 of 2014, and extends through January 15 of 2015.
(2) On or after January 1, 2016, the annual open enrollment period
begins October 15 of the preceding calendar year, and extends through
December 7 of the preceding calendar year.
(f) Effective date for coverage after the annual open enrollment
period. For the benefit years beginning--
(1) On January 1, 2015, the Exchange must ensure coverage is
effective--
(i) January 1, 2015, for plan selections received by the Exchange
on or before December 15, 2014.
(ii) February 1, 2015, for plan selections received by the Exchange
from December 16, 2015 through January 15, 2015.
(2) On or after January 1, 2016, the Exchange must ensure coverage
is effective as of the first day of the following benefit year for a
qualified individual who has made a QHP selection during the annual
open enrollment period.
* * * * *
0
24. Section 155.705 is amended by:
0
a. Revising paragraph (b)(1);
0
b. Adding paragraph (b)(3)(v);
0
c. Redesignating paragraph (b)(4)(ii) as (b)(4)(iii);
0
d. Adding new paragraph (b)(4)(ii); and
0
e. Revising paragraphs (b)(11)(ii)(C) and (D).
The additions and revisions read as follows:
Sec. 155.705 Functions of a SHOP.
* * * * *
(b) * * *
(1) Enrollment and eligibility functions. The SHOP must adhere to
the requirements outlined in Sec. Sec. 155.710, 155.715, 155.720,
155.725, 155.730, 155.735, and 155.740.
* * * * *
(3) * * *
(v) For plan years beginning on or after January 1, 2015, a
Federally-facilitated SHOP will provide a qualified employer a choice
of two methods to make stand-alone dental plans available to qualified
employees and their dependents:
(A) The employer may choose to make available a single stand-alone
dental plan.
(B) The employer may choose to make available all stand-alone
dental plans offered through the Federally-facilitated SHOP.
(4) * * *
(ii) The SHOP may establish one or more standard processes for
premium calculation, premium payment, and premium collection.
(A) Qualified employers in a Federally-facilitated SHOP must make
premium payments according to a timeline and process established by
HHS;
(B) For a Federally-facilitated SHOP, the premium for coverage
lasting less than 1 month must equal the product of:
(1) The premium for 1 month of coverage divided by the number of
days in the month; and
(2) The number of days for which coverage is being provided in the
month described in paragraph (b)(4)(ii)(B)(1) of this section.
* * * * *
(11) * * *
(ii) * * *
(C) The employer will define a percentage contribution toward
premiums for employee-only coverage under the reference plan and, if
dependent coverage is offered, a percentage contribution toward
premiums for dependent coverage under the reference plan. To the extent
permitted by other applicable law, for plan years beginning on or after
January 1, 2015, the Federally-facilitated SHOP may permit an employer
to define a different percentage contribution for full-time employees
from the percentage contribution it defines for non-full-time
employees, and it may permit an employer to define a different
percentage contribution for dependent coverage for full-time employees
from the percentage contribution it defines for dependent coverage for
non-full-time employees.
(D) In a Federally-facilitated SHOP, for plan years beginning on or
after January 1, 2015, if the employer elects to offer coverage to its
employees under Sec. 155.705(b)(3)(iv)(A), neither State law nor the
employer may require that employer contributions be based on a
calculated composite premium for the reference plan for employees, for
adult dependents of employees, and for dependents of employees under
age 21.
* * * * *
0
25. Section 155.715 is amended by revising paragraphs (c)(4), (d)(1)
introductory text, and (d)(2) introductory text to read as follows:
Sec. 155.715 Eligibility determination process for SHOP.
* * * * *
(c) * * *
(4) May not perform individual market Exchange eligibility
determinations or verifications described in subpart D of this part.
(d) * * *
(1) When the information submitted on the SHOP single employer
application is inconsistent with information collected from third-party
data sources through the verification process described in Sec.
155.715(c)(2), the SHOP must--
* * * * *
(2) When the information submitted on the SHOP single employee
application is inconsistent with information collected from third-party
data sources through the verification process described in Sec.
155.715(c)(2), the SHOP must--
* * * * *
0
26. Section 155.730 is amended by redesignating paragraph (g) as
paragraph (g)(1) and by adding paragraph (g)(2) to read as follows:
Sec. 155.730 Application standards for SHOP.
* * * * *
(g) * * *
(1) * * *
[[Page 72389]]
(2) The SHOP is not permitted to collect information on the single
employer or single employee application unless that information is
necessary to determine SHOP eligibility or effectuate enrollment
through the SHOP.
0
27. Section 155.1030 is amended by revising paragraphs (b)(1), (3), and
(4) to read as follows:
Sec. 155.1030 QHP certification standards related to advance payments
of the premium tax credit and cost-sharing reductions.
* * * * *
(b) * * *
(1) The Exchange must collect and review annually the rate
allocation and the actuarial memorandum that an issuer submits to the
Exchange under Sec. 156.470 of this subchapter, to ensure that the
allocation meets the standards set forth in Sec. 156.470(c) and (d).
* * * * *
(3) The Exchange must use the methodology specified in the annual
HHS notice of benefit and payment parameters to calculate advance
payment amounts for cost-sharing reductions, and must transmit the
advance payment amounts to HHS, in accordance with Sec. 156.340(a).
(4) HHS may use the information provided to HHS by the Exchange
under this section for oversight of advance payments of cost-sharing
reductions and premium tax credits.
* * * * *
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
28. The authority citation for part 156 is revised to read as follows:
Authority: Title I of the Affordable Care Act, sections 1301-
1304, 1311-1312, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, and
1412, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-
18032, 18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, 26
U.S.C. 36B, and 31 U.S.C. 9701).
0
29. Section 156.135 is amended by revising paragraph (a) and adding
paragraph (g) to read as follows:
Sec. 156.135 AV calculation for determining level of coverage.
(a) Calculation of AV. Subject to paragraphs (b) and (d) of this
section, to calculate the AV of a health plan, the issuer must use the
AV Calculator developed and made available by HHS for the given benefit
year.
* * * * *
(g) Updates to the AV calculator. HHS will update the AV Calculator
as follows, HHS will:
(1) Update the annual limit on cost sharing and related functions
based on a projected estimate to enable the AV Calculator to comply
with Sec. 156.130(a)(2);
(2) Update the continuance tables to reflect more current
enrollment data when HHS has determined that the enrolled population
has materially changed;
(3) Update the algorithms when HHS has determined the need to adapt
the AV Calculator for use by additional plan designs or to allow the AV
Calculator to accommodate potential new types of plan designs, where
such adaptations can be based on actuarially sound principles and will
not have a substantial effect on the AV calculations performed by the
then current AV Calculator;
(4) Update the continuance tables to reflect more current claims
data no more than every 3 and no less than every 5 years and to
annually trend the claims data when the trending factor is more than 5
percent different, calculated on a cumulative basis; and
(5) Update the AV Calculator user interface when a change would be
useful to a broad group of users of the AV Calculator, would not affect
the function of the AV Calculator, and would be technically feasible.
0
30. Section 156.150 is revised to read as follows:
Sec. 156.150 Application to stand-alone dental plans inside the
Exchange.
(a) Annual limitation on cost-sharing. For a stand-alone dental
plan covering the pediatric dental EHB under Sec. 155.1065 of this
subchapter in any Exchange, cost sharing may not exceed $300 for one
covered child and $400 for two or more covered children.
(b) [Reserved]
0
31. Section 156.285 is amended by adding paragraph (a)(4) and revising
paragraph (c)(7) to read as follows:
Sec. 156.285 Additional standards specific to SHOP.
(a) * * *
(4)(i) Adhere to the premium rating standards described in Sec.
147.102 regardless of whether the QHP is sold in the small group market
or the large group market; and
(ii) Effective in plan years beginning on or after January 1, 2015,
a QHP issuer in a Federally-facilitated SHOP may not offer to an
employer premiums that are based on average enrollee amounts under
Sec. 147.102(c)(3), if the employer elects to offer coverage to its
employees under Sec. 155.705(b)(3)(iv)(A).
* * * * *
(c) * * *
(7) A QHP issuer must enroll a qualified employee only if the
SHOP--
(i) Notifies the QHP issuer that the employee is a qualified
employee;
(ii) Transmits information to the QHP issuer as provided in Sec.
155.400(a) of this subchapter; and
(iii) Effective for QHPs offered through a Federally-facilitated
SHOP in plan years beginning on or after January 1, 2015, does not send
a cancellation notice to the QHP issuer prior to the effective date of
coverage.
* * * * *
0
32. Section 156.298 is added to subpart C to read as follows:
Sec. 156.298 Meaningful difference standard for Qualified Health
Plans in the Federally-facilitated Exchanges.
(a) General. Subject to paragraph (b)(2) of this section, starting
in the 2015 coverage year, in order to be certified as a QHP offered
through a Federally-facilitated Exchange, a plan must be meaningfully
different from all other QHPs offered by the same issuer of that plan
within a service area and level of coverage in the Exchange, as defined
in paragraph (b) of this section.
(b) Meaningful difference standard. A plan is considered
meaningfully different from another plan in the same service area and
metal tier (including catastrophic plans) if a reasonable consumer
would be able to identify two or more material differences among the
following characteristics between the plan and other plan offerings:
(1) Cost sharing;
(2) Provider networks;
(3) Covered benefits;
(4) Plan type;
(5) Premiums;
(6) Health Savings Account eligibility; or
(7) Self-only, non-self-only, or child-only coverage offerings.
(c) Exception for limited plan availability. If HHS determines that
the plan offerings at a particular metal level (including catastrophic
plans) within a county are limited, plans submitted for certification
in that particular metal level (including catastrophic plans) within
that county will not be subject to the meaningful difference
requirement set forth in paragraph (b) of this section.
(d) Two-year transition period for issuers with new acquisitions.
During the first 2 years after a merger or acquisition in which an
acquiring issuer obtains or merges with another issuer, the FFEs may
certify plans as QHPs that were previously offered by the acquired
[[Page 72390]]
or merged issuer without those plans meeting the meaningful difference
standard set forth in paragraph (b) of this section.
0
33. Section 156.420 is amended by revising paragraphs (c), (d), and (e)
to read as follows:
Sec. 156.420 Plan variations.
* * * * *
(c) Benefit and network equivalence in silver plan variations. A
standard silver plan and each silver plan variation thereof must cover
the same benefits and providers. Each silver plan variation is subject
to all requirements applicable to the standard silver plan (except for
the requirement that the plan have an AV as set forth in Sec.
156.140(b)(2)).
(d) Benefit and network equivalence in zero and limited cost
sharing plan variations. A QHP and each zero cost sharing plan
variation or limited cost sharing plan variation thereof must cover the
same benefits and providers. The out-of-pocket spending required of
enrollees in the zero cost sharing plan variation of a QHP for a
benefit that is not an essential health benefit from a provider
(including a provider outside the plan's network) may not exceed the
corresponding out-of-pocket spending required in the limited cost
sharing plan variation of the QHP, and the out-of-pocket spending
required of enrollees in the limited cost sharing plan variation of the
QHP for a benefit that is not an essential health benefit from a
provider (including a provider outside the plan's network) may not
exceed the corresponding out-of-pocket spending required in the QHP
with no cost-sharing reductions. A limited cost sharing plan variation
must have the same cost sharing for essential health benefits not
described in paragraph (b)(2) of this section as the QHP with no cost-
sharing reductions. Each zero cost sharing plan variation or limited
cost sharing plan variation is subject to all requirements applicable
to the QHP (except for the requirement that the plan have an AV as set
forth in Sec. 156.140(b)).
(e) Decreasing cost sharing and out-of-pocket spending in higher AV
silver plan variations. The cost sharing or out-of-pocket spending
required of enrollees under any silver plan variation of a standard
silver plan for a benefit from a provider (including a provider outside
the plan's network) may not exceed the corresponding cost sharing or
out-of-pocket spending required in the standard silver plan or any
other silver plan variation thereof with a lower AV.
* * * * *
0
34. Section 156.430 is amended by removing and reserving paragraph (a)
and by revising paragraph (b)(1) to read as follows:
Sec. 156.430 Payment for cost-sharing reductions.
(b) * * *
(1) A QHP issuer will receive periodic advance payments based on
the advance payment amounts calculated in accordance with Sec.
155.1030(b)(3).
* * * * *
0
35. Section 156.470 is amended by revising paragraph (a) to read as
follows:
Sec. 156.470 Allocation of rates for advance payments of the premium
tax credit.
(a) Allocation to additional health benefits for QHPs. An issuer
must provide to the Exchange annually for approval, in the manner and
timeframe established by HHS, for each health plan at any level of
coverage offered, or intended to be offered, in the individual market
on an Exchange, an allocation of the rate for the plan to:
(1) EHB, other than services described in Sec. 156.280(d)(1); and
(2) Any other services or benefits offered by the health plan not
described in paragraph (a)(1) of this section.
* * * * *
0
36. Section 156.1110 is added to Subpart L to read as follows:
Sec. 156.1110 Establishment of patient safety standards for QHP
issuers.
(a) Patient safety standards. A QHP issuer that contracts with a
hospital with greater than 50 beds must verify that the hospital, as
defined in section 1861(e) of the Social Security Act, is Medicare-
certified or has been issued a Medicaid-only CMS Certification Number
(CCN) and is subject to the Medicare Hospital Condition of
Participation requirements for--
(1) A quality assessment and performance improvement program as
specified in 42 CFR 482.21; and
(2) Discharge planning as specified in 42 CFR 482.43.
(b) Documentation. A QHP issuer must collect, from each of its
contracted hospitals with greater than 50 beds, information that
demonstrates that those hospitals meet patient safety standards
required in paragraph (a) of this section including, but not limited
to, the CCN.
(c) Reporting. (1) A QHP issuer must make available to the Exchange
the documentation referenced in paragraph (b) of this section, upon
request by the Exchange, in a time and manner specified by the
Exchange.
(2) Issuers of multi-State plans, as defined in Sec. 155.1000(a)
of this subchapter, must provide the documentation described in
paragraph (b) of this section to the U.S. Office of Personnel
Management, in the time and manner specified by the U.S. Office of
Personnel Management.
(d) Effective date. A QHP issuer must ensure that each QHP meets
patient safety standards in accordance with paragraph (a) of this
section effective for plan years beginning on or after January 1, 2015.
0
37. Section 156.1210 is amended by adding paragraph (c) to read as
follows:
Sec. 156.1210 Confirmation of HHS payment and collections reports.
* * * * *
(c) Discrepancies to be addressed in future reports. Discrepancies
in payment and collections reports identified to HHS under this section
will be addressed in subsequent payment and collections reports, and
will not be used to change debts determined pursuant to invoices
generated under previous payment and collections reports.
0
38. Section 156.1215 is added to Subpart M to read as follows:
Sec. 156.1215 Payment and collections processes.
(a) Netting of payments and charges for 2014. In 2014, as part of
its monthly payment and collections process, HHS will net payments owed
to QHP issuers and their affiliates under the same taxpayer
identification number against amounts due to the Federal government
from the QHP issuers and their affiliates under the same taxpayer
identification number for advance payments of the premium tax credit,
advance payments of cost-sharing reductions, and payment of Federally-
facilitated Exchange user fees.
(b) Netting of payments and charges for later years. In 2015 and
later years, as part of its payment and collections process, HHS may
net payments owed to issuers and their affiliates operating under the
same tax identification number against amounts due to the Federal
government from the issuers and their affiliates under the same
taxpayer identification number for advance payments of the premium tax
credit, advance payments of and reconciliation of cost-sharing
reductions, payment of Federally-facilitated Exchange user fees, and
risk adjustment, reinsurance, and risk corridors payments and charges.
(c) Determination of debt. Any amount owed to the Federal
government by an issuer and its affiliates for advance payments of the
premium tax credit, advance payments of and reconciliation of cost-
sharing reductions, Federally-facilitated Exchange user fees, risk
adjustment,
[[Page 72391]]
reinsurance, and risk corridors, after HHS nets amounts owed by the
Federal government under these programs, is a determination of a debt.
0
39. Section 156.1220 is added to subpart M to read as follows:
Sec. 156.1220 Administrative appeals.
(a) Requests for reconsideration. (1) Matters for reconsideration.
An issuer may file a request for reconsideration under this section to
contest a processing error by HHS, HHS's incorrect application of the
relevant methodology, or HHS's mathematical error only with respect to
the following:
(i) The amount of advance payment of the premium tax credit,
advance payment of cost-sharing reductions or Federally-facilitated
Exchange user fees charge for a benefit year;
(ii) The amount of a risk adjustment payment or charge for a
benefit year, including an assessment of risk adjustment user fees;
(iii) The amount of a reinsurance payment for a benefit year;
(iv) The amount of a risk adjustment default charge for a benefit
year;
(v) The amount of a reconciliation payment or charge for cost-
sharing reductions for a benefit year; or
(vi) The amount of a risk corridors payment or charge for a benefit
year.
(2) Time for filing a request for reconsideration. The request for
reconsideration must be filed in accordance with the following
timeframes:
(i) For advance payments of the premium tax credit, advance
payments of cost-sharing reductions, or Federally-facilitated Exchange
user fee charges, within 30 calendar days after the issuer receives a
final reconsideration notification specifying the aggregate amount of
advance payments of the premium tax credit, advance payments of cost-
sharing reductions, and Federally-facilitated Exchange user fees for
the applicable benefit year;
(ii) For a risk adjustment payment or charge, including an
assessment of risk adjustment user fees, within 30 calendar days of
receipt of the notification provided by HHS under Sec. 153.310(e);
(iii) For a reinsurance payment, within 30 calendar days of receipt
of the notification provided by HHS under Sec. 153.240(b)(1)(ii);
(iv) For a default risk adjustment charge, within 30 calendar days
of receipt of the notification of the default risk adjustment charge;
(v) For reconciliation of cost-sharing reductions, within 30
calendar days of receipt of the notification provided by HHS of the
cost-sharing reduction reconciliation payment or charge; and
(vi) For a risk corridors payment or charge, within 30 calendar
days of receipt of the notification provided by HHS under Sec.
153.510(d).
(3) Content of request. (i) The request for reconsideration must
specify the findings or issues specified in paragraph (a)(1) of this
section that the issuer challenges, and the reasons for the challenge.
(ii) Notwithstanding paragraph (a)(3)(i) of this section, a
reconsideration with respect to a processing error by HHS, HHS's
incorrect application of the relevant methodology, or HHS's
mathematical error may be requested only if, to the extent the issue
could have been previously identified by the issuer to HHS under Sec.
153.710(d)(2) or (e)(2) of this subchapter, it was so identified and
remains unresolved.
(iii) Notwithstanding paragraph (a)(3)(i) of this section, a
reconsideration with respect to advance payments of the premium tax
credit, advance payments of cost-sharing reductions, and Federally-
facilitated Exchange user fees may be requested only if, to extent the
issue could have been previously identified by the issuer to HHS under
Sec. 156.1210 of this subpart, it was so identified and remains
unresolved. An issuer may request reconsideration if it previously
identified an issue under Sec. 156.1210 of this subpart after the 15-
calendar-day deadline, but late discovery of the issue was not due to
misconduct on the part of the issuer.
(iv) The issuer may include in the request for reconsideration
additional documentary evidence that HHS should consider. Such
documents may not include data that was to have been filed by the
applicable data submission deadline, but may include evidence of timely
submission.
(4) Scope of review for reconsideration. In conducting the
reconsideration, HHS will review the appropriate payment and charge
determinations, the evidence and findings upon which the determination
was based, and any additional documentary evidence submitted by the
issuer. HHS may also review any other evidence it believes to be
relevant in deciding the reconsideration, which will be provided to the
issuer with a reasonable opportunity to review and rebut the evidence.
The issuer must prove its case by a preponderance of the evidence with
respect to issues of fact.
(5) Reconsideration decision. HHS will inform the issuer of the
reconsideration decision in writing. A reconsideration decision is
final and binding for decisions regarding the advance payments of the
premium tax credit, advance payment of cost-sharing reductions, or
Federally-facilitated Exchange user fees. A reconsideration decision
with respect to other matters is subject to the outcome of a request
for informal hearing filed in accordance with paragraph (b) of this
section.
(b) Informal hearing. An issuer may request an informal hearing
before a CMS hearing officer to appeal HHS's reconsideration decision.
(1) Manner and timing for request. A request for an informal
hearing must be made in writing and filed with HHS within 15 calendar
days of the date the issuer receives the reconsideration decision under
paragraph (a)(5) of this section.
(2) Content of request. The request for informal hearing must
include a copy of the reconsideration decision and must specify the
findings or issues in the decision that the issuer challenges, and its
reasons for the challenge. HHS may submit for review by the CMS hearing
officer a statement of its reasons for the reconsideration decision.
(3) Informal hearing procedures. (i) The issuer will receive a
written notice of the time and place of the informal hearing at least
15 calendar days before the scheduled date.
(ii) The CMS hearing officer will neither receive testimony nor
accept any new evidence that was not presented with the reconsideration
request and HHS statement under paragraph (b) of this section. The CMS
hearing officer will review only the documentary evidence provided by
the issuer and HHS, and the record that was before HHS when HHS made
its reconsideration determination. The issuer may be represented by
counsel in the informal hearing, and must prove its case by clear and
convincing evidence with respect to issues of fact.
(4) Decision of the CMS hearing officer. The CMS hearing officer
will send the informal hearing decision and the reasons for the
decision to the issuer. The decision of the CMS hearing officer is
final and binding, but is subject to the results of any Administrator's
review initiated in accordance with paragraph (c) of this section.
(c) Review by the Administrator. (1) If the CMS hearing officer
upholds the reconsideration decision, the issuer may request review by
the Administrator of CMS within 15 calendar days of receipt of the CMS
hearing officer's decision. The request for review must specify the
findings or issues that the issuer challenges. HHS may submit for
review by the Administrator a statement supporting the decision of the
CMS hearing officer.
[[Page 72392]]
(2) The Administrator will review the CMS hearing officer's
decision, the statements of the issuer and HHS, and any other
information included in the record of the CMS hearing officer's
decision, and will determine whether to uphold, reverse, or modify the
CMS hearing officer's decision. The issuer must provide its case by
clear and convincing evidence with respect to issues of fact. The
Administrator will send the decision and the reasons for the decisions
to the issuer.
(3) The Administrator's determination is final and binding.
Dated: November 21, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Approved: November 21, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-28610 Filed 11-25-13; 4:15 pm]
BILLING CODE 4120-01-P
