Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2017, 75487-75588 [2015-29884]

Download as PDF Vol. 80 Wednesday, No. 231 December 2, 2015 Part II Department of Health and Human Services jstallworth on DSK7TPTVN1PROD with PROPOSALS 45 CFR Parts 144, 146, 147, et al. Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2017; Proposed Rule VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\02DEP2.SGM 02DEP2 75488 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules DEPARTMENT OF HEALTH AND HUMAN SERVICES 45 CFR Parts 144, 146, 147, 153, 154, 155, 156, and 158 [CMS–9937–P] RIN 0938–AS57 Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2017 Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. AGENCY: This proposed rule sets forth payment parameters and 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 provides additional standards for the annual open enrollment period for the individual market for the 2017 benefit year; essential health benefits; cost-sharing requirements; qualified health plans; updated standards for Exchange consumer assistance programs; network adequacy; patient safety standards; the Small Business Health Options Program; stand-alone dental plans; acceptance of third-party payments by qualified health plans; the definitions of large employer and small employer; fair health insurance premiums; guaranteed availability; student health insurance coverage; the rate review program; the medical loss ratio program; eligibility and enrollment; exemptions and appeals; and other related topics. DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 21, 2015. ADDRESSES: In commenting, please refer to file code CMS–9937–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–9937–P, P.O. Box 8016, Baltimore, MD 21244–8016. jstallworth on DSK7TPTVN1PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 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–9937–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: Jeff Wu, (301) 492–4305, Krutika Amin, (301) 492–5153, or Lindsey Murtagh (301) 492–4106, for general information. David Mlawsky, (410) 786–6851, for matters related to fair health insurance premiums, the single risk pool, guaranteed availability, guaranteed renewability, and student health insurance coverage. Kelly Drury, (410) 786–0558, for matters related to risk adjustment. Adrianne Glasgow, (410) 786–0686, for matters related to reinsurance, distributed data collection, and PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 administrative appeals of financial transfers. Melissa Jaffe, (301) 492–4129, for matters related to risk corridors. Lisa Cuozzo, (410) 786–1746, for matters related to rate review. Jennifer Stolbach, (301) 492–4350, for matters related to establishing a State Exchange, and State-based Exchanges on the Federal Platform. Emily Ames, (301) 492–4246, and Michelle Koltov, (301) 492–4225, for matters related to Navigators and nonNavigator assistance personnel under part 155. Joan Matlack, (301) 492–4223, for matters related to certified application counselors under part 155. Briana Levine, (301) 492–4247, for matters related to agents and brokers. Dana Krohn, (301) 492–4412, for matters related to employer notification and verification. Rachel Arguello, (301) 492–4263, for matters related to open enrollment periods and special enrollment periods under part 155. Anne Pesto, (410) 786–3492, for matters related to eligibility determinations and appeals of eligibility determinations for Exchange participation and insurance affordability programs, and eligibility determinations for exemptions. Kate Ficke, (301) 492–4256, for matters related to exemptions from the shared responsibility payment. Christelle Jang, (410) 786–8438, for matters related to the SHOP. Krutika Amin, (301) 492–5153, for matters related to the Federallyfacilitated Exchange user fee. Leigha Basini, (301) 492–4380, for matters related to essential health benefits, network adequacy, essential community providers, and other standards for QHP issuers. Ielnaz Kashefipour, (301) 492–4376, for matters related to standardized options and third party payment of premiums and cost sharing. Rebecca Zimmermann, (301) 492– 4396, for matters related to stand-alone dental plans. Cindy Chiou, (301) 492–5142, for matters related to QHP issuer oversight. Pat Meisol, (410) 786–1917, for matters related to cost-sharing reductions and the premium adjustment percentage. Nidhi Singh Shah, (301) 492–5110, for matters related to patient safety standards. Christina Whitefield, (301) 492–4172, for matters related to the medical loss ratio program. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 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. jstallworth on DSK7TPTVN1PROD with PROPOSALS Table of Contents I. Executive Summary II. Background A. Legislative and Regulatory Overview B. Stakeholder Consultation and Input C. Structure of Proposed Rule III. Provisions of the Proposed HHS Notice of Benefit and Payment Parameters for 2017 A. Part 144—Requirements Relating to Health Insurance Coverage B. Part 146—Requirements for the Group Health Insurance Market C. Part 147—Health Insurance Reform Requirements for the Group and Individual Health Insurance Markets D. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment Under the Affordable Care Act E. Part 154—Health Insurance Issuer Rate Increases: Disclosure and Review Requirements F. Part 155—Exchange Establishment Standards and Other Related Standards Under the Affordable Care Act G. Part 156—Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges H. Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements IV. Collection of Information Requirements A. ICRs Regarding Submission of Risk Corridors Data B. ICRs Regarding Submission of Rate Filing Justification C. ICRs Regarding Election to Operate an Exchange After 2014 D. ICRs Regarding Standards for Certified Application Counselors E. ICRs Regarding Network Adequacy Standards F. ICR Regarding Monthly SHOP Enrollment Reconciliation Files Submitted by Issuers G. ICR Regarding Patient Safety Standards V. Response to Comments VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 VI. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Impact Estimates of the Payment Notice Provisions and Accounting Table D. Regulatory Alternatives Considered E. Regulatory Flexibility Act F. Unfunded Mandates G. Federalism H. Congressional Review Act Acronyms and Abbreviations 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), as amended APTC—Advance payments of the premium tax credit AV—Actuarial value CBO—Congressional Budget Office CFR—Code of Federal Regulations CHIP—Children’s Health Insurance Program CMP—Civil money penalties CMS—Centers for Medicare & Medicaid Services CSR—Cost-sharing reduction ECN—Exemption certificate number ECP—Essential community provider 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 FR—Federal Register FTE—Full-time equivalent GDP—Gross Domestic Product HCC—Hierarchical condition category HHS—United States Department of Health and Human Services HIOS—Health Insurance Oversight System HIPAA—Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104– 191) IRS—Internal Revenue Service MEC—Minimum essential coverage MLR—Medical loss ratio NAIC—National Association of Insurance Commissioners NHEA—National Health Expenditure Accounts OMB—Office of Management and Budget OPM—United States Office of Personnel Management PHS Act—Public Health Service Act PII—Personally Identifiable Information PMPM—Per member per month PRA—Paperwork Reduction Act of 1995 PSO—Patient safety organization QHP—Qualified health plan SADPs—Stand-alone dental Plans SBE—State-based Exchange SBE–FP—State-based Exchange on the Federal platform SHOP—Small Business Health Options Program The Code—Internal Revenue Code of 1986 (26 U.S.C. 1, et seq.) I. Executive Summary The Affordable Care Act enacted a set of reforms that are making high quality health insurance coverage and care more affordable and accessible to PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 75489 millions of Americans. These reforms include the creation of competitive marketplaces called Affordable Insurance Exchanges, or ‘‘Exchanges’’ (in this proposed rule, we also call an Exchange a Health Insurance MarketplaceSM,1 or MarketplaceSM) through which qualified individuals and qualified employers can purchase health insurance coverage. In addition, many individuals who enroll in qualified health plans (QHPs) through individual market Exchanges are eligible to receive a premium tax credit to make health insurance more affordable, and reductions in costsharing payments to reduce out-ofpocket expenses for health care services. These Affordable Care Act reforms also include the premium stabilization programs (that is, risk adjustment, reinsurance and risk corridors) and rules that are intended to mitigate the potential impact of adverse selection and stabilize the price of health insurance in the individual and small group markets. In previous rulemaking, we have outlined the major provisions and parameters related to many Affordable Care Act programs. In this proposed rule, we seek to improve States’ ability to operate efficient Exchanges through a proposal that leverages the economies of scale available through the Federal eligibility and enrollment platform and information technology infrastructure. We propose to codify a new Exchange model—the State-based Exchange on the Federal platform (SBE–FP). This model would enable State-based Exchanges (SBEs) to execute certain processes using the Federal eligibility and enrollment infrastructure. Under the proposal, the SBE–FP would be required to enter into a Federal platform agreement with HHS that would define a set of mutual obligations, including the set of Federal services upon which the SBE–FP relies. Under this Exchange model, certain requirements that were previously only applicable to QHPs offered on a Federally-facilitated Exchange (FFE) and their downstream and delegated entities would apply to QHPs offered on an SBE–FP and their downstream and delegated entities. In addition, we propose that agents and brokers facilitating enrollments through SBE–FPs would need to comply with the FFE registration and training requirements. For 2017, we propose a user fee for QHPs offered through SBE– FPs to offset Federal costs of providing this infrastructure. 1 Health Insurance MarketplaceSM and MarketplaceSM are service marks of the U.S. Department of Health & Human Services. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75490 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules We also propose a number of incremental amendments that we believe will improve the stability of the Exchanges while improving the choices available to consumers and supporting consumers’ ability to make informed choices when purchasing health insurance. These include the introduction of ‘‘standardized options’’ in the individual market, which will improve competition and consumer transparency. These amendments are complemented by a series of additional amendments designed to enhance consumers’ ability to make informed choices about their health coverage, increase the accessibility of high quality health insurance, and improve competition, transparency, and affordability. Our proposal for standardized options is intended to simplify the consumer shopping experience by allowing consumers to more easily compare plans across issuers in the individual market FFEs. We propose a standardized option with a specified cost-sharing structure at each of the bronze, silver (with costsharing reduction (CSR) plan variations), and gold metal levels. We do not propose to restrict issuers’ nonstandardized option offerings. We anticipate differentially displaying these standardized options to allow consumers to compare plans based on differences in price and quality rather than cost-sharing structure. We are also proposing to standardize a number of policies relating to network adequacy for QHPs on the FFEs. We propose a quantitative network adequacy threshold to be selected by the State and a Federal default network adequacy standard that would apply otherwise, that is based on the standard currently used for review and several provisions relating to provider transition for QHPs. We also discuss in this proposed rule a standardized categorization of network depth for QHPs in these Exchanges and their display on HealthCare.gov. Finally, we propose a standard for when an enrollee receives an essential health benefit at an in-network setting provided by an outof-network provider. As part of our efforts to provide consumers simplicity and transparency in their choices, we are considering giving the FFEs the authority to selectively contract with issuers. We would use this authority primarily to strengthen oversight in the short term. We also seek to improve consumers’ ability to make choices regarding health insurance coverage by ensuring they receive high-quality assistance in their interactions with the Exchange. The proposed rule would amend program VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 requirements for Navigators, certain non-Navigator assistance personnel, and certified application counselors. These amendments would require Navigators to assist consumers with certain postenrollment issues, serve underserved and vulnerable populations, and require Navigators and non-Navigator assistance personnel to complete training prior to conducting outreach and education activities. We would also amend our rules regarding the use of gifts by Navigators, certain non-Navigator assistance personnel and certified application counselors. In addition, we propose that certified application counselor designated organizations would be required to submit data and information related to the organization’s certified application counselors, upon the request of the Exchanges in which they operate. We believe transparency is critical to informed decision-making, and this proposed rule includes several proposals to increase transparency. This proposed rule proposes provisions to enhance the transparency of rates in all States and the effectiveness of the rate review program. In this proposed rule, we propose several provisions regarding when consumers may choose and enroll in plans. This rule proposes dates for the individual market annual open enrollment period for the 2017 benefit year. For 2017, we propose to maintain the same open enrollment period we adopted for 2016—that is, November 1, 2016, through January 31, 2017. We also propose to codify a number of Exchange policies relating to exemptions in order to provide certainty and transparency around these policies for all stakeholders. The HHS Notice of Benefit and Payment Parameters for 2014 (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. Risk adjustment factors reflect enrollee health risk and the costs of a given disease relative to average spending. Last year, we recalibrated the HHS risk adjustment models for 2016 by using 2011, 2012, and 2013 claims data from the Truven Health Analytics 2010 MarketScan® Commercial Claims and Encounters database (MarketScan) to develop updated risk factors. Similarly, this year we propose to do so using the 2012, 2013, and 2014 claims data, when the 2014 MarketScan data become available. If any reinsurance contribution amounts remain after calculating reinsurance payments for the 2016 benefit year (including after HHS would PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 increase the coinsurance rate to 100 percent for the 2016 benefit year), we propose to lower the 2016 attachment point of $90,000 to pay out any remaining contribution amounts for the 2016 benefit year. We also propose several changes to the risk corridors program for 2015 and 2016. We propose that, for 2015 risk corridors and MLR reporting, if the issuer reported a certified estimate of 2014 cost-sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting Form that is lower than the actual cost-sharing reductions provided, HHS would make an adjustment to the issuer’s 2015 risk corridors payment or charge amount in order to address the impact of the inaccurate reporting on the risk corridors and MLR calculations for the 2014 benefit year. We also propose that the issuer must adjust the cost-sharing reduction amounts it reports for the 2015 MLR and risk corridors reporting cycle by any difference between 2014 reported and actual cost-sharing reductions amounts. We also propose that for the 2015 and later benefit years, the issuer must true up claims liabilities and reserves used to determine the allowable costs reported for the risk corridors program for the preceding benefit year to reflect the actual claims payments made through June 30 of the year following the benefit year. In addition, we propose changes to the definition of ‘‘unpaid claim reserves’’ and related requirements for reporting incurred claims for the MLR program beginning with the 2015 reporting year to require issuers to utilize a 6-month (rather than a 3-month) claims run out period. In addition to provisions aimed at stabilizing premiums, we propose several provisions related to cost sharing. First, we propose the premium adjustment percentage for 2017, 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 for 2017. We propose the maximum annual limitations on cost sharing for the 2017 benefit year for cost-sharing reduction plan variations. This proposed rule also proposes standards for stand-alone dental plans (SADPs) related to the annual limitation on cost sharing, and would amend standards related to the acceptance of third party payments for premiums and cost sharing by QHP issuers. This proposed rule includes several incremental improvements that seek to ensure Americans have access to not only affordable, but also robust, highquality health care coverage. This proposed rule would amend E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules requirements for QHPs, including essential community providers (ECPs) and meaningful difference requirements. There are also proposed technical amendments to QHP issuer oversight provisions. This rule proposes amendments to further strengthen the patient safety requirements for QHP issuers offering coverage through Exchanges. For consumers purchasing coverage through the Small Business Health Options Program (SHOP), we propose a new ‘‘vertical choice’’ model for Federally-facilitated SHOPs for plan years beginning on or after January 1, 2017, under which employers would be able to offer qualified employees a choice of all plans across all available levels of coverage from a single issuer. Finally, in this proposed rule, as outlined, we propose adjustments to our programs and rules, as we do each year, so that our rules and policies reflect the latest market developments. We propose the following changes and clarifications to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and Affordable Care Act health insurance reform requirements. We propose revisions to the definitions of small employer and large employer to bring them into conformance with recently enacted legislation. We also propose provisions to ensure that a network plan in the small group market with a limited service area can be appropriately rated based on geography. We propose that an issuer subject to the guaranteed availability requirements may—in the limited circumstances of when the exception to the guaranteed renewability requirement related to discontinuing a particular product, or the exception related to discontinuing all coverage in a market, applies—deny coverage to individuals and employers. Lastly, we propose provisions regarding the application of the actuarial value (AV) and single risk pool provisions to student health insurance coverage. jstallworth on DSK7TPTVN1PROD with PROPOSALS II. Background A. Legislative and Regulatory Overview The Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted 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.’’ Subtitles A and C of title I of the Affordable Care Act reorganized, amended, and added to the provisions VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 of part A of title XXVII of the Public Health Service Act (PHS Act) relating to group health plans and health insurance issuers in the group and individual markets. Section 2701 of the PHS Act, as added by the Affordable Care Act, restricts the variation in premium rates charged by a health insurance issuer for nongrandfathered health insurance coverage in the individual or small group market to certain specified factors. The factors are: Family size, rating area, age and tobacco use. Section 2701 of the PHS Act operates in coordination with section 1312(c) of the Affordable Care Act. Section 1312(c) of the Affordable Care Act generally requires a health insurance issuer to consider all enrollees in all health plans (except for grandfathered health plans) offered by such issuer to be members of a single risk pool for each of its individual and small group markets. States have the option to merge the individual market and small group market risk pools under section 1312(c)(3) of the Affordable Care Act. Section 2702 of the PHS Act, as added by the Affordable Care Act, requires health insurance issuers that offer health insurance coverage in the group or individual market in a State to offer coverage to and accept every employer and individual in the State that applies for such coverage unless an exception applies.2 Section 2703 of the PHS Act, as added by the Affordable Care Act, and sections 2712 and 2741 of the PHS Act, as added by HIPAA and codified prior to the enactment of the Affordable Care Act, require health insurance issuers that offer health insurance coverage in the group or individual market to renew or continue in force such coverage at the option of the plan sponsor or individual unless an exception applies. Section 2718 of the PHS Act, as added by the Affordable Care Act, generally requires health insurance issuers to submit an annual MLR report to HHS, and provide rebates to enrollees if the issuers do not achieve specified MLR thresholds. Section 2794 of the PHS Act, as added by the Affordable Care Act, directs the Secretary of HHS (the Secretary), in conjunction with the States, to establish a process for the annual review of ‘‘unreasonable increases in premiums for health insurance coverage.’’ 3 The 2 Before enactment of the Affordable Care Act, the Health Insurance Portability and Accountability Act of 1996 amended the PHS Act (formerly section 2711) to generally require guaranteed availability of coverage for employers in the small group market. 3 The implementing regulations in part 154 limit the scope of the requirements under section 2794 PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 75491 law also requires health insurance issuers to submit to the Secretary and the applicable State justifications for unreasonable premium increases prior to the implementation of the increases. Section 2794(b)(2) of the PHS Act further specifies that beginning with plan years starting in 2014, the Secretary, in conjunction with the States, will monitor premium increases of health insurance coverage offered through an Exchange and outside of an Exchange. Section 1252 of the Affordable Care Act provides that any standard or requirement adopted by a State under title I of the Affordable Care Act, or any amendment made by title I of the Affordable Care Act, shall be applied uniformly to all health plans in each insurance market to which the standard and requirement apply. Section 1302 of the Affordable Care Act provides for the establishment of an essential health benefits (EHB) package that includes coverage of EHB (as defined by the Secretary), cost-sharing limits, and actuarial value requirements. The law directs that EHBs be equal in scope to the benefits covered by a typical employer plan and that they cover at least the following 10 general categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Section 1301(a)(1)(B) of the Affordable Care Act directs all issuers of QHPs to cover the EHB package described in section 1302(a) of the Affordable Care Act, including coverage of the services described in section 1302(b) of the Affordable Care Act, to adhere to the cost-sharing limits described in section 1302(c) of the Affordable Care Act and to meet the AV levels established in section 1302(d) of the Affordable Care Act. Section 2707(a) of the PHS Act, which is effective for plan or policy years beginning on or after January 1, 2014, extends the coverage of the EHB package to nongrandfathered individual and small group coverage, irrespective of whether such coverage is offered through an Exchange. In addition, section 2707(b) of the PHS Act to health insurance issuers offering health insurance coverage in the individual market or small group market. See Rate Increase Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23, 2011). E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75492 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules of the PHS Act directs nongrandfathered group health plans to ensure that cost sharing under the plan does not exceed the limitations described in sections 1302(c)(1) and (2) of the Affordable Care Act. Section 1302(d) of the Affordable Care Act describes the various levels of coverage based on actuarial value. Consistent with section 1302(d)(2)(A) of the Affordable Care Act, actuarial value 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 Small Business Health Options Program assist qualified small employers in facilitating the enrollment of their employees in qualified health plans offered in the small group market. Sections 1312(f)(1) and (2) of the Affordable Care Act define qualified individuals and qualified employers. 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 an Exchange.4 Section 1311(c)(1)(B) of the Affordable Care Act requires the Secretary to establish minimum criteria for provider network adequacy that a health plan must meet to be certified as a QHP. Section 1311(c)(5) of the Affordable Care Act requires the Secretary to continue to operate, maintain, and update the Internet portal developed under section 1103 of the Affordable Care Act to provide information to consumers and small businesses on affordable health insurance coverage options. Section 1311(c)(6)(B) of the Affordable Care Act states that the Secretary is to set annual open enrollment periods for Exchanges for calendar years after the initial enrollment period. Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act direct all Exchanges to establish a Navigator program. 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 4 If a State elects this option, the rating rules in section 2701 of the PHS Act and its implementing regulations will apply to all coverage offered in such State’s large group market (except for selfinsured group health plans) pursuant to section 2701(a)(5) of the PHS Act. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 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 1321(a) of the Affordable Care Act provides broad 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. Section 1321(a)(1) directs the Secretary to issue regulations that set standards for meeting the requirements of title I of the Affordable Care Act with respect to, among other things, the establishment and operation of Exchanges. Sections 1313 and 1321 of the Affordable Care Act provide the Secretary with the authority to oversee the financial integrity of State Exchanges, their compliance with HHS standards, and the efficient and nondiscriminatory administration of State Exchange activities. Section 1321 of the Affordable Care Act provides for State flexibility in the operation and enforcement of Exchanges and related requirements. 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 1321(c)(2) of the Affordable Care Act authorizes the Secretary to enforce the Exchange standards using civil money penalties (CMPs) on the same basis as detailed in section 2723(b) of the PHS Act. Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs as a means of enforcing the individual and group market reforms contained in Part A of title XXVII of the PHS Act when a State fails to substantially enforce these provisions Section 1321(d) of the Affordable Care Act provides that nothing in title I of the PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 Affordable Care Act should be construed to preempt any State law that does not prevent the application of title I of the Affordable Care Act. Section 1311(k) of the Affordable Care Act specifies that Exchanges may not establish rules that conflict with or prevent the application of regulations issued by the Secretary. 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 in benefit years 2014 through 2016. Section 1342 of the Affordable Care Act directs the Secretary to establish a temporary risk corridors program that reduces the impact of inaccurate rate setting from 2014 through 2016. Section 1343 of the Affordable Care Act establishes a permanent risk adjustment program to provide increased payments to health insurance issuers that attract higher-risk populations, such as those with chronic conditions, funded by payments from those that attract lower-risk populations; thereby, reducing incentives for issuers to avoid higher-risk enrollees. Sections 1402 and 1412 of the Affordable Care Act provide for, among other things, reductions in cost sharing for essential health benefits for qualified low- and moderate-income enrollees in silver level health plans offered through the individual market Exchanges. These sections also provide for reductions in cost sharing for Indians enrolled in QHPs at any metal level. Section 5000A of the Internal Revenue Code of 1986 (the Code), as added by section 1501(b) of the Affordable Care Act, requires all nonexempt individuals to maintain minimum essential coverage (MEC) for each month or make the individual shared responsibility payment. Section 5000A(f) of the Code defines minimum essential coverage as any of the following: (1) Coverage under a specified government sponsored program; (2) coverage under an eligible employer-sponsored plan; (3) coverage under a health plan offered in the individual market within a State; and (4) coverage under a grandfathered health plan. Section 5000A(f)(1)(E) of the Code authorizes the Secretary of HHS, in coordination with the Secretary of the Treasury, to designate other health benefits coverage as minimum essential coverage. The Protecting Affordable Coverage for Employees Act (Pub. L. 114–60) amended section 1304(b) of the Patient Protection and Affordable Care Act and section 2791(e) of the PHS Act to amend the definition of small employer in E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules these statutes to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 50 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year. It also amended these statutes to make conforming changes to the definition of large employer, and to provide that a State may treat as a small employer, with respect to a calendar year and a plan year, an employer who employed 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. jstallworth on DSK7TPTVN1PROD with PROPOSALS 1. Premium Stabilization Programs In the July 15, 2011 Federal Register (76 FR 41929), we published a proposed rule outlining the framework for the premium stabilization programs. We implemented the premium stabilization programs in a final rule, published in the March 23, 2012 Federal Register (77 FR 17219) (Premium Stabilization Rule). In the December 7, 2012 Federal Register (77 FR 73117), we published a proposed rule outlining the benefit and payment parameters for the 2014 benefit year 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 final rule in the March 11, 2013 Federal Register (78 FR 15409). In the December 2, 2013 Federal Register (78 FR 72321), we published a proposed rule outlining the benefit and payment parameters for the 2015 benefit year to expand the provisions related to the premium stabilization programs, setting forth certain oversight provisions and establishing the payment parameters in those programs (proposed 2015 Payment Notice). We published the 2015 Payment Notice final rule in the March 11, 2014 Federal Register (79 FR 13743). In the November 26, 2014 Federal Register (79 FR 70673), we published a proposed rule outlining the benefit and payment parameters for the 2016 benefit year to expand the provisions related to the premium stabilization programs, setting forth certain oversight provisions and establishing the payment parameters in those programs (proposed 2016 Payment Notice). We published the 2016 Payment Notice final rule in the February 27, 2015 Federal Register (80 FR 10749). VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 2. Program Integrity In the June 19, 2013 Federal Register (78 FR 37031), 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 Program Integrity Rule’’ published in the August 30, 2013 Federal Register (78 FR 54069) and the ‘‘second Program Integrity Rule’’ published in the October 30, 2013 Federal Register (78 FR 65045). 3. Exchanges We published a request for comment relating to Exchanges in the August 3, 2010 Federal Register (75 FR 45584). We issued initial guidance to States on Exchanges on November 18, 2010. We proposed a rule in the July 15, 2011 Federal Register (76 FR 41865) to implement components of the Exchanges, and a rule in the August 17, 2011 Federal Register (76 FR 51201) regarding Exchange functions in the individual market, eligibility determinations, and Exchange standards for employers. 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 18309) (Exchange Establishment Rule). We established standards for 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 March 11, 2013 Federal Register (78 FR 15541). The provisions established in the interim final rule were finalized in the second Program Integrity Rule. We also set forth standards related to Exchange user fees in the 2014 Payment Notice. We 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 39869) (Preventive Services Rule). In a final rule published in the July 17, 2013 Federal Register (78 FR 42823), we established standards for Navigators and non-Navigator assistance personnel in FFEs and for nonNavigator assistance personnel funded through an Exchange establishment grant. This final rule also established a certified application counselor program for Exchanges and set standards for that program. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 75493 4. Essential Health Benefits and Actuarial Value On December 16, 2011, HHS released a bulletin 5 (the EHB Bulletin) that outlined an intended regulatory approach for defining EHB, including a benchmark-based framework. HHS also published a bulletin that outlined its intended regulatory approach to calculations of AV on February 24, 2012.6 A proposed rule relating to EHBs and AVs was published in the November 26, 2012 Federal Register (77 FR 70643). We established requirements relating to EHBs and AVs in the Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation Final Rule, which was published in the February 25, 2013 Federal Register (78 FR 12833) (EHB Rule). 5. Market Rules A proposed rule relating to the 2014 health insurance market rules was published in the November 26, 2012 Federal Register (77 FR 70584). A final rule implementing the health insurance market rules was published in the February 27, 2013 Federal Register (78 FR 13406) (2014 Market Rules). A proposed rule relating to Exchanges and Insurance Market Standards for 2015 and Beyond was published in the March 21, 2014 Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A final rule implementing the Exchange and Insurance Market Standards for 2015 and Beyond was published in the May 27, 2014 Federal Register (79 FR 30240) (2015 Market Standards Rule). 6. Rate Review A proposed rule to establish the rate review program was published in the December 23, 2010 Federal Register (75 FR 81003). A final rule with comment period implementing the rate review program was published in the May 23, 2011 Federal Register (76 FR 29963) (Rate Review Rule). The provisions of the Rate Review Rule were amended in final rules published in the September 6, 2011 Federal Register (76 FR 54969), the February 27, 2013 Federal Register (78 FR 13405), the May 27, 2014 Federal Register (79 FR 30339), and the February 27, 2015 Federal Register (80 FR 10749). 5 ‘‘Essential Health Benefits Bulletin.’’ December 16, 2011. Available at: https://www.cms.gov/CCIIO/ Resources/Files/Downloads/essential_health_ benefits_bulletin.pdf. 6 ‘‘Actuarial Value and Cost-Sharing Reductions Bulletin.’’ February 24, 2012. Available at: https://www.cms.gov/CCIIO/Resources/Files/ Downloads/Av-csr-bulletin.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 75494 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 7. Medical Loss Ratio We published a request for comment on section 2718 of the PHS Act 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 MLR program on December 1, 2010 (75 FR 74863). A final rule with a 30-day comment period was published in the December 7, 2011 Federal Register (76 FR 76573). An interim final rule with a 60-day comment period was published in the December 7, 2011 Federal Register (76 FR 76595). A final rule was published in the Federal Register on May 16, 2012 (77 FR 28790). B. Stakeholder Consultation and Input HHS has consulted with stakeholders on policies related to the operation of Exchanges, including the SHOP and the premium stabilization programs. We have held a number of listening sessions with consumers, providers, employers, health plans, the actuarial community, and State representatives to gather public input. We 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 public input we received as we developed the policies in this proposed rule. jstallworth on DSK7TPTVN1PROD with PROPOSALS C. Structure of Proposed Rule The regulations outlined in this proposed rule would be codified in 45 CFR parts 144, 146, 147, 153, 154, 155, 156 and 158. The proposed regulations in part 144 would, consistent with recent legislation, revise the definitions of ‘‘large employer’’ and ‘‘small employer.’’ The proposed regulations in parts 146 and 147 would codify an exception to the guaranteed availability requirement when the exception to the guaranteed renewability requirement related to discontinuing a particular product or discontinuing all coverage in a market applies. The proposed regulations in part 147 would clarify the definition of principal business address for purposes of geographic rating. We further propose provisions regarding the treatment of student health insurance coverage with regard to the AV and single risk pool requirements. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 The proposed regulations in part 153 amend the audit provision for the reinsurance program to clarify that this authority also extends to third parties who assist contributing entities with their obligations under this program. The proposed regulations also include the risk adjustment user fee for 2017 and outline certain modifications to the HHS risk adjustment methodology. We propose to clarify reporting requirements for the risk adjustment, reinsurance, and risk corridors. The proposed regulations in part 154 outline certain modifications to enhance the transparency and effectiveness of the rate review program. We propose to collect a Unified Rate Review Template from all issuers offering single risk pool coverage in the individual and small group market, including coverage with rate decreases or unchanged rates, as well as rates for new plans. We also announce our intention to disclose all proposed rate increases for single risk pool coverage at a uniform time on the CMS Web site, including rates with increases of less than 10 percent. We also reiterate the process for establishing the uniform timeline that proposed rate increases subject to review and all final rate increases (including those not subject to review) for single risk pool coverage must be posted at a uniform time by States with Effective Rate Review Programs. Finally, we specify the rate filing requirements for student health insurance coverage. The proposed regulations in part 155 include a clarification related to the functions of an Exchange, and would establish the individual market open enrollment period for the 2017 benefit year. Certain proposals in part 155 are related to the eligibility and verification processes related to eligibility for insurance affordability programs. We also propose to amend and clarify rules related to enrollment of qualified individuals into QHPs. We describe changes to the process of submitting certain exemption applications and options for State Exchanges to handle exemptions. The proposed regulations also include a Federal platform agreement through which a State Exchange may rely on the FFE for certain functions as an SBE–FP. We propose that QHP issuers on an SBE–FP be required to comply with certain provisions relating directly to the eligibility and enrollment platform, and propose to require that SBE–FPs promulgate regulations at least as stringent as a number of FFE regulations, to maintain consistency of the HealthCare.gov experience. We also make various proposals related to the SHOPs. We propose to amend the PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 standards applicable to the consumer assistance functions performed by Navigators, non-Navigator assistance personnel, and certified application counselors. We also discuss our approach to denial of QHP certification, and outline proposed modifications to standards for FFE-registered agents and brokers and requirements for HHSapproved vendors of FFE training. The proposed regulations in part 156 set forth proposals related to cost sharing, including the premium adjustment percentage, the maximum annual limitation on cost sharing, and the reductions in the maximum annual limitation for cost-sharing plan variations for 2017. We propose a clarification to the administrative appeals process applicable to the premium stabilization, Exchange financial assistance, and FFE user fee programs. Part 156 also includes proposals related to essential health benefits, including clarification to the policy regarding additional Staterequired benefits. We propose amendments to network adequacy requirements (including application of out-of-network costs to the annual limitation on cost sharing for EHBs covered under QHPs in the small group and individual markets), and essential community provider requirements. We propose establishing standardized options for cost-sharing structures, indexing for the stand-alone dental plan annual limitation on cost sharing, changes to our process for updating the AV Calculator for QHPs, meaningful difference standards for QHPs, and minor changes to QHP issuer oversight standards. We also propose additional modifications to acceptance of third party payments by QHP issuers and the next phase for patient safety standards for issuers of QHPs offered on Exchanges. The proposed amendments to the regulations in part 158 propose revisions related to the definitions of ‘‘large employer’’ and ‘‘small employer’’ consistent with recent legislation, as well as revisions related to the reporting of incurred claims. III. Provisions of the Proposed HHS Notice of Benefit and Payment Parameters for 2017 A. Part 144—Requirements Relating to Health Insurance Coverage 1. Definitions (§ 144.103) Under § 144.103, the term ‘‘plan year’’ means, for a group health plan, the year that is designated as the plan year in the plan document of the group health plan. However, if the plan document does not E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS designate a plan year or if there is no plan document, then the plan year is— • The deductible or limit year used under the plan; • If the plan does not impose deductibles or limits on a yearly basis, then the plan year is the policy year; • If the plan does not impose deductible or limits on a yearly basis, and either the plan is not insured or the insurance policy is not renewed on an annual basis, then the plan year is the employer’s taxable year; or • In any other case, the plan year is the calendar year.7 We are not proposing any changes to the definition of ‘‘plan year’’ in this proposed rule. However, we note that whichever definition applies under § 144.103, we interpret the term plan year to mean a period that is no longer than 12 months with respect to grandfathered and non-grandfathered group health plans. Plan years that exceed 12 months are inconsistent with the Affordable Care Act, including the rate review and single risk pool requirements, which both contemplate 12-month or shorter plan years. The Departments of Labor and the Treasury, which respectively have jurisdiction over parallel definitions in the Employee Retirement Income Security Act of 1974 (ERISA) and the Code, have advised HHS that they concur with this interpretation. Also under § 144.103, because of the original Affordable Care Act definitions, the term large employer currently is defined to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 101 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year. In the case of plan years beginning before January 1, 2016, a State may elect to define large employer by substituting ‘‘51 employees’’ for ‘‘101 employees.’’ The term small employer currently is defined to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of 7 Under § 147.104(b)(1)(i), in the small group market, including under § 155.725 in the SHOP, issuers generally must permit small employers to purchase coverage at any point during the year. In the SHOP, the employer’s plan year must consist of the 12-month period beginning with the qualified employer’s effective date of coverage. With respect to an employer that purchases coverage in the small group market in a State that has elected to merge its individual and small group risk pools under section 1312(c) of the Affordable Care Act, the plan year will begin on the qualified employer’s effective date of coverage, which might be any day during the year, and end on December 31 of the calendar year in which coverage first became effective. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 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. In the case of plan years beginning before January 1, 2016, a State may elect to define small employer by substituting ‘‘50 employees’’ for ‘‘100 employees.’’ These regulatory definitions were consistent with section 1304(b) of the Affordable Care Act and section 2791(e) of the PHS Act. However, both of those sections have recently been amended by the Protecting Affordable Coverage for Employees Act (Pub. L. 114–60). Therefore, we propose to revise the regulatory definitions of large employer and small employer in § 144.103 to conform to this legislation. Specifically, we propose to revise the regulatory definition of large employer to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year, but would provide that a State may elect to define large employer by substituting ‘‘101 employees’’ for ‘‘51 employees.’’ Conversely, we propose to revise the regulatory definition of small employer to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 50 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year, but would provide that a State may elect to define small employer by substituting ‘‘100 employees’’ for ‘‘50 employees.’’ Consistent with section 1304(b) of the Affordable Care Act and section 2791(e) of the PHS Act, we also propose to codify statutory language providing that in the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a large employer or a small employer be based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year. Finally, we propose to correct a crossreference in the definition of excepted benefits under § 144.103, which should refer to the group market provisions in § 146.145(b) as opposed to § 146.145(c). PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 75495 B. Part 146—Requirements for the Group Health Insurance Market 1. Guaranteed Availability of Coverage for Employers in the Small Group Market (§ 146.150) Part 146 includes pre-Affordable Care Act HIPAA requirements on group health insurance issuers, including § 146.150, which requires health insurance issuers in the small group market to guarantee the availability of coverage, with some specific exceptions. We propose to add paragraph (g) to § 146.150, providing an exception to the guaranteed availability requirement when the exceptions to the guaranteed renewability requirement in § 146.152(c) or (d) related to discontinuing a particular product or all coverage in a market apply. For a further discussion of this proposal, see the discussion of § 147.104, ‘‘Guaranteed Availability of Coverage,’’ in this proposed rule at part 147, ‘‘Health Insurance Reform Requirements for the Group and Individual Health Insurance Markets.’’ C. Part 147—Health Insurance Reform Requirements for the Group and Individual Health Insurance Markets 1. Fair Health Insurance Premiums (§ 147.102) Under section 2701 of the PHS Act and regulations at § 147.102, the rating area for a small group plan is the group policyholder’s principal business address. We propose to amend § 147.102(a)(1)(ii) to provide that if the employer has registered an in-State principal business address with the State, that location is the principal business address. We note that an inState address registered solely for purposes of service of process would not be considered the employer’s principal business address, unless it is a substantial worksite for the employer’s business. If an in-State principal business address is not registered with the State or is only registered for purposes of service of process and is not a substantial worksite, the employer would designate as its principal business address the business address within the State where the greatest number of employees work in the applicable State. When a network plan offered in a State has a limited service area, the policy described above could result in an issuer having to make a plan available to an employer (because the employer has an employee who lives, works, or resides in the service area), but not be able to apply a geographic rating factor under the current rule, because the issuer might not have E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75496 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules established rates applicable to the location of the employer’s principal business address outside the plan’s service area. We propose to amend § 147.102 to provide for an additional principal business address to be identified within a plan’s service area so that the plan can be appropriately rated for sale to the employer. In such instances, the additional principal business address would be the business address within the plan’s service area where the greatest number of employees work as of the beginning of the plan year, or, if there is no such business address, an address within the rating area selected by the employer that reasonably reflects where the greatest number of employees within the plan’s service area live or reside as of the beginning of the plan year. We note that SHOPs, including the Federally-facilitated Small Business Health Options Programs (FF–SHOPs), may use the address that was used to establish a qualified employer’s eligibility for participation in the SHOP to determine the applicable geographic rating area when calculating premiums for participating employers. The SHOPs, including the FF–SHOPs, may not be able to accommodate multiple principal business addresses within a State for premium calculation purposes. As a result, when a single application is completed in a State, plan availability and premium calculations will be based on the principal business address entered on the FF–SHOP employer user interface. Under § 147.102(b), States have considerable flexibility in establishing rating areas. Rating areas must be based on counties, three-digit zip codes, or metropolitan statistical areas and nonmetropolitan statistical areas, and generally will be presumed adequate if State-established rating areas are no greater in number than the number of metropolitan statistical areas in the State plus one. States may seek approval from CMS for a greater number of rating areas provided they are actuarially justified, are not unfairly discriminatory, reflect significant differences in health care unit costs, lead to stability in rates over time, and apply uniformly to all issuers in a market. We have observed wide variations in the size of rating areas in the various States. We are concerned that, within States, this could lead to pockets of smaller rating areas with higher-risk groups, which potentially compromises the risk-spreading objective that the single risk pool requirement is intended to achieve. At the same time, States are VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 the primary regulators of health insurance, and we believe it is important to recognize the unique needs of each State. We also recognize the consumer disruption that could result from changes to rating areas. Therefore, we seek comments on whether we should seek more uniformity in the size of rating areas or establish a minimum size for rating areas, and if so, how that should be achieved, consistent with the principle of flexibility for States. For example, to help ensure uniformity in rating areas, we could require that each rating area in a State be one geographically contiguous area, and that the relative population of each rating area not vary by more than a specified percentage. To help ensure that rating areas are sufficiently large, we could direct that each State have a maximum number of rating areas equal to the number of metropolitan statistical areas in the State, plus one. We also seek comment on how we could improve uniformity and sufficient size for risk pooling in a manner that would preserve flexibility to accommodate the unique needs of each State. We also recognize the inconsistency that can occur between an issuer’s rating area and the service area of some of its network-based plans. Under current § 155.1055, the service area of a QHP must be established without regard to racial, ethnic, language, health statusrelated factors, or other factors that exclude specific high utilizing, high cost, or medically underserved populations. We believe it could be beneficial from an insurance market perspective for the rating area and the service area to generally be consistent, to provide that health insurance issuers offer a full array of products in larger geographic areas. We seek comment on whether and how to achieve this objective, including whether to achieve it through regulation, and if so, how our regulations should be revised for this purpose. Section 147.102(e) provides for a uniform age curve in each State. When a State does not specify an age curve, a Federal default uniform age curve will apply. We are investigating the child age rating factor in the Federal uniform age curve, and seek to determine whether the default factor is appropriate, or fails to adequately differentiate the health risk of children of different ages. We seek comment and data on the most appropriate child age curve, and the policy reasons underlying any recommendation. PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 2. Guaranteed Availability of Coverage (§ 147.104) a. Product Discontinuance and Market Withdrawal Exceptions to Guaranteed Availability Section 147.104 includes several exceptions to the guaranteed availability requirement. We have been asked whether there is an exception to this requirement in the small group, large group, and individual markets when an issuer avails itself of the exception to the guaranteed renewability requirement in § 147.106(c) (discontinuing a particular product), or in § 147.106(d) (discontinuing all coverage). The exception to the guaranteed renewability requirement in § 147.106(c) requires an issuer to provide notice in writing, in a form and manner specified by the Secretary, to each plan sponsor or individual, as applicable, (and to all participants and beneficiaries covered under such coverage) of the discontinuation at least 90 calendar days before the date the coverage will be discontinued. The exception to the guaranteed renewability requirement in § 147.106(d) requires an issuer to provide notice in writing to the applicable State authority and to each plan sponsor or individual, as applicable (and to all participants and beneficiaries covered under the coverage) of the discontinuation at least 180 calendar days prior to the date the coverage will be discontinued. We have been asked whether the guaranteed availability requirement requires health insurance issuers discontinuing a product, or all coverage, to guarantee the availability of coverage during these 90- and 180-day (or other applicable) time periods. We do not believe an issuer should be required to guarantee the availability of a product the issuer is in the process of discontinuing, while the issuer is attempting to wind down its operations for that product. Therefore, we propose to redesignate paragraphs (e) through (i) as (f) through (j), and add a new paragraph (e) to § 147.104, providing for an exception to the guaranteed availability requirement when the exceptions to the guaranteed renewability requirement in § 147.106(c) or (d) related to discontinuing a particular product, or the exception related to discontinuing all coverage in a market, apply. The exception would be effective for the duration of the notice periods discussed above. We acknowledge that the statute does not expressly contain such an exception to the guaranteed availability requirement. However, the statutory requirement under the guaranteed renewability E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS provision requires issuers to provide at least 90-day or 180-day advance notice to enrollees prior to discontinuation of the coverage. If additional consumers continue to enroll after notice is given, the issuer would not be able to provide the required advance notice to these new enrollees before discontinuing coverage. Accordingly, we are interpreting the interaction between the guaranteed availability and guaranteed renewability provisions to permit an issuer to deny enrollments during the applicable product discontinuance or market withdrawal notice period. However, we propose in paragraph (e)(3) that this exception does not relieve issuers of their obligations to existing policyholders, such as enrolling dependents under a special enrollment right during the 90-day or 180-day period. We understand that some States may wish issuers to guarantee the availability of products until the end of the applicable notice period, and any such requirement would continue to apply. We also propose a new paragraph (e)(2), under which an issuer that denies coverage under these provisions must apply the denial uniformly to all employers or individuals in the large group, small group, or individual market, as applicable, in the State consistent with applicable State law, and without regard to the claims experience or any health-status related factor relating to those individuals or employers and their employees (or their respective dependents). We seek comment on these proposals. b. Minimum Participation and Contribution Rules Section 2702 of the PHS Act generally requires health insurance issuers in the group and individual markets to guarantee the availability of coverage. In the 2014 Market Rules final rule, we determined that small employers accordingly could not be denied coverage for failure to satisfy minimum participation or contribution requirements. In recognition of the potential for adverse selection, however, under our authority to define open enrollment periods at § 147.104, we permitted health insurance issuers offering non-grandfathered plans in the small group market to limit the availability of coverage to small employers that do not meet an issuer’s employer contribution or group participation rules to an annual enrollment period of November 15 to December 15 of each year. We continue to recognize that the use of minimum participation or contribution rules to VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 limit when coverage can be obtained can guard against adverse selection, in that some employers might wait to purchase insurance only when medical need arises. We also acknowledge the possibility that minimum contribution rules might promote employee take-up and help spread insurance risk across a broad and diverse pool of individuals. However, several features of the Affordable Care Act make participation and contribution rules less relevant, including the individual shared responsibility provisions, under which non-exempt individuals must maintain minimum essential coverage (such as might be available through a group health plan) or make an individual shared responsibility payment, and the employer shared responsibility provisions, under which applicable large employers (in general, employers with at least 50 full-time employees (including full-time equivalent employees)) must either offer coverage that is affordable and that provides minimum value to their full-time employees (and their dependents) or potentially make an assessable payment to the IRS. Based on our experience since the finalization of the rule providing for the November 15 to December 15 enrollment window, we are concerned that the limitation of the enrollment window could result in some applicable large employers that intend to avoid an employer shared responsibility payment by offering coverage being unable to reasonably offer coverage, if a State were to expand the small group market to include employers with up to 100 employees. In recognition of this dynamic, we note that a State electing to expand its small group market to include employers with up to 100 employees may opt, under its own authority, to prohibit a small group health insurance issuer from restricting the availability of small group coverage based on employer contribution or group participation rules. Alternatively, in cases where a State expands the definition of a small employer to include up to 100 employees, we could amend the guaranteed availability regulations, with respect to small employers with 51–100 employees or with respect to all small employers altogether, to achieve this objective. We seek comment on such an approach. 3. Guaranteed Renewability of Coverage (§ 147.106) The guaranteed renewability provisions of title XXVII of the PHS Act provide that an issuer may discontinue a product offered in the group or PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 75497 individual market if the issuer offers to each plan sponsor or individual who is enrolled in that particular product the option to purchase all (or, in the case of the large group market, any) other health insurance coverage currently being offered by the issuer in that market, and complies with other requirements of those sections, as well as with any applicable State law. Title XXVII of the PHS Act includes several exceptions to the guaranteed renewability provisions, including when a group health plan sponsor has violated a material plan provision relating to employer contribution or group participation rules, provided applicable State law allows an exception to guaranteed renewability under such circumstances; and for coverage made available in the individual market, or small or large group market only through one or more bona fide associations, if the individual’s or employer’s membership in the association ceases. Although the Affordable Care Act removed from title XXVII these exceptions as they applied to guaranteed availability, it did not do so with respect to guaranteed renewability. Therefore, a large employer whose coverage is nonrenewed for one of these reasons, and a small employer whose coverage is nonrenewed due to membership ceasing in an association, could be seen to have a right to immediately purchase that same coverage (if available in the market) from that same issuer in accordance with guaranteed availability. This renders effectively meaningless these two exceptions to guaranteed renewability in these contexts. To address this potential ambiguity regarding the interplay between guaranteed renewability and guaranteed availability, we propose to remove these guaranteed renewability exceptions from the regulations at § 147.106. We seek comment on other ways in which this ambiguity could be addressed. 4. Student Health Insurance Coverage (§ 147.145) a. Index Rate Setting Methodology for Student Health Insurance Coverage Under 45 CFR 147.145, student health insurance coverage is a type of individual health insurance coverage that, subject to limited exceptions, must comply with the PHS Act requirements that apply to individual health insurance coverage. However, section 1560(c) of the Affordable Care Act provides that nothing in title I of the Affordable Care Act (or an amendment made by title I) is to be construed to prohibit an institution of higher E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75498 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules education from offering a student health insurance plan to the extent that the requirement is otherwise permitted under applicable Federal, State, or local law. HHS has exercised its authority under section 1560(c) to modify some of its rules as applied to student health insurance coverage, including those related to the guaranteed availability, guaranteed renewability, and single risk pool requirements. Our intent in exempting student health insurance coverage from the single risk pool requirement was to provide that student health insurance issuers need not include their student health insurance coverage in their overall individual market (or merged market) risk pool, and also need not have one single risk pool composed of their total statewide book of student health insurance business. Rather, we intended that issuers could establish separate risk pools from their individual health insurance market single risk pool (or merged market risk pool, where applicable) for student health insurance coverage, including by establishing separate risk pools for different institutions of higher education, or multiple risk pools within a single institution, provided the risk pools were based on a bona fide school-related classification (for example, graduate students and undergraduate students) and not a health status-related factor as described in § 146.121. However, we have learned that student health insurance issuers may be using certain rating factors that would be prohibited under the single risk pool regulation in § 156.80(d) to establish rates for institutions of higher education, on the basis that student health insurance coverage has been exempted from those single risk pool index rating requirements under our regulations. Examples of such rating factors include the percentage of students enrolled in the coverage, or the length of time the college or university has had coverage through the issuer. Section 156.80(d) requires a health insurance issuer to base its index rate only on the total combined claims costs for providing EHB (subject to certain adjustments). We do not intend to disrupt rate setting for student health insurance, but we do seek to ensure that rates are based on actuarially justified factors. To clarify our intent, we propose, for plan years beginning on or after January 1, 2017, that student health insurance coverage be subject to the index rate setting methodology of the single risk pool provision in the regulation at § 156.80(d). However, student health insurance issuers still would be permitted to establish separate risk VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 pools from their individual health insurance market single risk pool (or merged market risk pool, where applicable) for student health insurance coverage, including by establishing separate risk pools for different institutions of higher education, or multiple risk pools within a single institution, provided they are based on a bona fide school-related classification (for example, graduate students and undergraduate students) and not a health status-related factor as described in § 146.121. Consistent with our single risk pool policy, the index rates for these risk pools would be based upon actuarially justified estimates of claims. Permissible plan-level adjustments to these index rates would be limited to those permitted under our rules. This approach would continue to allow rates for student health insurance coverage to reflect the unique characteristics of the student population at the particular institution, while more clearly delineating our intent with regard to the treatment of student health insurance coverage. We seek comment on any potential operational challenges associated with this proposal, including potential challenges related to filing rates for student health insurance coverage and how this policy might be adjusted to address those challenges. b. Actuarial Value Requirements for Student Health Insurance Plans Many colleges and universities have reported to us that they offer student health insurance plans that are rich in benefits (for example, providing an actuarial value of 96 percent) and that they are reluctant to reduce the level of benefits to meet an actuarial value metal level. Because enrollees in student health insurance plans are not typically selecting among such plans, there is less need for standardization of actuarial levels in this part of the individual market. Therefore, we propose to add an exemption to the requirements for student health insurance coverage in § 147.145, under which, for plan years beginning on or after January 1, 2017, student health insurance coverage would be exempt from the actuarial value requirements under section 1302(d) of the Affordable Care Act, as implemented in §§ 156.135 and 156.140, but would be required to provide an actuarial value of at least 60 percent. To determine a plan’s actuarial value for purposes of the application of the 60 percent actuarial value requirement to student health insurance coverage, we propose to require student health insurance coverage issuers to obtain certification by an actuary that the plan provides an actuarial value of at least 60 PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 percent. This determination would be required to be made by a member of the American Academy of Actuaries, based on analysis in accordance with generally accepted actuarial principles and methodologies. We considered making modifications to the AV Calculator for the purposes of determining the actuarial value for student health insurance plans. However, the standard population in the AV Calculator is more diverse than the expected population in student health insurance plans, such that the AV Calculator’s calculations might be less accurate. That said, we solicit comments on whether the AV Calculator should be used for this purpose. We also solicit comments on whether to require student health insurance issuers to specify, in their SBCs, summary plan descriptions, enrollment materials, marketing materials, or other materials, the actuarial value of the coverage, the next lowest metal level the coverage would otherwise satisfy, based on its actuarial value, or any other data that would give enrollees and prospective enrollees information about the actuarial value of the coverage. D. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment Under the Affordable Care Act 1. Sequestration In accordance with the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2016,8 both the transitional reinsurance program and permanent risk adjustment program are subject to the fiscal year 2016 sequestration. The Federal government’s 2016 fiscal year began on October 1, 2015. The reinsurance program will be sequestered at a rate of 6.8 percent for payments made from fiscal year 2016 resources (that is, funds collected during the 2016 fiscal year). To meet the sequestration requirement for the risk adjustment program for fiscal year 2016, HHS will sequester risk adjustment payments made using fiscal year 2016 resources in all States where HHS operates risk adjustment at a sequestration rate of 7.0 percent. HHS estimates that increasing the sequestration rate for all risk adjustment payments made in fiscal year 2016 to all issuers in the States where HHS operates risk adjustment by 0.2 percent will permit HHS to meet the required national risk adjustment program 8 Available at: https://www.whitehouse.gov/sites/ default/files/omb/assets/legislative_reports/ sequestration/2016_jc_sequestration_report_ speaker.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules sequestration percentage of 6.8 percent noted in the OMB Report to Congress. HHS, in coordination with the OMB, has determined that, under section 256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and the underlying authority for these programs, the funds that are sequestered in fiscal year 2016 from the reinsurance and risk adjustment programs will become available for payment to issuers in fiscal year 2017 without further Congressional action. If the Congress does not enact deficit reduction provisions that replace the Joint Committee reductions, these programs would be sequestered in future fiscal years, and any sequestered funding would become available in the fiscal year following that in which it was sequestered. jstallworth on DSK7TPTVN1PROD with PROPOSALS 2. Provisions and Parameters for the Permanent Risk Adjustment Program In subparts D and G of 45 CFR part 153, we established standards for the administration of the 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 accordance with § 153.310(a), 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. Overview of the HHS Risk Adjustment Model (§ 153.320) The HHS risk adjustment model predicts plan liability for an average enrollee based on that person’s age, sex, and diagnoses (risk factors), producing a risk score. The HHS risk adjustment methodology utilizes separate models for adults, children, and infants to account for cost differences in each of these age groups. In each of the adult and child models, the relative costs assigned to an individual’s age, sex, and diagnoses are added together to produce a risk score. Infant risk scores are determined by inclusion in one of 25 mutually exclusive groups, based on the infant’s maturity and the severity of its diagnoses. If applicable, the risk score is multiplied by a cost-sharing reduction adjustment. The enrollment-weighted average risk score of all enrollees in a particular risk adjustment-covered plan, or the plan liability risk score, within a geographic rating area is one of the inputs into the risk adjustment payment transfer VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 formula, which determines the payment or charge that an issuer will receive or be required to pay for that plan. Thus, the HHS risk adjustment model predicts average group costs to account for risk across plans, which, as we stated in the 2014 Payment Notice, accords with the Actuarial Standards Board’s Actuarial Standards of Practice for risk classification. b. Proposed Updates to the Risk Adjustment Model (§ 153.320) We propose to continue to use the same risk adjustment methodology finalized in the 2014 Payment Notice. We propose to make certain updates to the risk adjustment model to incorporate preventive services into our simulation of plan liability, and to reflect more current data. The proposed data updates are similar to the ones we effectuated for 2016 risk adjustment in the 2016 Payment Notice. We propose to recalculate the weights assigned to the various hierarchical condition categories (HCCs) and demographic factors in our risk adjustment models using the most recent data available. As we previously described, in the adult and child models, enrollee health risks are estimated using the HHS risk adjustment model, which assigns a set of additive factors that reflect the relative costs attributable to demographics and diagnoses. Risk adjustment factors are developed using claims data and reflect the costs of a given disease relative to average spending. The longer the lag in data used to develop the risk factors, the greater the potential that the costs of treating one disease versus another have changed in a manner not fully reflected in the risk factors. To provide risk adjustment factors that best reflect more recent treatment patterns and costs, we propose to recalibrate the HHS risk adjustment models for 2017 by using more recent claims data to develop updated risk factors. The risk factors published in the 2016 Payment Notice for use in 2016 were developed using the Truven Health Analytics 2011, 2012 and 2013 MarketScan® Commercial Claims and Encounters database (MarketScan); we are proposing to update the risk factors in the HHS risk adjustment model using 2012, 2013, and 2014 MarketScan data. We would publish and finalize the updated factors in the final rule. We seek comment on this proposal. We are proposing to incorporate preventive services into our simulation of plan liability in the recalibration of the risk adjustment models for 2017. We identified preventive services for the 2012 and 2013 MarketScan samples PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 75499 using procedure and diagnosis codes, prescription drug therapeutic classes, and enrollee age and sex. We relied on lists of preventive services from several major issuers, the preventive services used for the AV Calculator, and Medicare’s preventive services benefit to operationalize preventive services definitions for incorporation in the risk adjustment models. We then adjusted plan liability by adding 100 percent of preventive services covered charges to simulate plan liability for all metal levels. We also applied standard benefit cost sharing rules by metal level to covered charges for non-preventive services. Total adjusted simulated plan liability is the sum of preventive services covered charges, and nonpreventive services simulated plan liability. We re-estimated the risk adjustment models by metal level, predicting plan liability adjusted to account for preventive services without cost sharing. We compared the model coefficients predicting original (that is, non-adjusted for preventive services) and adjusted simulated plan liability. Adjusting for preventive services increases age-sex coefficients relative to HCC coefficients, especially in the higher cost-sharing metal tiers (bronze and silver), and in age/sex ranges with high preventive services expenditures (for example, young adult females). The implication of the changes to the model coefficients is that the risk scores of healthy enrollees (whose risk scores are based solely on model age-sex coefficients) will likely rise relative to the risk scores of the less healthy (whose risk scores include one or more HCC coefficients in addition to an agesex coefficient), especially in bronze and silver plans. As a result of the risk score changes for individuals, we expect that the incorporation of preventive services would increase the risk scores of bronze and silver plans with healthier enrollees relative to other plans’ risk scores when preventive services are taken into account. This incorporation of preventive services will more accurately compensate risk adjustment covered plans with enrollees who use preventive services. We seek comment on this approach. Additionally, we are evaluating how we may incorporate prescription drug data in the Federally certified risk adjustment methodology that HHS uses when it operates risk adjustment. Prescription drug data could be used in the risk adjustment methodology to supplement diagnostic data by using the prescription drug data as a severity indicator, or as a proxy for diagnoses is in cases where diagnostic data are likely E:\FR\FM\02DEP2.SGM 02DEP2 75500 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules to be incomplete. We are assessing these approaches, with particular sensitivity to reliability and the potential for strategic behavior with respect to prescribing behavior. As we noted in the 2014 Payment Notice, we did not include prescription drugs to predict expenditures to avoid creating adverse incentives to modify discretionary prescribing. We are evaluating whether we can improve the models’ predictive power through the incorporation of prescription drugs without unduly incentivizing altered prescribing behavior. We seek comment and any data that may inform effective methods of incorporating prescription drug data in future recalibrations. Similarly, we believe we could more accurately account for high-cost conditions with new treatments that are not reflected in our model due to lags in the data available to us for recalibration. We believe that stability across our models is important, but seek comment and data that may inform better methods of accurately compensating for new treatments for high cost conditions. For example, we seek comment on whether there are ways to model the severity of these conditions in a manner that will more fully capture the highest cost enrollees. Lastly, we would like to explore the effect of partial year enrollment in the HHS risk adjustment methodology. We have received input that issuers are experiencing higher than expected claims costs for partial-year enrollees. We have also received input that the methodology does not capture enrollees with chronic conditions who may not have accumulated diagnoses in their partial year enrollment. At the same time, as compared to full year enrollees of the same relative risk, partial year enrollees are less likely to have spending that exceeds the deductible or annual limitation on cost sharing. We seek comment and data on how the methodology could be made more predictive for partial year enrollees. c. List of Factors To Be Employed in the Model (§ 153.320) The HHS risk adjustment models predict annualized plan liability expenditures using age and sex categories and the HHS HCCs included in the HHS risk adjustment model. Dollar coefficients were estimated for these factors using weighted least squares regression, where the weight was the fraction of the year enrolled. We are including the same HCCs that were included in the original risk adjustment calibration in the 2014 Payment Notice. For each model, the factors are the statistical regression dollar values for each HCC in the model divided by a weighted average plan liability for the full modeling sample. The factors represent the predicted relative incremental expenditures for each HCC. The proposed factors resulting from the blended factors from the 2012 and 2013 separately solved models (with the incorporation of preventive services) are shown in the tables below. For a given enrollee, the sums of the factors for the enrollee’s HCCs are the total relative predicted expenditures for that enrollee. Table 1 contains factors for each adult model, including the interactions. Table 2 contains the HHS HHCs in the severity illness indicator variable. Table 3 contains the factors for each child model. Table 4 contains the factors for each infant model. TABLE 1—ADULT RISK ADJUSTMENT MODEL FACTORS Factor Platinum Gold Silver Bronze Catastrophic Demographic Factors Age Age Age Age Age Age Age Age Age Age Age Age Age Age Age Age Age Age 21–24, 25–29, 30–34, 35–39, 40–44, 45–49, 50–54, 55–59, 60–64, 21–24, 25–29, 30–34, 35–39, 40–44, 45–49, 50–54, 55–59, 60–64, Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Male ..................................................................................... Female ................................................................................. Female ................................................................................. Female ................................................................................. Female ................................................................................. Female ................................................................................. Female ................................................................................. Female ................................................................................. Female ................................................................................. Female ................................................................................. 0.242 0.249 0.296 0.356 0.435 0.518 0.662 0.755 0.907 0.404 0.491 0.613 0.704 0.785 0.802 0.905 0.921 1.003 0.183 0.186 0.220 0.268 0.335 0.405 0.531 0.607 0.733 0.315 0.383 0.488 0.570 0.638 0.649 0.739 0.748 0.814 0.117 0.117 0.135 0.170 0.221 0.277 0.380 0.439 0.538 0.211 0.262 0.350 0.423 0.477 0.480 0.554 0.554 0.601 0.077 0.074 0.082 0.104 0.143 0.188 0.274 0.318 0.395 0.144 0.181 0.259 0.327 0.369 0.364 0.421 0.412 0.445 0.076 0.073 0.080 0.103 0.142 0.186 0.272 0.316 0.392 0.143 0.180 0.257 0.325 0.367 0.362 0.419 0.409 0.442 5.924 5.438 5.099 5.113 5.114 11.809 7.068 4.995 9.345 24.911 11.632 6.960 4.743 9.238 24.456 11.526 6.891 4.574 9.168 24.139 11.587 6.914 4.530 9.156 24.207 11.589 6.914 4.530 9.156 24.209 11.344 6.079 5.522 10.991 5.829 5.272 10.744 5.643 5.082 10.751 5.597 5.034 10.752 5.596 5.034 3.188 3.005 2.861 2.807 2.806 1.556 1.392 1.248 1.153 1.152 jstallworth on DSK7TPTVN1PROD with PROPOSALS Diagnosis Factors HIV/AIDS .................................................................................................. Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/ Shock ................................................................................................... Central Nervous System Infections, Except Viral Meningitis .................. Viral or Unspecified Meningitis ................................................................ Opportunistic Infections ........................................................................... Metastatic Cancer .................................................................................... Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ............................................................................. Non-Hodgkin‘s Lymphomas and Other Cancers and Tumors ................ Colorectal, Breast (Age <50), Kidney, and Other Cancers ..................... Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and Tumors ................................................ Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors .......................................................................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 75501 TABLE 1—ADULT RISK ADJUSTMENT MODEL FACTORS—Continued jstallworth on DSK7TPTVN1PROD with PROPOSALS Factor Platinum Pancreas Transplant Status/Complications ............................................. Diabetes with Acute Complications ......................................................... Diabetes with Chronic Complications ...................................................... Diabetes without Complication ................................................................ Protein-Calorie Malnutrition ..................................................................... Mucopolysaccharidosis ............................................................................ Lipidoses and Glycogenosis .................................................................... Amyloidosis, Porphyria, and Other Metabolic Disorders ......................... Adrenal, Pituitary, and Other Significant Endocrine Disorders ............... Liver Transplant Status/Complications .................................................... End-Stage Liver Disease ......................................................................... Cirrhosis of Liver ...................................................................................... Chronic Hepatitis ...................................................................................... Acute Liver Failure/Disease, Including Neonatal Hepatitis ..................... Intestine Transplant Status/Complications .............................................. Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis ............. Intestinal Obstruction ............................................................................... Chronic Pancreatitis ................................................................................. Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption ............................................................................................. Inflammatory Bowel Disease ................................................................... Necrotizing Fasciitis ................................................................................. Bone/Joint/Muscle Infections/Necrosis .................................................... Rheumatoid Arthritis and Specified Autoimmune Disorders ................... Systemic Lupus Erythematosus and Other Autoimmune Disorders ....... Osteogenesis Imperfecta and Other Osteodystrophies .......................... Congenital/Developmental Skeletal and Connective Tissue Disorders .. Cleft Lip/Cleft Palate ................................................................................ Hemophilia ............................................................................................... Myelodysplastic Syndromes and Myelofibrosis ....................................... Aplastic Anemia ....................................................................................... Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn Sickle Cell Anemia (Hb-SS) ..................................................................... Thalassemia Major ................................................................................... Combined and Other Severe Immunodeficiencies .................................. Disorders of the Immune Mechanism ...................................................... Coagulation Defects and Other Specified Hematological Disorders ....... Drug Psychosis ........................................................................................ Drug Dependence .................................................................................... Schizophrenia .......................................................................................... Major Depressive and Bipolar Disorders ................................................. Reactive and Unspecified Psychosis, Delusional Disorders ................... Personality Disorders ............................................................................... Anorexia/Bulimia Nervosa ....................................................................... Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes ....... Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes .......................................................... Autistic Disorder ....................................................................................... Pervasive Developmental Disorders, Except Autistic Disorder ............... Traumatic Complete Lesion Cervical Spinal Cord .................................. Quadriplegia ............................................................................................. Traumatic Complete Lesion Dorsal Spinal Cord ..................................... Paraplegia ................................................................................................ Spinal Cord Disorders/Injuries ................................................................. Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease ... Quadriplegic Cerebral Palsy .................................................................... Cerebral Palsy, Except Quadriplegic ....................................................... Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies ............................................................................................. Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/ Inflammatory and Toxic Neuropathy .................................................... Muscular Dystrophy ................................................................................. Multiple Sclerosis ..................................................................................... Parkinson’s, Huntington’s, and Spinocerebellar Disease, and Other Neurodegenerative Disorders .............................................................. Seizure Disorders and Convulsions ........................................................ Hydrocephalus ......................................................................................... Non-Traumatic Coma, and Brain Compression/Anoxic Damage ............ Respirator Dependence/Tracheostomy Status ........................................ Respiratory Arrest .................................................................................... Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes ........................................................................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00015 Fmt 4701 Gold Silver Bronze Catastrophic 5.898 1.261 1.261 1.261 14.543 2.246 2.246 2.246 2.246 15.618 5.957 2.417 2.212 4.584 35.083 12.704 6.960 5.898 5.665 1.113 1.113 1.113 14.553 2.121 2.121 2.121 2.121 15.437 5.705 2.245 2.059 4.410 35.028 12.429 6.679 5.665 5.517 0.984 0.984 0.984 14.565 2.018 2.018 2.018 2.018 15.325 5.543 2.128 1.942 4.290 34.981 12.241 6.497 5.517 5.542 0.875 0.875 0.875 14.629 1.963 1.963 1.963 1.963 15.338 5.560 2.094 1.881 4.284 35.010 12.279 6.526 5.542 5.543 0.873 0.873 0.873 14.630 1.962 1.962 1.962 1.962 15.339 5.561 2.093 1.880 4.284 35.009 12.279 6.527 5.543 2.929 3.154 7.009 7.009 3.718 1.235 3.474 3.474 1.507 42.711 12.218 12.218 9.749 9.749 9.749 5.252 5.252 2.989 3.809 3.809 3.100 1.777 1.777 1.188 2.786 2.824 2.728 2.884 6.797 6.797 3.455 1.092 3.263 3.263 1.336 42.402 12.073 12.073 9.576 9.576 9.576 5.095 5.095 2.884 3.542 3.542 2.840 1.601 1.601 1.050 2.612 2.684 2.583 2.680 6.650 6.650 3.263 0.968 3.094 3.094 1.200 42.168 11.973 11.973 9.446 9.446 9.446 4.985 4.985 2.801 3.340 3.340 2.647 1.450 1.450 0.913 2.469 2.579 2.538 2.572 6.671 6.671 3.242 0.880 3.035 3.035 1.130 42.178 11.984 11.984 9.441 9.441 9.441 4.991 4.991 2.774 3.241 3.241 2.568 1.346 1.346 0.805 2.406 2.531 2.537 2.571 6.671 6.671 3.242 0.879 3.034 3.034 1.130 42.179 11.985 11.985 9.441 9.441 9.441 4.992 4.992 2.773 3.240 3.240 2.567 1.344 1.344 0.803 2.405 2.531 1.042 1.188 1.188 13.957 13.957 10.170 10.170 6.086 3.246 1.400 0.000 0.933 1.050 1.050 13.787 13.787 10.005 10.005 5.864 2.997 1.183 0.000 0.828 0.913 0.913 13.663 13.663 9.884 9.884 5.707 2.827 1.020 0.000 0.752 0.805 0.805 13.665 13.665 9.875 9.875 5.679 2.787 0.960 0.000 0.751 0.803 0.803 13.666 13.666 9.875 9.875 5.679 2.788 0.959 0.000 0.126 0.033 0.000 0.000 0.000 5.285 2.211 9.367 5.129 2.034 8.954 5.018 1.907 8.667 4.995 1.835 8.708 4.995 1.834 8.710 2.211 1.485 7.352 9.834 37.369 11.456 2.034 1.319 7.229 9.691 37.364 11.296 1.907 1.184 7.123 9.579 37.365 11.192 1.835 1.109 7.098 9.574 37.433 11.262 1.834 1.108 7.097 9.574 37.434 11.264 11.456 11.296 11.192 11.262 11.264 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 75502 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules TABLE 1—ADULT RISK ADJUSTMENT MODEL FACTORS—Continued Factor Platinum Heart Assistive Device/Artificial Heart ..................................................... Heart Transplant ...................................................................................... Congestive Heart Failure ......................................................................... Acute Myocardial Infarction ..................................................................... Unstable Angina and Other Acute Ischemic Heart Disease ................... Heart Infection/Inflammation, Except Rheumatic .................................... Specified Heart Arrhythmias .................................................................... Intracranial Hemorrhage .......................................................................... Ischemic or Unspecified Stroke ............................................................... Cerebral Aneurysm and Arteriovenous Malformation ............................. Hemiplegia/Hemiparesis .......................................................................... Monoplegia, Other Paralytic Syndromes ................................................. Atherosclerosis of the Extremities with Ulceration or Gangrene ............. Vascular Disease with Complications ...................................................... Pulmonary Embolism and Deep Vein Thrombosis .................................. Lung Transplant Status/Complications .................................................... Cystic Fibrosis .......................................................................................... Chronic Obstructive Pulmonary Disease, Including Bronchiectasis ........ Asthma ..................................................................................................... Fibrosis of Lung and Other Lung Disorders ............................................ Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections .............................................................................................. Kidney Transplant Status ......................................................................... End Stage Renal Disease ....................................................................... Chronic Kidney Disease, Stage 5 ............................................................ Chronic Kidney Disease, Severe (Stage 4) ............................................. Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism .............................................................................................. Miscarriage with Complications ............................................................... Miscarriage with No or Minor Complications ........................................... Completed Pregnancy With Major Complications ................................... Completed Pregnancy With Complications ............................................. Completed Pregnancy with No or Minor Complications .......................... Chronic Ulcer of Skin, Except Pressure .................................................. Hip Fractures and Pathological Vertebral or Humerus Fractures ........... Pathological Fractures, Except of Vertebrae, Hip, or Humerus .............. Stem Cell, Including Bone Marrow, Transplant Status/Complications .... Artificial Openings for Feeding or Elimination ......................................... Amputation Status, Lower Limb/Amputation Complications .................... Gold Silver Bronze Catastrophic 35.695 35.695 3.387 10.835 5.666 6.510 3.099 10.244 3.640 4.354 6.079 3.944 11.784 8.222 4.155 35.331 12.237 1.009 1.009 2.091 35.429 35.429 3.271 10.482 5.370 6.365 2.940 9.944 3.440 4.138 5.979 3.803 11.679 8.025 3.978 35.127 11.906 0.883 0.883 1.961 35.257 35.257 3.190 10.255 5.186 6.260 2.818 9.743 3.319 3.986 5.919 3.705 11.619 7.892 3.852 34.994 11.656 0.768 0.768 1.867 35.324 35.324 3.186 10.380 5.209 6.240 2.765 9.761 3.331 3.947 5.967 3.688 11.694 7.898 3.829 35.078 11.667 0.687 0.687 1.828 35.325 35.325 3.186 10.382 5.210 6.239 2.764 9.761 3.332 3.946 5.967 3.688 11.695 7.898 3.829 35.080 11.667 0.686 0.686 1.827 8.033 10.464 40.683 2.212 2.212 7.949 10.180 40.431 2.102 2.102 7.895 9.997 40.270 2.031 2.031 7.913 9.991 40.401 2.026 2.026 7.914 9.991 40.403 2.026 2.026 1.372 1.372 1.372 3.837 3.837 3.837 2.399 9.757 1.951 32.229 10.912 6.029 1.177 1.177 1.177 3.331 3.331 3.331 2.270 9.532 1.817 32.225 10.812 5.865 0.993 0.993 0.993 3.033 3.033 3.033 2.183 9.381 1.700 32.223 10.748 5.760 0.798 0.798 0.798 2.879 2.879 2.879 2.168 9.425 1.626 32.243 10.791 5.790 0.794 0.794 0.794 2.880 2.880 2.880 2.168 9.426 1.624 32.243 10.792 5.791 11.440 11.440 11.678 11.678 11.854 11.854 11.949 11.949 11.950 11.950 11.440 11.678 11.854 11.949 11.950 11.440 11.678 11.854 11.949 11.950 11.440 11.440 11.440 11.678 11.678 11.678 11.854 11.854 11.854 11.949 11.949 11.949 11.950 11.950 11.950 11.440 11.678 11.854 11.949 11.950 11.440 2.193 11.678 2.336 11.854 2.443 11.949 2.529 11.950 2.530 2.193 2.336 2.443 2.529 2.530 2.193 2.193 2.336 2.336 2.443 2.443 2.529 2.529 2.530 2.530 2.193 2.193 2.336 2.336 2.443 2.443 2.529 2.529 2.530 2.530 2.193 2.336 2.443 2.529 2.530 jstallworth on DSK7TPTVN1PROD with PROPOSALS Interaction Factors Severe illness x Opportunistic Infections ................................................. Severe illness x Metastatic Cancer ......................................................... Severe illness x Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ........................................................ Severe illness x Non-Hodgkin’s Lymphomas and Other Cancers and Tumors ................................................................................................. Severe illness x Myasthenia Gravis/Myoneural Disorders and GuillainBarre Syndrome/Inflammatory and Toxic Neuropathy ......................... Severe illness x Heart Infection/Inflammation, Except Rheumatic .......... Severe illness x Intracranial Hemorrhage ............................................... Severe illness x HCC group G06 (G06 is HCC Group 6 which includes the following HCCs in the blood disease category: 67, 68) ................ Severe illness x HCC group G08 (G08 is HCC Group 8 which includes the following HCCs in the blood disease category: 73, 74) ................ Severe illness x End-Stage Liver Disease .............................................. Severe illness x Acute Liver Failure/Disease, Including Neonatal Hepatitis ........................................................................................................ Severe illness x Atherosclerosis of the Extremities with Ulceration or Gangrene ............................................................................................. Severe illness x Vascular Disease with Complications ........................... Severe illness x Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections .............................................................. Severe illness x Artificial Openings for Feeding or Elimination .............. Severe illness x HCC group G03 (G03 is HCC Group 3 which includes the following HCCs in the musculoskeletal disease category: 54, 55) VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 75503 TABLE 2—HHS HCCS IN THE SEVERITY ILLNESS INDICATOR VARIABLE Description Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock. Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis. Seizure Disorders and Convulsions. Non-Traumatic Coma, Brain Compression/Anoxic Damage. Respirator Dependence/Tracheostomy Status. Respiratory Arrest. Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes. Pulmonary Embolism and Deep Vein Thrombosis. TABLE 3—CHILD RISK ADJUSTMENT MODEL FACTORS Factor Platinum Gold Silver Bronze Catastrophic Demographic Factors Age Age Age Age Age Age Age Age 2–4, Male ......................................................................................... 5–9, Male ......................................................................................... 10–14, Male ..................................................................................... 15–20, Male ..................................................................................... 2–4, Female ..................................................................................... 5–9, Female ..................................................................................... 10–14, Female ................................................................................. 15–20, Female ................................................................................. 0.251 0.176 0.224 0.290 0.205 0.140 0.210 0.348 0.167 0.113 0.158 0.216 0.131 0.086 0.148 0.262 0.082 0.048 0.084 0.134 0.061 0.033 0.083 0.165 0.032 0.012 0.045 0.084 0.024 0.006 0.050 0.105 0.031 0.011 0.044 0.083 0.024 0.005 0.050 0.104 3.608 3.174 2.855 2.743 2.742 18.093 12.330 3.826 23.638 38.499 17.932 12.136 3.606 23.563 38.239 17.830 11.998 3.444 23.513 38.029 17.855 12.005 3.341 23.505 38.030 17.856 12.005 3.340 23.505 38.030 13.275 9.665 3.995 12.966 9.384 3.755 12.718 9.151 3.539 12.660 9.061 3.419 12.660 9.060 3.417 3.123 2.910 2.725 2.614 2.612 1.892 33.115 2.630 2.630 2.630 14.811 6.419 6.419 6.419 6.419 6.419 33.115 13.699 12.715 1.566 13.286 33.115 16.433 6.156 9.291 1.713 32.960 2.290 2.290 2.290 14.720 6.134 6.134 6.134 6.134 6.134 32.960 13.535 12.528 1.405 13.119 32.960 16.077 5.905 9.008 1.548 32.863 2.028 2.028 2.028 14.655 5.907 5.907 5.907 5.907 5.907 32.863 13.419 12.391 1.257 12.987 32.863 15.815 5.705 8.815 1.438 32.876 1.773 1.773 1.773 14.683 5.866 5.866 5.866 5.866 5.866 32.876 13.421 12.343 1.186 12.966 32.876 15.844 5.620 8.801 1.436 32.877 1.770 1.770 1.770 14.683 5.865 5.865 5.865 5.865 5.865 32.877 13.422 12.344 1.185 12.967 32.877 15.845 5.619 8.800 2.803 5.919 5.073 5.073 3.361 1.226 1.704 1.704 1.660 56.279 2.658 5.531 4.814 4.814 3.116 1.061 1.565 1.565 1.433 55.780 2.528 5.229 4.608 4.608 2.901 0.899 1.432 1.432 1.242 55.399 2.436 5.120 4.555 4.555 2.803 0.778 1.357 1.357 1.127 55.383 2.435 5.118 4.554 4.554 2.801 0.776 1.356 1.356 1.125 55.384 jstallworth on DSK7TPTVN1PROD with PROPOSALS Diagnosis Factors HIV/AIDS .................................................................................................. Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/ Shock ................................................................................................... Central Nervous System Infections, Except Viral Meningitis .................. Viral or Unspecified Meningitis ................................................................ Opportunistic Infections ........................................................................... Metastatic Cancer .................................................................................... Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia ............................................................................. Non-Hodgkin’s Lymphomas and Other Cancers and Tumors ................ Colorectal, Breast (Age <50), Kidney, and Other Cancers ..................... Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and Tumors ................................................ Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors .......................................................................................... Pancreas Transplant Status/Complications ............................................. Diabetes with Acute Complications ......................................................... Diabetes with Chronic Complications ...................................................... Diabetes without Complication ................................................................ Protein-Calorie Malnutrition ..................................................................... Mucopolysaccharidosis ............................................................................ Lipidoses and Glycogenosis .................................................................... Congenital Metabolic Disorders, Not Elsewhere Classified .................... Amyloidosis, Porphyria, and Other Metabolic Disorders ......................... Adrenal, Pituitary, and Other Significant Endocrine Disorders ............... Liver Transplant Status/Complications .................................................... End-Stage Liver Disease ......................................................................... Cirrhosis of Liver ...................................................................................... Chronic Hepatitis ...................................................................................... Acute Liver Failure/Disease, Including Neonatal Hepatitis ..................... Intestine Transplant Status/Complications .............................................. Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis ............. Intestinal Obstruction ............................................................................... Chronic Pancreatitis ................................................................................. Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption ............................................................................................. Inflammatory Bowel Disease ................................................................... Necrotizing Fasciitis ................................................................................. Bone/Joint/Muscle Infections/Necrosis .................................................... Rheumatoid Arthritis and Specified Autoimmune Disorders ................... Systemic Lupus Erythematosus and Other Autoimmune Disorders ....... Osteogenesis Imperfecta and Other Osteodystrophies .......................... Congenital/Developmental Skeletal and Connective Tissue Disorders .. Cleft Lip/Cleft Palate ................................................................................ Hemophilia ............................................................................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 75504 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules TABLE 3—CHILD RISK ADJUSTMENT MODEL FACTORS—Continued jstallworth on DSK7TPTVN1PROD with PROPOSALS Factor Platinum Myelodysplastic Syndromes and Myelofibrosis ....................................... Aplastic Anemia ....................................................................................... Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn Sickle Cell Anemia (Hb-SS) ..................................................................... Thalassemia Major ................................................................................... Combined and Other Severe Immunodeficiencies .................................. Disorders of the Immune Mechanism ...................................................... Coagulation Defects and Other Specified Hematological Disorders ....... Drug Psychosis ........................................................................................ Drug Dependence .................................................................................... Schizophrenia .......................................................................................... Major Depressive and Bipolar Disorders ................................................. Reactive and Unspecified Psychosis, Delusional Disorders ................... Personality Disorders ............................................................................... Anorexia/Bulimia Nervosa ....................................................................... Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes ....... Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes .......................................................... Autistic Disorder ....................................................................................... Pervasive Developmental Disorders, Except Autistic Disorder ............... Traumatic Complete Lesion Cervical Spinal Cord .................................. Quadriplegia ............................................................................................. Traumatic Complete Lesion Dorsal Spinal Cord ..................................... Paraplegia ................................................................................................ Spinal Cord Disorders/Injuries ................................................................. Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease ... Quadriplegic Cerebral Palsy .................................................................... Cerebral Palsy, Except Quadriplegic ....................................................... Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies ............................................................................................. Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/ Inflammatory and Toxic Neuropathy .................................................... Muscular Dystrophy ................................................................................. Multiple Sclerosis ..................................................................................... Parkinson’s, Huntington’s, and Spinocerebellar Disease, and Other Neurodegenerative Disorders .............................................................. Seizure Disorders and Convulsions ........................................................ Hydrocephalus ......................................................................................... Non-Traumatic Coma, and Brain Compression/Anoxic Damage ............ Respirator Dependence/Tracheostomy Status ........................................ Respiratory Arrest .................................................................................... Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes ........................................................................................... Heart Assistive Device/Artificial Heart ..................................................... Heart Transplant ...................................................................................... Congestive Heart Failure ......................................................................... Acute Myocardial Infarction ..................................................................... Unstable Angina and Other Acute Ischemic Heart Disease ................... Heart Infection/Inflammation, Except Rheumatic .................................... Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders .............................................................................................. Major Congenital Heart/Circulatory Disorders ......................................... Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital Heart/Circulatory Disorders ..................................... Specified Heart Arrhythmias .................................................................... Intracranial Hemorrhage .......................................................................... Ischemic or Unspecified Stroke ............................................................... Cerebral Aneurysm and Arteriovenous Malformation ............................. Hemiplegia/Hemiparesis .......................................................................... Monoplegia, Other Paralytic Syndromes ................................................. Atherosclerosis of the Extremities with Ulceration or Gangrene ............. Vascular Disease with Complications ...................................................... Pulmonary Embolism and Deep Vein Thrombosis .................................. Lung Transplant Status/Complications .................................................... Cystic Fibrosis .......................................................................................... Chronic Obstructive Pulmonary Disease, Including Bronchiectasis ........ Asthma ..................................................................................................... Fibrosis of Lung and Other Lung Disorders ............................................ Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections .............................................................................................. Kidney Transplant Status ......................................................................... End Stage Renal Disease ....................................................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00018 Fmt 4701 Gold Silver Bronze Catastrophic 17.181 17.181 7.999 7.999 7.999 6.480 6.480 5.201 5.249 5.249 5.328 1.935 1.935 0.781 2.818 3.727 17.007 17.007 7.705 7.705 7.705 6.287 6.287 5.051 4.979 4.979 4.926 1.707 1.707 0.645 2.603 3.503 16.867 16.867 7.476 7.476 7.476 6.134 6.134 4.911 4.782 4.782 4.626 1.495 1.495 0.486 2.423 3.351 16.847 16.847 7.409 7.409 7.409 6.076 6.076 4.837 4.717 4.717 4.528 1.332 1.332 0.344 2.357 3.317 16.847 16.847 7.407 7.407 7.407 6.075 6.075 4.835 4.717 4.717 4.527 1.329 1.329 0.341 2.356 3.317 1.555 1.867 0.923 13.459 13.459 11.430 11.430 5.506 8.929 4.067 0.974 1.360 1.660 0.772 13.418 13.418 11.214 11.214 5.254 8.672 3.800 0.772 1.203 1.462 0.592 13.402 13.402 11.066 11.066 5.060 8.473 3.630 0.616 1.114 1.308 0.421 13.481 13.481 11.066 11.066 4.983 8.435 3.648 0.531 1.113 1.305 0.418 13.482 13.482 11.066 11.066 4.982 8.435 3.648 0.530 1.210 1.053 0.917 0.845 0.843 9.746 3.762 6.689 9.558 3.552 6.337 9.412 3.387 6.076 9.372 3.308 6.037 9.372 3.307 6.037 3.762 2.136 6.047 8.776 42.997 13.335 3.552 1.942 5.916 8.612 42.897 13.131 3.387 1.755 5.820 8.487 42.854 12.994 3.308 1.619 5.814 8.448 42.982 12.998 3.307 1.617 5.814 8.447 42.984 12.998 13.335 33.115 33.115 7.307 11.965 6.781 16.783 13.131 32.960 32.960 7.189 11.749 6.652 16.643 12.994 32.863 32.863 7.087 11.601 6.566 16.539 12.998 32.876 32.876 7.047 11.612 6.583 16.519 12.998 32.877 32.877 7.046 11.613 6.584 16.519 6.142 1.945 5.922 1.808 5.704 1.640 5.578 1.529 5.575 1.527 1.370 4.748 17.965 8.807 4.116 5.352 3.500 15.636 18.385 15.215 33.115 14.859 0.484 0.484 3.395 1.252 4.549 17.699 8.679 3.893 5.230 3.334 15.350 18.204 15.029 32.960 14.403 0.390 0.390 3.241 1.106 4.375 17.514 8.600 3.725 5.146 3.220 15.141 18.079 14.908 32.863 14.062 0.262 0.262 3.101 1.021 4.309 17.509 8.623 3.664 5.127 3.178 15.046 18.077 14.927 32.876 14.084 0.170 0.170 3.038 1.019 4.308 17.510 8.624 3.663 5.127 3.178 15.045 18.077 14.928 32.877 14.084 0.169 0.169 3.037 9.223 14.429 39.233 9.149 14.054 39.038 9.092 13.797 38.913 9.104 13.798 38.998 9.104 13.798 38.999 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 75505 TABLE 3—CHILD RISK ADJUSTMENT MODEL FACTORS—Continued Factor Platinum Chronic Kidney Disease, Stage 5 ............................................................ Chronic Kidney Disease, Severe (Stage 4) ............................................. Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism .............................................................................................. Miscarriage with Complications ............................................................... Miscarriage with No or Minor Complications ........................................... Completed Pregnancy With Major Complications ................................... Completed Pregnancy With Complications ............................................. Completed Pregnancy with No or Minor Complications .......................... Chronic Ulcer of Skin, Except Pressure .................................................. Hip Fractures and Pathological Vertebral or Humerus Fractures ........... Pathological Fractures, Except of Vertebrae, Hip, or Humerus .............. Stem Cell, Including Bone Marrow, Transplant Status/Complications .... Artificial Openings for Feeding or Elimination ......................................... Amputation Status, Lower Limb/Amputation Complications .................... Gold Silver Bronze Catastrophic 10.493 10.493 10.315 10.315 10.152 10.152 10.039 10.039 10.037 10.037 1.160 1.160 1.160 3.354 3.354 3.354 1.654 5.891 1.718 33.115 15.795 8.011 0.967 0.967 0.967 2.882 2.882 2.882 1.541 5.601 1.565 32.960 15.698 7.729 0.768 0.768 0.768 2.584 2.584 2.584 1.428 5.355 1.392 32.863 15.662 7.525 0.565 0.565 0.565 2.386 2.386 2.386 1.366 5.259 1.270 32.876 15.783 7.418 0.561 0.561 0.561 2.385 2.385 2.385 1.365 5.257 1.268 32.877 15.785 7.416 TABLE 4—INFANT RISK ADJUSTMENT MODELS FACTORS Group Platinum Extremely Immature * Severity Level 5 (Highest) .................................... Extremely Immature * Severity Level 4 .................................................... Extremely Immature * Severity Level 3 .................................................... Extremely Immature * Severity Level 2 .................................................... Extremely Immature * Severity Level 1 (Lowest) ..................................... Immature * Severity Level 5 (Highest) ...................................................... Immature * Severity Level 4 ..................................................................... Immature * Severity Level 3 ..................................................................... Immature * Severity Level 2 ..................................................................... Immature * Severity Level 1 (Lowest) ...................................................... Premature/Multiples * Severity Level 5 (Highest) ..................................... Premature/Multiples * Severity Level 4 .................................................... Premature/Multiples * Severity Level 3 .................................................... Premature/Multiples * Severity Level 2 .................................................... Premature/Multiples * Severity Level 1 (Lowest) ...................................... Term * Severity Level 5 (Highest) ............................................................ Term * Severity Level 4 ............................................................................ Term * Severity Level 3 ............................................................................ Term * Severity Level 2 ............................................................................ Term * Severity Level 1 (Lowest) ............................................................. Age 1 * Severity Level 5 (Highest) ........................................................... Age 1 * Severity Level 4 ........................................................................... Age 1 * Severity Level 3 ........................................................................... Age 1 * Severity Level 2 ........................................................................... Age 1 * Severity Level 1 (Lowest) ............................................................ Age 0 Male .............................................................................................. Age 1 Male .............................................................................................. Gold 409.050 203.011 54.774 54.774 54.774 193.052 91.573 54.774 31.501 31.501 180.068 34.716 18.143 9.619 6.761 148.077 17.881 6.615 3.999 1.717 55.723 9.659 3.494 2.210 0.603 0.723 0.168 407.618 201.612 53.619 53.619 53.619 191.689 90.161 53.619 30.277 30.277 178.688 33.374 17.052 8.708 6.055 146.787 16.823 5.913 3.438 1.385 55.014 9.128 3.127 1.911 0.465 0.672 0.148 Silver Bronze 406.498 200.519 52.671 52.671 52.671 190.621 89.057 52.671 29.298 29.298 177.612 32.329 16.164 7.919 5.326 145.765 15.955 5.209 2.791 0.811 54.446 8.675 2.751 1.570 0.288 0.641 0.127 TABLE 5—HHS HCCS INCLUDED IN INFANT MODEL MATURITY CATEGORIES jstallworth on DSK7TPTVN1PROD with PROPOSALS Maturity category HCC/Description Extremely Immature ................................... Extremely Immature ................................... Extremely Immature ................................... Immature .................................................... Immature .................................................... Premature/Multiples ................................... Premature/Multiples ................................... Term ........................................................... Age 1 ......................................................... Extremely Immature Newborns, Birthweight <500 Grams. Extremely Immature Newborns, Including Birthweight 500–749 Grams. Extremely Immature Newborns, Including Birthweight 750–999 Grams. Premature Newborns, Including Birthweight 1000–1499 Grams. Premature Newborns, Including Birthweight 1500–1999 Grams. Premature Newborns, Including Birthweight 2000–2499 Grams. Other Premature, Low Birthweight, Malnourished, or Multiple Birth Newborns. Term or Post-Term Singleton Newborn, Normal or High Birthweight All age 1 infants. TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES Severity category HCC Severity Level 5 (Highest) ......................... Severity Level 5 ......................................... Severity Level 5 ......................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 Metastatic Cancer. Pancreas Transplant Status/Complications. Liver Transplant Status/Complications. PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 406.512 200.501 52.503 52.503 52.503 190.640 89.058 52.503 29.119 29.119 177.587 32.210 15.859 7.456 4.813 145.664 15.592 4.662 2.206 0.379 54.372 8.484 2.528 1.327 0.206 0.584 0.101 Catastrophic 406.513 200.502 52.501 52.501 52.501 190.641 89.059 52.501 29.116 29.116 177.588 32.210 15.855 7.447 4.803 145.663 15.587 4.651 2.195 0.371 54.371 8.481 2.524 1.323 0.205 0.582 0.100 75506 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES—Continued Severity category HCC Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level 5 5 5 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 4 4 4 4 4 ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity jstallworth on DSK7TPTVN1PROD with PROPOSALS Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level 4 4 4 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... Severity Severity Severity Severity Level Level Level Level 3 3 3 3 ......................................... ......................................... ......................................... ......................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 End-Stage Liver Disease. Intestine Transplant Status/Complications. Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis. Respirator Dependence/Tracheostomy Status. Heart Assistive Device/Artificial Heart. Heart Transplant. Congestive Heart Failure. Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders. Lung Transplant Status/Complications. Kidney Transplant Status. End Stage Renal Disease. Stem Cell, Including Bone Marrow, Transplant Status/Complications. Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock. Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia. Mucopolysaccharidosis. Major Congenital Anomalies of Diaphragm, Abdominal Wall, and Esophagus, Age <2. Myelodysplastic Syndromes and Myelofibrosis. Aplastic Anemia. Combined and Other Severe Immunodeficiencies. Traumatic Complete Lesion Cervical Spinal Cord. Quadriplegia. Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease. Quadriplegic Cerebral Palsy. Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy. Non-Traumatic Coma, Brain Compression/Anoxic Damage. Respiratory Arrest. Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes. Acute Myocardial Infarction. Heart Infection/Inflammation, Except Rheumatic. Major Congenital Heart/Circulatory Disorders. Intracranial Hemorrhage. Ischemic or Unspecified Stroke. Vascular Disease with Complications. Pulmonary Embolism and Deep Vein Thrombosis. Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections. Chronic Kidney Disease, Stage 5. Hip Fractures and Pathological Vertebral or Humerus Fractures. Artificial Openings for Feeding or Elimination. HIV/AIDS. Central Nervous System Infections, Except Viral Meningitis. Opportunistic Infections. Non-Hodgkin‘s Lymphomas and Other Cancers and Tumors. Colorectal, Breast (Age <50), Kidney and Other Cancers. Breast (Age 50+), Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and Tumors. Lipidoses and Glycogenosis. Adrenal, Pituitary, and Other Significant Endocrine Disorders. Acute Liver Failure/Disease, Including Neonatal Hepatitis. Intestinal Obstruction. Necrotizing Fasciitis. Bone/Joint/Muscle Infections/Necrosis. Osteogenesis Imperfecta and Other Osteodystrophies. Cleft Lip/Cleft Palate. Hemophilia. Disorders of the Immune Mechanism. Coagulation Defects and Other Specified Hematological Disorders. Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes. Traumatic Complete Lesion Dorsal Spinal Cord. Paraplegia. Spinal Cord Disorders/Injuries. Cerebral Palsy, Except Quadriplegic. Muscular Dystrophy. Parkinson’s, Huntington’s, and Spinocerebellar Disease, and Other Neurodegenerative Disorders. Hydrocephalus. Unstable Angina and Other Acute Ischemic Heart Disease. Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital Heart/Circulatory Disorders. Specified Heart Arrhythmias. Cerebral Aneurysm and Arteriovenous Malformation. Hemiplegia/Hemiparesis. Cystic Fibrosis. PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 75507 TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES—Continued Severity category HCC Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level 3 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Severity Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level Level 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... (Lowest) .......................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... ......................................... Fibrosis of Lung and Other Lung Disorders. Pathological Fractures, Except of Vertebrae, Hip, or Humerus. Viral or Unspecified Meningitis. Thyroid, Melanoma, Neurofibromatosis, and Other Cancers and Tumors. Diabetes with Acute Complications. Diabetes with Chronic Complications. Diabetes without Complication. Protein-Calorie Malnutrition. Congenital Metabolic Disorders, Not Elsewhere Classified. Amyloidosis, Porphyria, and Other Metabolic Disorders. Cirrhosis of Liver. Chronic Pancreatitis. Inflammatory Bowel Disease. Rheumatoid Arthritis and Specified Autoimmune Disorders. Systemic Lupus Erythematosus and Other Autoimmune Disorders. Congenital/Developmental Skeletal and Connective Tissue Disorders. Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn. Sickle Cell Anemia (Hb-SS). Drug Psychosis. Drug Dependence. Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes. Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies. Seizure Disorders and Convulsions. Monoplegia, Other Paralytic Syndromes. Atherosclerosis of the Extremities with Ulceration or Gangrene. Chronic Obstructive Pulmonary Disease, Including Bronchiectasis. Chronic Ulcer of Skin, Except Pressure. Chronic Hepatitis. Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption. Thalassemia Major. Autistic Disorder. Pervasive Developmental Disorders, Except Autistic Disorder. Multiple Sclerosis. Asthma. Chronic Kidney Disease, Severe (Stage 4). Amputation Status, Lower Limb/Amputation Complications. No Severity HCCs. d. Cost-Sharing Reductions Adjustments (§ 153.320) We propose to continue including an adjustment for the receipt of costsharing reductions in the model to account for increased plan liability due to increased utilization of health care services by enrollees receiving costsharing reductions. The proposed costsharing reduction adjustment factors for 2017 risk adjustment are unchanged from those finalized in the 2016 Payment Notice and are set forth in Table 7. These adjustments are effective for 2015, 2016, and 2017 risk adjustment, and are multiplied against the sum of the demographic, diagnosis, and interaction factors. We will continue to evaluate this adjustment in future years as more data becomes available. We seek comment on this approach. TABLE 7—COST-SHARING REDUCTION ADJUSTMENT Household income Plan AV Induced utilization factor Silver Plan Variant Recipients jstallworth on DSK7TPTVN1PROD with PROPOSALS 100–150% of FPL ............................................................... 150–200% of FPL ............................................................... 200–250% of FPL ............................................................... >250% of FPL ..................................................................... Plan Variation 94% ............................................................. Plan Variation 87% ............................................................. Plan Variation 73% ............................................................. Standard Plan 70% ............................................................ 1.12 1.12 1.00 1.00 Zero Cost-Sharing Recipients <300% <300% <300% <300% of of of of FPL FPL FPL FPL ..................................................................... ..................................................................... ..................................................................... ..................................................................... Platinum (90%) ................................................................... Gold (80%) ......................................................................... Silver (70%) ........................................................................ Bronze (60%) ..................................................................... 1.00 1.07 1.12 1.15 Limited Cost-Sharing Recipients >300% of FPL ..................................................................... VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Platinum (90%) ................................................................... Frm 00021 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 1.00 75508 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules TABLE 7—COST-SHARING REDUCTION ADJUSTMENT—Continued Household income Plan AV >300% of FPL ..................................................................... >300% of FPL ..................................................................... >300% of FPL ..................................................................... Gold (80%) ......................................................................... Silver (70%) ........................................................................ Bronze (60%) ..................................................................... e. Model Performance Statistics (§ 153.320) To evaluate the model’s performance, we examined its R-squared and predictive ratios. The R-squared statistic, which calculates the percentage of individual variation explained by a model, measures the predictive accuracy of the model overall. The predictive ratios measure the predictive accuracy of a model for different validation groups or subpopulations. The predictive ratio for each of the HHS risk adjustment models is the ratio of the weighted mean predicted plan liability for the model sample population to the weighted mean actual plan liability for the model sample population. The predictive ratio represents how well the model does on average at predicting plan liability for that subpopulation. A subpopulation that is predicted perfectly would have a predictive ratio of 1.0. For each of the HHS risk adjustment models, the R- Induced utilization factor 1.07 1.12 1.15 squared statistic and the predictive ratio are in the range of published estimates for concurrent risk adjustment models.9 Because we are proposing to blend the coefficients from separately solved models based on MarketScan 2012 and 2013 data (and 2012, 2013, and 2014 data in the final rule), we are publishing the R-squared statistic for each model and year separately to verify their statistical validity. The R-squared statistic for each model is shown in Table 8. TABLE 8—R-SQUARED STATISTIC FOR HHS RISK ADJUSTMENT MODELS R-Squared statistic Risk adjustment model 2012 Platinum Adult .......................................................................................................................... Platinum Child .......................................................................................................................... Platinum Infant ......................................................................................................................... Gold Adult ................................................................................................................................ Gold Child ................................................................................................................................ Gold Infant ............................................................................................................................... Silver Adult ............................................................................................................................... Silver Child ............................................................................................................................... Silver Infant .............................................................................................................................. Bronze Adult ............................................................................................................................ Bronze Child ............................................................................................................................ Bronze Infant ........................................................................................................................... Catastrophic Adult ................................................................................................................... Catastrophic Child ................................................................................................................... Catastrophic Infant ................................................................................................................... jstallworth on DSK7TPTVN1PROD with PROPOSALS f. Overview of the Payment Transfer Formula (§ 153.320) We do not propose to alter our payment transfer methodology. Plan average risk scores will continue to be calculated as the member monthweighted average of individual enrollee risk scores. We defined the calculation of plan average actuarial risk and the calculation of payments and charges in the Premium Stabilization Rule. In the 2014 Payment Notice, we combined those concepts into a risk adjustment payment transfer formula. Risk adjustment transfers (payments and charges) will be calculated after issuers have completed risk adjustment data reporting. The payment transfer formula 9 Winkleman, Ross and Syed Mehmud. ‘‘A Comparative Analysis of Claims-Based Tools for VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 includes a set of cost adjustment terms that require transfers to be calculated at the geographic rating area level for each plan (that is, HHS will calculate two separate transfer amounts for a plan that operates in two rating areas). The payment transfer formula is designed to provide a per member per month (PMPM) transfer amount. The PMPM transfer amount derived from the payment transfer formula would be multiplied by each plan’s total member months for the benefit year to determine the total payment due or charge owed by the issuer for that plan in a rating area. 2013 0.3936 0.2855 0.2844 0.3895 0.2804 0.2823 0.3858 0.2757 0.2808 0.3836 0.2732 0.2807 0.3836 0.2732 0.2807 (1) Overview of the Payment Transfer Formula Although we do not propose to change the payment transfer formula from what was finalized in the 2014 Payment Notice (78 FR 15430 through 15434), we believe it would be useful to republish the formula in its entirety, since, as noted above, we are proposing to recalibrate the HHS risk adjustment model. Transfers (payments and charges) will be calculated as the difference between the plan premium estimate reflecting risk selection and the plan premium estimate not reflecting risk selection. As finalized in the 2014 Payment Notice, the HHS risk adjustment payment transfer formula is: Health Risk Assessment.’’ Society of Actuaries. April 2007. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 0.3820 0.2774 0.3215 0.3775 0.2722 0.3195 0.3735 0.2674 0.3182 0.3713 0.2649 0.3181 0.3712 0.2648 0.3181 E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules The denominator is summed across all plans in the risk pool in the market in the State. The difference between the two premium estimates in the payment transfer formula determines whether a plan pays a risk transfer charge or receives a risk transfer payment. Note that the value of the plan average risk score by itself does not determine whether a plan would be assessed a charge or receive a payment—even if the risk score is greater than 1.0, it is possible that the plan would be assessed a charge if the premium compensation that the plan may receive through its rating practices (as measured through the allowable rating factor) exceeds the plan’s predicted liability associated with risk selection. Risk adjustment transfers are calculated at the risk pool level, and catastrophic plans are treated as a separate risk pool for purposes of risk adjustment. jstallworth on DSK7TPTVN1PROD with PROPOSALS g. State-Submitted Alternate Risk Adjustment Methodology The Commonwealth of Massachusetts has expressed interest in having an HHS-operated risk adjustment program, beginning in the 2017 benefit year. If HHS operates risk adjustment in Massachusetts for 2017 using the Federally certified methodology we use in all States in which we operate risk adjustment, we would announce this in the final rule. h. Risk Adjustment User Fee (§ 153.610(f)) As noted above, 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 with the meaning of § 153.20 must remit a user fee to HHS 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 VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 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 issuers of risk adjustment covered plans because it will mitigate the financial instability associated with potential adverse risk selection. The risk 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 2016 Payment Notice, we estimated Federal administrative expenses of operating the risk adjustment program to be $1.75 per enrollee per year, based on our estimated contract costs for risk adjustment operations. For the 2017 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. To calculate the user fee, we 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 2017 will be approximately $52 million, and that the risk adjustment user fee would be $1.80 per enrollee per year. The risk adjustment user fee contract costs for 2017 include costs related to 2017 risk adjustment data validation, and are slightly higher than the 2016 contract costs as the result of some contracts that were rebid. We do not anticipate PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 Massachusetts’ decision to use the Federal risk adjustment methodology will substantially affect the risk adjustment user fee rate for 2017. 3. 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 the 2015 Payment Notice, we established 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. In the 2016 Payment Notice, we established the reinsurance payment parameters and uniform reinsurance contribution rate for the 2016 benefit year and certain clarifying provisions related to the operation of the reinsurance program. a. Decreasing the Reinsurance Attachment Point for the 2016 Benefit Year 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 non-grandfathered, individual market issuers for high-risk claims that provides for the equitable allocation of funds. In the Premium Stabilization Rule (77 FR 17228), we provided that reinsurance payments to issuers of reinsurance-eligible plans 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. We finalized in the 2015 Payment Notice (79 FR 13777) that HHS will use E:\FR\FM\02DEP2.SGM 02DEP2 EP02DE15.002</GPH> Where: PS = State average premium; PLRSI = plan i’s plan liability risk score; AVi = plan i’s metal level AV; ARFi = allowable rating factor; IDFi = plan i’s induced demand factor; GCFi = plan i’s geographic cost factor; Si = plan i’s share of State enrollment. 75509 75510 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS any excess contributions for reinsurance payments for a benefit year by increasing the coinsurance rate for that benefit year up to 100 percent before rolling over any remaining funds in the next year. If any contribution amounts remain after calculating reinsurance payments for the 2016 benefit year (and after HHS increases the coinsurance rate to 100 percent for the 2016 benefit year), we propose to decrease the 2016 attachment point of $90,000 to pay out any remaining contribution amounts in an equitable manner for the 2016 benefit year. We believe that expending all remaining reinsurance contribution funds as payments for the 2016 benefit year will support the reinsurance program’s goals of promoting nationwide premium stabilization and market stability in the early years of Exchange operations while providing issuers with incentives to continue to effectively manage enrollee costs. The final attachment point and coinsurance rate for the 2016 benefit year will be calculated based on total available reinsuance collections and accepted reinsurance payment requests. We seek comment on this proposal. b. Audit Authority Extends to Entities That Assist Contributing Entities (§ 153.405(i)) In accordance with § 153.405(i), HHS or its designee has the authority to audit a contributing entity to assess compliance with the reinsurance program requirements. In 2014, HHS implemented a streamlined approach through which a contributing entity, or a third party such as a third party administrator or an administrative services-only contractor acting on behalf of a contributing entity, could register on Pay.gov, calculate the annual enrollment count and schedule reinsurance contribution payments. During the 2014 contribution submission process, many third party administrators and administrative services-only contractors assisted contributing entities by calculating the contributing entity’s annual enrollment count and maintaining the records necessary to validate that enrollment. To ensure that reported annual enrollment counts are calculated correctly in accordance with §§ 153.405(d) through 153.405(g) and applicable guidance, we propose to amend § 153.405(i) to specify that the audit authority extends to any third party administrators, administrative services-only contractors, or other third parties that complete any part of the reinsurance contribution submission process on behalf of contributing entities or otherwise assist contributing VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 entities with compliance with the requirements for the transitional reinsurance program. This would include third party administrators, administrative services-only contractors or other third parties that provide contributing entities with their annual enrollment counts or maintain records to substantiate the annual enrollment counts, even if the third party does not submit the annual enrollment count to HHS. Additionally, we propose to amend § 153.405(i) to specify that a contributing entity that chooses to use a third party administrator, administrative services-only contractor, or other third party to complete the reinsurance contribution submission process on its behalf must ensure that this third party administrator, administrative servicesonly contractor, or other third party cooperate with any audit under this section. Contributing entities, not third party administrators, administrative services-only contractors, or other third parties, remain responsible for the payment of reinsurance contributions. We seek comment on these amendments. 4. Provisions for the Temporary Risk Corridors Program This section contains proposals related to the temporary risk corridors program, and therefore applies only to issuers of QHPs, as defined at § 153.500, with respect to the benefit years 2014 through 2016. a. Risk Corridors Payment Methodology (§ 153.510(g)) To ensure the integrity of data used in risk corridors and MLR calculations, in prior guidance 10 we indicated that we would propose in the HHS Notice of Benefit and Payment Parameters for 2017 an adjustment to correct for any inaccuracies in risk corridors payment and charge amounts that could result from issuers reporting a certified estimate of cost-sharing reductions on the 2014 MLR and Risk Corridors Annual Reporting Form.11 The use of a certified estimate that is lower than the actual cost-sharing reductions provided would affect the MLR calculation and the risk corridors financial transfers by increasing incurred claims and allowable costs, thereby increasing the MLR and potentially increasing the risk corridors payment or lowering the risk 10 https://www.cms.gov/CCIIO/Resources/ Regulations-and-Guidance/Downloads/AdvanceCSR-Payment-and-RC-MLRsubmission_6192015.pdf. 11 https://www.cms.gov/CCIIO/Resources/ Regulations-and-Guidance/Downloads/AdvanceCSR-Payment-and-RC-MLRsubmission_6192015.pdf PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 corridors charge. We believe that requiring an update of these reported amounts through recalculation of the risk corridors and MLR amounts for the 2014 benefit year will be disruptive to the market and consumers, as well as administratively burdensome and difficult to operationalize for issuers and HHS. Therefore, consistent with our earlier guidance, we are proposing to add a new paragraph (g) to the risk corridors payment methodology set forth in § 153.510 to propose that if the issuer reported a certified estimate of 2014 cost-sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting Form that is lower than the actual cost-sharing reductions provided (as calculated under § 156.430(c) for the 2014 benefit year, which will take place in the spring of 2016), HHS would make an adjustment to the amount of the issuer’s 2015 benefit year risk corridors payment or charge measured by the full difference between the certified estimate reported and the actual cost-sharing reductions provided as calculated under § 156.430(c) in order to address the impact of the inaccurate reporting on the risk corridors and MLR calculations for the 2014 benefit year. We seek comment on this proposal. b. Risk Corridors Data Requirements (§ 153.530) Due to the fact that the actual value of cost-sharing reductions provided by an issuer was not available in time for risk corridors and MLR reporting for 2014, for the purpose of adjusting allowable costs in the risk corridors calculation and incurred claims in the MLR calculation for 2014, HHS instructed issuers to report the amount of the cost-sharing reduction portion of the advance payments received by the issuer for 2014 (to the extent not reimbursed to the provider furnishing the item or service).12 Additionally, issuers were permitted to report a certified estimate of the amount of costsharing reductions provided in 2014 (to the extent not reimbursed to the provider furnishing the item or service) in their risk corridors and MLR reporting for the 2014 benefit year. We propose to amend § 153.530 to add a new paragraph (b)(2)(iii) to require an issuer to adjust the costsharing reduction amount it reports on its 2015 risk corridors and MLR forms by the difference (if any) between the reported cost-sharing reduction amount used to adjust allowable costs and 12 https://www.cms.gov/CCIIO/Resources/ Regulations-and-Guidance/Downloads/AdvanceCSR-Payment-and-RC-MLRsubmission_6192015.pdf E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules incurred claims on the 2014 MLR Annual Reporting Form and the actual cost-sharing reductions provided by the issuer for the 2014 benefit year (as calculated under § 156.430(c) for the 2014 benefit year, which will take place in the spring of 2016). Issuers must report the amount as calculated under § 156.430(c) when reporting risk corridors and MLR for the applicable benefit year. As discussed elsewhere in this preamble, we are proposing to modify the issuer data reporting requirements in § 153.710(h)(1)(iii) to reflect this change. In addition, in the May 23, 2012 Premium Stabilization Rule (77 FR 17220), we defined ‘‘allowable costs’’ to reference the MLR term ‘‘incurred claims’’ and to include quality improvement activity expenditures as defined in the MLR rule. Incurred claims, as defined in § 158.140 for the MLR program, are generally comprised of claims incurred during the reporting year and paid through the applicable run-out period beyond the end of the year, plus the liabilities and reserves estimating claims incurred during the reporting year but still unpaid at the end of the run-out period, with certain other adjustments. Thus, the MLR definition of incurred claims relies only on reserves and liabilities at the end of the reporting year, rather than a trued up year-overyear change in reserves and liabilities. In the MLR calculation, these drawbacks are mitigated to some extent because the MLR calculation is based on 3 years of data, and consequently the estimates of unpaid claims are trued up over the following 2 years. However, because the risk corridors calculation is based on only a single year of data, an issuer’s estimate of unpaid claims is never trued up, and consequently any inaccuracy in these estimates can have a significant impact on the accuracy of the risk corridors payment or charge calculation. Therefore, to preserve the integrity of the risk corridors program, we propose to amend § 153.530 to add a new paragraph (b)(2)(iv) to require issuers to adjust the claims reported as allowable costs for the 2015 and later benefit years by the amount by which the issuer’s estimate of unpaid claims for the preceding benefit year exceeded (or fell below) the actual payments that the issuer made after the date of the estimate for claims attributable to the preceding benefit year. For example, if in calculating its 2014 allowable costs, an issuer overestimated the amount of claims it incurred in 2014 that were unpaid as of March 31, 2015, then under this proposal, in calculating its 2015 allowable costs, the issuer would be VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 required to subtract the amount by which its March 31, 2015 claims estimate exceeded the actual payments for 2014 claims that the issuer made between March 31, 2015 and June 30, 2016 (the claims reserves and liabilities valuation dates for the 2014 and 2015 benefit years, respectively). We seek comment on the most appropriate way to true up estimates of unpaid claims for 2016. For example, we could provide for a 2017 payment or charge (calculated with 2018 MLR), provide for a simplified true-up process, require that the 2016 estimate be based on actual 2014 and 2015 amounts, or provide for no true-up at all in the final year. 5. Distributed Data Collection for the HHS-Operated Programs a. Interim Dedicated Distributed Data Environment Reports (§ 153.710(d)) Effective for the 2016 benefit year, we propose deleting § 153.710(d), which sets forth an interim discrepancy reporting process by which an issuer must notify HHS of any discrepancy it identifies between the data to which the issuer has provided access to HHS through its dedicated distributed data environment (that is, an issuer’s EDGE server) and the interim dedicated distributed data environment report, or 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. Many issuers viewed the interim discrepancy process for the 2014 benefit year as an additional burden and an administrative reporting exercise that they had to complete in order to preserve their appeal rights. The process also required significant resources and extensive support from HHS. Additionally, the information collected during the 2014 interim formal discrepancy process largely focused on the problems that issuers were encountering with the data submission process, as opposed to issues involving the dedicated distributed data environment report matching the data the issuer made accessible in its environment. HHS is committed to working with issuers prior to the data submission deadline to address any data issues so that reinsurance payment and risk adjustment transfer calculations can be made accurately and timely. After the initial submission period and prior to the data submission deadline (that is, April 30 of the year following the applicable benefit year), issuers should identify any problems that the issuer is PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 75511 experiencing in loading complete and accurate data; HHS must know about these data issues during this period to assist issuers in addressing these issues prior to the data submission deadline and in advance of reinsurance payment and risk adjustment transfer calculations. Throughout the data collection period, HHS will continue to maintain a help desk to assist issuers with data submission errors and to provide technical assistance. We believe that removing the requirement to file an interim discrepancy report starting in the 2016 benefit year will alleviate the administrative burden on issuers and HHS, as well as streamline outreach and communications during the data submission window. In light of this proposal, we propose to remove any cross-references to the interim discrepancy reporting process currently codified at § 153.710(d) in §§ 153.710 and 156.1220. We also propose conforming amendments to redesignate paragraph (e) as paragraph (d), as well as to revise and redesignate paragraph (f) as (e). We seek comment on this proposal and the proposed effective date. b. Evaluation of Quality and Quantity of EDGE Data Submissions (§ 153.710(f)) Under § 153.740(b), if an issuer of a risk adjustment covered plan fails to provide HHS with access to the required data in a dedicated data environment such that HHS cannot apply the applicable Federally certified risk adjustment methodology to calculate the risk adjustment payment transfer amount for the risk adjustment covered plan in a timely fashion, HHS will assess a default risk adjustment charge. Similarly, under §§ 153.420 and 153.740(a), an issuer of a reinsuranceeligible plan will forfeit reinsurance payments it otherwise might have received if the issuer fails to establish a dedicated data environment or fails to meet certain data requirements. HHS released guidance on April 24, 2015, entitled ‘‘Evaluation of EDGE Data Submissions’’ describing the approach it would use, starting with data submissions for the 2014 benefit year, to evaluate whether an issuer provided access in a dedicated data environment to data that was sufficient for HHS to calculate reinsurance payments and apply the HHS risk adjustment methodology.13 The approach evaluated the sufficiency of an issuer’s data in terms of the quantity and quality of the data. In this rulemaking, we propose to 13 https://www.cms.gov/CCIIO/Resources/ Regulations-and-Guidance/Downloads/EDGEguidance-42415-final.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75512 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules codify this practice for future benefit years to support the integrity of payments and charges made under the HHS-operated risk adjustment program and payments under the reinsurance program, both of which depend upon the submission of accurate and complete data by issuers to their EDGE servers. Consistent with the approach for review of 2014 benefit year data, to determine if an issuer meets data quantity standards, HHS would compare an issuer’s self-reported baseline data on its total enrollment and claims counts by market to the issuer’s data submitted to its dedicated data environment. An issuer with a low enrollment count following the submission deadline would be subject to a default risk adjustment charge under § 153.740(b). An issuer with a low claims count following the submission deadline would be subject to a default risk adjustment charge if the default charge is lower than the charge it would have received through the risk adjustment transfer calculation. Additionally, an issuer with either a low enrollment count or a low claims count would forgo reinsurance payments for any claims that it failed to submit. HHS proposes to set forth in guidance, on an annual basis, the appropriate threshold by which HHS will deem data sufficient as to quantity for a given benefit year. HHS will also specify in guidance the format and timeline for submission of baseline data to HHS. To determine if an issuer meets the data quality standards required for HHS to calculate reinsurance payments and apply the HHS risk adjustment methodology, HHS proposes to perform an outlier analysis using select metrics that target reinsurance data quality and risk adjustment data quality. For the 2014 benefit year, HHS used the following five key metrics: Percentage of all enrollees with at least one HCC; average number of conditions per enrollee with at least one HCC; issuer average risk score; percentage of individual market enrollees with reinsurance payments; and average reinsurance payment per enrollee for which the issuer would receive reinsurance payments. Similar to data quantity, HHS plans to describe in guidance, on an annual basis, the metrics used for a given benefit year. An issuer may be assessed a risk adjustment default charge if it does not meet data quality standards on any of the risk adjustment metrics and may forfeit reinsurance payments it might otherwise have received if it does not meet data quality standards for any of the reinsurance metrics. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 HHS would conduct these data quality and quantity analyses after the deadline for submission of data specified in § 153.730 (that is, April 30, of the year following the applicable benefit year). In § 153.710, we propose to add a paragraph (f). In the new paragraph (f), we propose to specify that HHS will assess default risk adjustment charges based on these analyses no later than the date of the notification provided by HHS under § 153.310(e) (that is, June 30 of the year following the applicable benefit year); and to describe the responsibilities of issuers in relation to the quality and quantity analyses. In § 153.710(f)(1), we propose to codify the requirement for issuers to provide baseline data on their total enrollment and claims counts by market, in a format and on a timeline that we intend to specify in guidance. In § 153.710(f)(2), we propose that if HHS identifies a data anomaly that would cause the data that a risk adjustment covered plan or a reinsurance-eligible plan made available through a dedicated data environment to fail HHS’s quality thresholds, the issuer may, within 10 calendar days of receiving notification of the anomaly, submit an explanation of the anomaly for HHS to consider in determining whether the issuer met the reinsurance and risk adjustment data requirements. HHS expects to perform informal data sufficiency analyses throughout the data submission process. Issuers are encouraged to provide explanations and corrected enrollment or claims counts at any time during the data submission process. The timeframe we propose in § 153.710(f)(2) would apply to the final data sufficiency analyses only, which are performed following the deadline for submission of data specified in § 153.730 (that is, April 30, of the year following the applicable benefit year). We seek comment on this proposal. c. Data Requirements (§ 153.710(g)) We are proposing to make conforming amendments to the introductory language at § 153.710(g)(1) to remove the cross-references to the interim discrepancy reporting process currently codified at § 153.710(d). However, because we have learned in the first year of the implementation of the premium stabilization and Exchange financial assistance programs that flexibility is often needed in reporting the amounts on risk corridors and MLR forms, we also propose that HHS have the ability to modify these instructions in subregulatory guidance. Our intent in issuing any such guidance would be to avoid having the application of the instructions in exceptional PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 circumstances lead to unfair or misleading financial reporting. We propose to capture this flexibility through a new proposed paragraph at § 153.710(g)(3). We also propose to change § 153.710(g)(1)(iii) to require an issuer to report the amount of cost-sharing reductions calculated under § 156.430(c) in its annual MLR and risk corridors report, regardless of whether the issuer had any unresolved discrepancy under § 156.1210, or whether the issuer had submitted a request for reconsideration under § 156.1220(a)(1)(v). Additionally, consistent with the process outlined in § 153.710(g)(2), we propose to require an issuer to adjust the cost-sharing reduction amount it reports on its 2015 risk corridors and MLR forms by the difference (if any) between the reported cost-sharing reduction amount used to adjust allowable costs and incurred claims on the 2014 MLR Annual Reporting Form and the amount of costsharing reductions as calculated under § 156.430(c) for the 2014 benefit year. Consistent with the approach currently outlined in § 153.710(g)(2), we propose to amend this paragraph to require an issuer to report any adjustment made or approved by HHS for any risk adjustment payment or charge, reinsurance payment, costsharing reduction payment to reflect actual cost-sharing reduction amounts received, or risk corridors payment or charge, where the adjustment has not been accounted for in a prior MLR and Risk Corridors Annual Reporting Form in the next following year. By way of example, if an issuer’s risk adjustment charges or payments are adjusted as a result of the administrative appeals process, the issuer should adjust these reported amounts in the next MLR and risk corridors reporting cycle, after the appeal has been resolved. Similarly, if HHS makes changes to an issuer’s risk adjustment charges or payments after the risk corridors and MLR reporting cycle has closed for the applicable reporting year, the issuer should adjust these reported amounts in the next MLR and risk corridors reporting cycle to account for the difference between the reported amounts and the amounts actually received or paid for the previous benefit year. However, if an issuer is notified about the modification during an open MLR and risk corridors submission period, it must report the modified amounts in that open reporting cycle. We also propose to clarify in § 153.710(g)(1)(iii) that cost-sharing reduction amounts to be reported under this section must exclude amounts reimbursed to providers of services or E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules items. This clarifying language is consistent with how the instructions for cost-sharing reductions amounts are reported under § 153.530(b)(2)(iii) (risk corridors data requirements) and § 158.140(b)(iii) (MLR data requirements). Lastly, we propose to revise paragraph (g)(1)(iv) to require that for medical loss ratio reporting only, issuers should report the risk corridors payment to be made or charge assessed by HHS, as reflected under § 153.510. jstallworth on DSK7TPTVN1PROD with PROPOSALS d. Good Faith Safe Harbor In the second Program Integrity Rule, we finalized § 153.740(a), which permits HHS to impose civil money penalties upon issuers of risk adjustment covered plans and reinsurance-eligible plans for failure to adhere to certain standards relating to their dedicated distributed data environments. In the preamble to that rule, we stated that if we are able to determine that an issuer of a risk adjustment covered plan or reinsuranceeligible plan is making good faith efforts to comply with the standards set forth in § 153.740(a), consistent with our policy codified at § 156.800(c), we would not seek to impose CMPs for noncompliance with those standards during 2014 (78 FR 65061). In the 2016 Payment Notice (80 FR 10780), we extended the good faith safe harbor to the 2015 calendar year, and stated that we would not apply the good faith safe harbor to non-compliance with dedicated distributed data environment standards applicable during the 2016 calendar year, even where the noncompliance relates to data for the 2015 benefit year. As we have previously said, we are not proposing to extend the good-faith safe harbor. Starting in the 2016 calendar year and beyond, civil money penalties may be imposed if an issuer of a risk adjustment covered plan or reinsurance-eligible plan fails to establish a dedicated distributed data environment in a manner and timeframe specified by HHS; fails to provide HHS with access to the required data in such environment in accordance with § 153.700(a) or otherwise fails to comply with the requirements of §§ 153.700 through 153.730; fails to adhere to the reinsurance data submission requirements set forth in § 153.420; or fails to adhere to the risk adjustment data submission and data storage requirements set forth in §§ 153.610 through 153.630, even if the issuer has made good faith efforts to comply with these requirements. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 e. Default Risk Adjustment Charge (§ 153.740(b)) In the second Program Integrity Rule and the 2015 Payment Notice, HHS indicated that a default risk adjustment charge will be assessed if an issuer does not establish a dedicated distributed data environment or submits inadequate risk adjustment data. In the 2016 Payment Notice, we established how a default risk adjustment charge will be allocated among risk adjustment covered plans. 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 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 other reliable data sources. In the 2015 Payment Notice, we determined that we would calculate Cn—the PMPM amount for a plan— equal to the product of the Statewide average premium (expressed as a PMPM amount) for a risk pool and the 75th percentile plan risk transfer amount expressed as a percentage of the respective Statewide average PMPM premiums for the risk pool. The nationwide percentile would reflect only plans in States where HHS is operating the risk adjustment program and would be calculated based on the absolute value of plan risk transfer amounts. The PMPM amount determined using the method described here would be multiplied by the noncompliant plan’s enrollment, as determined using the sources finalized in the second final Program Integrity Rule, to establish the plan’s total default risk adjustment charge. For the second year of risk adjustment, the 2015 benefit year, we are proposing to calculate Cn in the same manner, but increased to the 90th percentile plan risk transfer amount expressed as a percentage of the respective Statewide average PMPM premiums for the risk pool. We believe that the 75th percentile was reasonable for the initial year of risk adjustment, as PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 75513 we did not yet know the distribution of risk adjustment transfers and issuers were more likely to experience technical difficulties in establishing a dedicated distributed data environment. In the second year of risk adjustment, now that issuers have set up EDGE servers and participated in the calculation of risk adjustment transfers, we believe that adjusting the default charge upwards to the 90th percentile of plan risk transfer amounts expressed as a percentage of the respective Statewide average PMPM premiums for the risk pool will encourage continued compliance with risk adjustment data submission requirements. We are concerned that, absent this change, some issuers may prefer receiving a default charge at the 75th percentile over participating in the risk adjustment program; a default charge at this level lacks sufficient deterrent value. In contrast, we believe the proposed 90th percentile default charge will adequately incentivize issuers to participate in the risk adjustment program. We seek comment on this approach. For the 2016 benefit year, we propose a separate calculation of Cn for issuers where En Statewide, in the individual and small group markets combined, is 500 billable member months or less. For these issuers, we are proposing to calculate Cn, or the PMPM charge for a plan, as 14 percent of premium, which we have calculated as the mean charge as a percent of premium of issuers with 500 billable member months or fewer in the 2014 benefit year in the small group market. We are basing the charge itself on the experience of small group issuers in the 2014 benefit year, as we believe that individual market issuers are more likely to set up an EDGE server because of the availability of reinsurance. Limiting the applicability in the 2016 benefit year of this default charge to issuers with 500 billable member months or fewer is intended to ensure that the only issuers with this option are ones that are so small that their removal from the overall risk adjustment risk pool would have a minimal impact on transfers nationwide. In 2014, approximately 125 issuers would have had fewer than 500 member months in the individual and small group markets combined. Of those approximately 125 small issuers, 80 were assessed risk adjustment charges greater than the proposed default charge of 14 percent of premium PMPM. Those charges amounted to less than 0.09 percent of total risk adjustment charges assessed nationally. Assuming every one of those issuers elect to accept the proposed 14 percent default risk charge, and none of E:\FR\FM\02DEP2.SGM 02DEP2 75514 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS the small issuers that owed risk adjustment payments, or with charges below 14 percent of premium PMPM, did so (which we believe unlikely, due to the administrative expenses of setting up an EDGE server), the assessment of the proposed 14 percent of premium default charge on those 80 issuers (and only those 80 issuers) would have resulted in a 0.05 percent (that is, one twentieth of one percent) reduction in risk adjustment charges collected nationally. Because issuers of this size are immaterial to the overall risk adjustment risk pools and have a disproportionately high operational burden to comply with risk adjustment data submission requirements, we believe that a separate default charge for these issuers would promote efficiency and data quality in the risk adjustment program. We propose to establish this risk adjustment default charge as the mean charge in the small group for these small issuers, or 14 percent of statewide average premium PMPM, to compensate on average for the absence of these immaterial amounts in the affected risk pools. We intend that this policy would apply only to the very smallest issuers, in recognition of the disproportionately high operational burden on these issuers, and seek comment on this approach. f. Insolvent Issuers We are aware that a health insurance issuer may become insolvent or exit a market during a benefit year. In some cases, another entity, such as another issuer or liquidator may take over the issuer’s operations, or a State guaranty fund may become responsible for paying claims for the insolvent issuer. In some instances when this occurs, both the entity seeking to acquire business from an insolvent issuer and the insolvent issuer lack a full year’s data to submit for the risk adjustment or reinsurance programs. To address this concern, we propose to clarify that an entity acquiring or entering into another arrangement with an issuer to serve the current enrollees under a plan, or a State guaranty fund that is responsible for paying claims on behalf of the insolvent issuer, with substantially the same terms may accrue the previous months of claims experience for purposes of risk adjustment and reinsurance to fully reflect the enrollees’ risk and claims costs. We propose the ‘‘substantially the same’’ standard because we understand that in many of these situations an acquiring entity’s platform may require some adjustments to the plan arrangements. To meet this standard would require the carryover of VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 accumulators for deductibles and annual limitations on cost sharing. If the ‘‘substantially the same’’ standard is met, and the insolvent issuer and acquiring entity agree that the acquiring entity will accrue the previous months of claims experience, the acquiring entity must take responsibility for submitting to HHS complete and accurate claims and baseline information for that benefit year (including data from the insolvent issuer) in accordance with HHS’s operational guidance. We also recognize that guaranty funds may not meet all of the requirements to be considered a risk adjustment covered plan or reinsurance eligible plan (for example, they may not meet the definition of ‘‘health insurance issuer’’), and so we propose to permit a guaranty fund to participate in those programs notwithstanding these definition, to the extent it has taken over liability for a risk adjusted covered plan or reinsurance eligible plan during a benefit year. We seek comment on these policies, including with respect to permissible ways in which the acquiring entity’s arrangements may differ and other ways of ensuring the submission of the data necessary for HHS to calculate the risk adjustment financial transfer amounts and the reinsurance payment amounts when another party will take over operations of the insolvent issuer, or pay claims on behalf of the insolvent issuer, during a benefit year. We also solicit comments on whether additional flexibility is needed with respect to the data submission requirements for the reinsurance and risk adjustment programs, such as with respect to the definition of a ‘‘paid claim’’ to account for situations when an issuer is unable to pay claims for covered services, for example, due to insolvency. E. Part 154—Health Insurance Issuer Rate Increases: Disclosure and Review Requirements 1. General Provisions This section includes proposals related to the rate review program under part 154. The amendments in this part would apply to rates filed during the 2016 calendar year for coverage effective on or after January 1, 2017. 2. Disclosure and Review Provisions a. Rate Increases Subject To Review (§ 154.200) In § 154.200, we propose amending paragraph (c)(2) to provide that a rate increase for single risk pool coverage 14 14 The phrase ‘‘single risk pool coverage’’ is used to describe non-grandfathered health insurance PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 beginning on or after January 1, 2017 meets or exceeds the applicable threshold for review if the average increase, including premium rating factors described in § 147.102 of the subchapter, for all enrollees weighted by premium volume for any plan within the product meets or exceeds the applicable threshold. We previously provided that a rate increase for single risk pool coverage beginning on or after January 1, 2017 meets or exceeds the applicable threshold if an increase in the plan-adjusted index rate for any plan within the product meets or exceeds the applicable threshold. We propose this change under paragraph (c)(2) because the planadjusted index rate does not reflect changes to adjustments for rating area, family size, age, or tobacco factors. Therefore, it would be possible for an issuer to change geographic rating area factors such that members in a certain rating area receive a larger increase, even though the overall rate increase would not be subject to rate review because the plan-adjusted index rate does not increase by 10 percent or more. We believe the annual review of unreasonable increases must include review of the underlying rates that are used to develop the premiums, as opposed to the actual premiums themselves. We do not expect this to result in additional rate increases that meet the threshold, but will measure rate increases in plans more accurately. We seek comment on this proposal. Consistent with the approach finalized in the 2016 Payment Notice (80 FR 10781), we note that starting with rates filed for single risk pool coverage beginning on or after January 1, 2017, rate increases would be calculated at the plan level as opposed to the product level when determining whether an increase is subject to review. We are not proposing any changes to that policy. b. Submission of Rate Filing Justification (§ 154.215) Under § 154.215, health insurance issuers are currently required to submit a Rate Filing Justification for all single coverage in the individual or small group (or merged) market that is subject to all of the single risk pool provisions at 45 CFR 156.80. Although we are proposing that student health insurance plans be subject to the index rating methodology specified in 45 CFR 56.80(d), such plans would not have to be included in an issuers’ individual (or merged) market single risk pool. Rather they could be included in one or more separate risk pools. Student health plan issuers submit the required rate filing information using the Rate Review Justification Template rather than the Unified Rate Review Template. Student health insurance plans are referred to as ‘‘non-single risk pool coverage’’ for purposes of the requirements established in 45 CFR part 154. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules risk pool coverage products (including new or discontinued products) when any plan within a product in the individual or small group (or merged) market is subject to a rate increase, regardless of the size of the increase. This requirement was established, in part, to carry out the Secretary’s responsibility, in conjunction with the States, under section 2794(b)(2)(A) of the PHS Act to monitor premium increases of health insurance coverage offered through an Exchange and outside of an Exchange beginning in 2014. However, our experience with the rate review program has shown that premium increases cannot reasonably be monitored without evaluating the net effect on premiums, including the impact of rate decreases, plans with unchanged rates, and new plans’ rates. We therefore propose to revise paragraphs (a) and (b) to address this gap in information. We propose to revise paragraph (a)(1) to require health insurance issuers to submit the Unified Rate Review Template (also known as Part I of the Rate Filing Justification) for all single risk pool coverage products in the individual or small group (or merged) market, regardless of whether any plan within a product is subject to a rate increase. We note that most issuers offering single risk pool coverage already submit a Unified Rate Review Template because: • A plan within the issuer’s single risk pool has a rate increase; • The issuer’s State regulator requires submission of the Rate Filing Justification for all rates; • The issuer is seeking to offer a QHP through a Federally-Facilitated or State Partnership Exchange; or • The issuer chooses to use the Rate Filing Justification to satisfy the requirement to annually set an index rate. We believe that requiring the submission of the Unified Rate Review Template, rather than requiring submission of a new document, will reduce administrative burden for issuers while providing the Secretary and the States with the information necessary to more effectively carry out their responsibilities to monitor premium increases inside and outside of Exchanges. We propose to revise paragraph (a)(2) so that issuers must submit a Unified Rate Review Template and an Actuarial Memorandum (also known as Parts I and III of the Rate Filing Justification) when a plan within a product is subject to a rate increase. The Unified Rate Review Template and Actuarial Memorandum are submitted at the risk VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 pool level, but the requirement to submit is based on increases at the plan level. This is the current policy but we are revising regulatory text for clarity. We propose to revise paragraph (a)(3) to provide that all three parts of the Rate Filing Justification (that is, the Unified Rate Review Template, a written description justifying a rate increase, and the Actuarial Memorandum) must be filed when a plan within a product has a rate increase that is subject to review. The information is submitted at the risk pool level, but the requirement to submit is based on increases at the plan level. This is the current policy but we are revising regulatory text for clarity. We also propose to revise paragraph (b) to provide that a Unified Rate Review Template, a written description justifying a rate increase, and rate filing documentation (commonly referred to as an Actuarial Memorandum) are part of a Rate Filing Justification. One or all of those parts of the Rate Filing Justification may be required by CMS and the State, depending on the change, if any, to plan rates. We also propose to remove and reserve paragraph (c), as it would be unnecessary in light of the proposed amendments to paragraphs (a) and (b). These proposed amendments and clarifications will ensure that the rate review process is transparent regardless of whether coverage is included in the individual market or small group market single risk pool, and will allow HHS and the States to more effectively monitor premium increases for coverage offered through or outside of an Exchange. Furthermore, the proposed amendments and clarifications will introduce consistent submission requirements for all issuers of single risk pool coverage, regardless of whether the issuer is increasing, decreasing, or maintaining rates. We also remind issuers of student health insurance plans to use the Rate Review Justification (RRJ) module of the Health Insurance Oversight System (HIOS) to submit the required rate filing information.15 Even though we propose to amend § 147.145 in this rulemaking (see III.C.4. of this preamble) to extend the index rate setting methodology to student health insurance plans for plan years beginning on or after January 1, 2017, we do not propose to change the form or manner of submission of rate filing information under 45 CFR part 154 for such coverage. In States without 15 See Rate Review Student Health Plans FAQ published on August 12, 2015. https:// www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Rate_Review_Student_ Health_Plans_FAQ_20150812_Final.pdf. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 75515 Effective Rate Review programs, issuers would be required to submit Preliminary Justifications for all student health insurance plans with rate increases subject to review to CMS by the earlier of the date that the issuer files the Preliminary Justification with the State or a date prior to implementation of the rate increase. In the States where CMS enforces the Public Health Service Act requirements, as amended by the Affordable Care Act, issuers must submit rate filings for student health insurance plan coverage for (a) rate increases of 10 percent or more into the HIOS RRJ module; and (b) rate increases of less than 10 percent into the HIOS Document Collection Form Filing Module. We propose to permit the Secretary to specify in guidance, as provided under § 154.220(b)(2), different submission deadlines for Rate Filing Justifications for single risk pool coverage plans versus non-single risk pool coverage plans. In accordance with paragraph (h)(2), we intend to make public on an HHS Web site the information contained in parts I and III of each Rate Filing Justification that is not a trade secret or confidential commercial or financial information, as defined in HHS’ Freedom of Information Act regulations, 45 CFR 5.65. We intend to disclose such information for all single risk pool coverage proposed rate increases (regardless of whether the increase is subject to review) and for all final rate increases. We note that we currently make such information available to the public for single risk pool coverage proposed rate increases subject to review and all final rates. The disclosure of information for all single risk pool coverage proposed rate increases, rather than only proposed rate increases subject to review, will provide the public with more comprehensive information and increase the transparency of the rate setting process. c. Timing of Providing the Rate Filing Justification (§ 154.220) Section 154.220 establishes time frames for required rate filing justifications. As previously discussed, we propose to collect a Unified Rate Review Template for all single risk pool coverage products in the individual or small group (or merged) market, regardless of whether any plan within a product is subject to a rate increase. We propose technical changes to the language in this section to align with this proposal to remove references to rate increases and clarify that the time frames listed pertain to all single risk E:\FR\FM\02DEP2.SGM 02DEP2 75516 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules pool coverage products with or without rate changes. Specifically, we propose to revise the introductory language to this section with accompanying edits to the language in paragraphs (b) and (b)(1). jstallworth on DSK7TPTVN1PROD with PROPOSALS d. Submission and Posting of Final Justifications for Unreasonable Rate Increases (§ 154.230) We propose a technical change to paragraph (c)(2)(i). That paragraph currently includes a reference to § 154.215(i) but no such paragraph exists. We propose to fix the typographical error and change the cross reference to § 154.215(h). e. CMS’s Determinations of Effective Rate Review Programs (§ 154.301) Section 154.301 sets forth criteria for evaluating whether a State has an Effective Rate Review Program in the individual and small group (or merged) markets. In the 2016 Payment Notice (80 FR 10783), we provided that the criteria for determining whether a State has an Effective Rate Review program includes making rate information available to the public at a uniform time (rather than on a rolling basis) for proposed rate increases subject to review and all final rate increases, including those not subject to review (as applicable) for single risk pool coverage in the relevant market segment and without regard to whether coverage is offered through an Exchange or outside of an Exchange. As this was the first year for these uniform posting requirements, and because the uniform timelines were published by CMS well into 2015, CMS understands that some States had significant challenges in meeting the specified timelines for rates filed for coverage beginning on or after January 1, 2016. For rates filed for coverage beginning on or after January 1, 2017, we intend to make a proposed timeline for release of rate information for single risk pool coverage available for comment from States and other stakeholders in December and finalize the timeline no later than March. We believe the comment process will allow States and other stakeholders to identify in advance any challenges that the timeline may pose and allow us to make adjustments as may be necessary to accommodate State-specific needs and other considerations. We also believe this process will better support States that seek to operate an Effective Rate Review program in compliance with these requirements for rates filed for coverage beginning on or after January 1, 2017. We consider the posting of proposed rate increases that are subject to review and the posting of all final rate increases VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (including those not subject to review) for single risk pool coverage at a uniform time a criterion for a State retaining its designation as having an Effective Rate Review Program. We will continue to monitor States to ensure that single risk pool coverage rate filings are posted at a uniform time, in the relevant market segment and without regard to whether the coverage is offered through or outside of an Exchange, in accordance with these requirements and guidance issued by CMS. reasonably expected the employer will employ on business days in the current calendar year. We do not propose to change the applicability of the counting methodology under 4980H(c)(2) of the Code to these definitions, but we propose to eliminate language about the timing of its applicability, which will no longer be relevant when this rule is finalized. F. Part 155—Exchange Establishment Standards and Other Related Standards Under the Affordable Care Act a. Election To Operate an Exchange After 2014 (§ 155.106) We propose to modify the timeframes for submission and approval of documentation specifying how an Exchange established by a State or a regional Exchange meets the Exchange approval standards (that is, the Exchange Blueprint). Based on our experience over the last two open enrollment periods, we believe the current Exchange Blueprint application deadlines for States intending to operate a State Exchange do not sufficiently balance the need to provide States with time to adequately prepare their Blueprint applications against the need to ensure HHS has sufficient time to accurately assess a State’s progress and ability to timely build the necessary Exchange information technology. In our experience, the process for seeking approval to operate a State Exchange involves substantial technical assistance and collaboration between HHS and the State in developing plans to transition from one Exchange operational model and information technology infrastructure to another, including key milestones, deadlines, and contingency measures. Since the completion of some of these key milestones and deadlines would need to occur prior to the submission of the Blueprint application, we propose that we will make that technical assistance available and initiate the transition planning process following submission of a declaration letter from the State, as provided for in the Blueprint approval process. The declaration letter would serve as formal notification to HHS of a State’s intent to pursue approval to operate a State Exchange, and will initiate coordination between the State and HHS on a transition plan. We would seek a declaration letter approximately 21 months prior to the beginning of the SBE’s first annual enrollment and 9 months prior to the beginning of an SBE–FP’s first annual open enrollment. In § 155.106(a)(2), we propose to require States that are establishing a State Exchange (not including a State Exchange using the Federal platform for 1. General Provisions a. Definitions (§ 155.20) In § 155.20, we propose to amend the definition of ‘‘applicant’’ for the small group market so that the term also includes an employer seeking eligibility to purchase coverage through a SHOP, without necessarily enrolling in that coverage themselves. The current definition of an applicant contemplates an employer, employee, or former employee seeking eligibility for enrollment in a QHP through the SHOP for himself or herself. For consistency with our existing regulations governing the SHOP application process at §§ 155.710 and 155.715 and for consistency with how the small group market typically works, we propose that the term applicant also include an employer who is seeking eligibility to purchase coverage through a SHOP, but who is not seeking to enroll in that coverage himself or herself. We also propose to amend § 155.20 to add a definition for ‘‘Federal platform agreement’’ to apply to this part. We propose to define a Federal platform agreement to mean an agreement entered into by a State Exchange and HHS, under which the State Exchange elects to rely on the Federal platform to carry out select Exchange functions. We also propose to modify the definitions of a ‘‘small employer’’ and ‘‘large employer’’ at § 155.20 to align with the Protecting Affordable Coverage for Employees Act (Pub. L. 114–60), which was recently enacted, as further described in the preamble for § 144.103. As described in that section of the preamble, consistent with section 1304(b) of the Affordable Care Act and section 2791(e) of the PHS Act, we propose to codify that in the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a large employer or a small employer be based on the average number of employees that it is PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 2. General Standards Related to the Establishment of an Exchange E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules select functions) to submit an Exchange Blueprint at least 15 months prior to the date the Exchange proposes to begin open enrollment as a State Exchange. We also propose in § 155.106(a)(3) to increase the time that the State must have in effect an approved or conditionally approved Exchange Blueprint from 6.5 months to 14 months prior to the date the Exchange proposes to begin open enrollment as a State Exchange. We recognize that in some situations the open enrollment period may not have been established when Blueprints are due. Therefore, we propose in paragraph (a)(5), if the open enrollment period for the year the State intends to begin operating an SBE has not been established, a State should assume open enrollment will begin on the same date as open enrollment is to begin for the year in which they are submitting the Blueprint. We propose to revise paragraph (b) to clarify that HHS will operate the Exchange if a State Exchange ceases operations. We propose to add a paragraph (c) to establish requirements for a State that elects to operate an SBE–FP. These States must submit an Exchange Blueprint (or submit an update to an existing approved Exchange Blueprint) at least 3 months prior to the date open enrollment is to begin for the State as an SBE–FP; and must have in effect an approved, or conditionally approved, Exchange Blueprint and operational readiness assessment at least 2 months prior to the date on which the Exchange proposes to begin open enrollment as an SBE–FP. If the State Exchange has a conditionally approved Exchange Blueprint application, we propose that it would not be required to submit a new Blueprint application, but must submit any significant changes to that application for HHS approval at least 3 months prior to the date on which the Exchange proposes to begin open enrollment as an SBE–FP. Upon receipt of approval or conditional approval of the Exchange Blueprint or amended Blueprint, and prior to the start of the open enrollment period, we propose that these States must execute a Federal platform agreement and be required to coordinate with HHS on a transition plan. Lastly, we want to be clear that we are only proposing changes to the timelines for submission of the Blueprint application. We are not otherwise proposing any modifications to the information and documents that States must submit as part of the actual Exchange Blueprint application. We seek comment on these proposals. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 b. Additional Required Benefits (§ 155.170) Section 1311(d)(3)(B) of the Affordable Care Act permits a State, at its option, to require QHPs to cover benefits in addition to the essential health benefits, but requires a State to make payments, either to the individual enrollee or to the issuer on behalf of the enrollee, to defray the cost of these additional State-required benefits. In the 2016 Payment Notice, we instructed States to select a new EHB basebenchmark plan to take effect beginning for the 2017 plan year. The final EHB base-benchmark plans selected as a result of this process have been made publicly available.16 Section 1311(d)(3)(B) of the Affordable Care Act refers to situations in which the State requires QHPs to cover benefits. That section is not specific to State statutes and we have interpreted that section to apply not only in cases of legislative action but also in cases of State regulation, guidance, or other State action. Therefore, we propose to reword § 155.170(a)(2) to make clear that a benefit required by the State through action taking place on or before December 31, 2011 is considered an EHB. In the EHB Rule (78 FR 12837 through 12838), we discussed § 155.170(a)(2), which implements section 1311(d)(3)(B) of the Affordable Care Act. In our discussion of that provision, we provided that ‘‘State-required benefits enacted on or before December 31, 2011 (even if not effective until a later date) may be considered EHB, which would obviate the requirement for the State to defray costs for these State-required benefits.’’ This policy continues to apply. Therefore, benefits required by a State through action taking place after December 31, 2011 that directly apply to the QHPs are not considered EHB (unless enactment is directly attributable to State compliance with Federal requirements, as discussed below). Although benefits requirements enacted by States after December 31, 2011 that directly apply to the QHP and that were not enacted for purposes of compliance with Federal requirements are not considered EHB,17 the basebenchmark plan might cover some of those non-EHB. Nonetheless, issuers 16 Available at https://downloads.cms.gov/cciio/ FinalListofBMPs_15_10_21.pdf. 17 The 2016 Payment Notice provides that States are not expected to defray the cost of State-required benefits enacted on or after January 1, 2012 that were required in order to comply with new Federal requirements. (80 FR 10749, 10813 (Feb. 27, 2015)). PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 75517 must treat those benefits as they would other non-EHB, such as those identified in § 156.115(d) 18 and the State must defray the cost. We propose to codify this interpretation in § 155.170(a)(2). We seek comment on this proposal. At § 155.170(a)(3), we currently require the Exchange to identify which additional State-required benefits, if any, are in excess of EHB. We propose to amend paragraph (a)(3) to designate the State, rather than the Exchange, as the entity that identifies which Staterequired benefits are not EHB. We propose this change because we believe insurance regulators are generally more familiar with State-required benefits. We believe each State should determine the appropriate State entity best suited to identify newly required benefits. Additionally, for consistency of terminology, we propose to amend paragraph (a)(3) to replace the reference to ‘‘in excess of EHB’’ to ‘‘in addition to EHB.’’ In current § 155.170(c)(2)(iii), we require QHP issuers to quantify the cost attributable to each additional Staterequired benefit and report their calculations to the Exchange. We also propose to designate the State as the entity that receives issuer calculations in paragraph (c)(2)(iii). Since the State is required by statute to remit a payment to an enrollee or issuer, we believe the calculation should be sent directly to the State rather than to the Exchange. We seek comment on this proposal. The 2016 Payment Notice specified that a State may need to supplement habilitative services if the basebenchmark plan does not cover such services. If a State supplements the base-benchmark plan, there is no requirement to defray the cost of the benefits added through supplementation, as long as the State imposes the requirement to comply with the Affordable Care Act or another Federal requirement. Examples of such Federal requirements include: Requirements to provide benefits and services in each of the 10 categories of EHB; requirements to cover preventive services; requirements to comply with the Mental Health Parity and Addiction Equity Act; and the removal of discriminatory age limits from existing benefits. In some States, the base-benchmark plan may be a large group (nonMedicaid HMO) or State employee plan. We have received questions regarding State-required benefits that are 18 An issuer of a plan offering EHB may not include routine non-pediatric dental services, routine non-pediatric eye exam services, long-term/ custodial nursing home care benefits, or nonmedically necessary orthodontia as EHB. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75518 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules embedded in those large group (nonMedicaid HMO) base-benchmark plans. As stated earlier in this section, if the State-required benefit in question was required by State action after December 31, 2011, applies directly to the QHP, and was not enacted for purposes of compliance with Federal requirements, the benefit is not considered EHB, even if the benefit is embedded in the basebenchmark plan. However, a benefit required only in the large group market and reflected in a large group basebenchmark plan is not an EHB for QHPs offered in the individual or small group markets because such a benefit requirement does not apply directly to those plans, and to the extent it is included in the base-benchmark plan, it may be ‘‘substituted’’ for, in accordance with § 156.115(b). Therefore, the State would not have to defray the cost of individual and small group market QHPs covering State-required benefits that are required in the large group market only. (However, to the extent the State permits large group plans to be sold as QHPs through the State’s Exchange, the State would have to defray the cost of the large group QHPs covering the mandated benefit.) We note that plans subject to the EHB requirements offered in the individual and small group markets in those States would have to be substantially equal to the base-benchmark plan, and therefore may cover the State-required benefit as EHB since it is embedded in the basebenchmark plan. In such a case, the benefit is an EHB because it is covered by the base-benchmark plan, but the cost of coverage by individual and small group QHPs does not have to be defrayed, because the State-required benefit does not apply directly to those QHPs. Some States have imposed new benefit requirements only on individual and small group plans that are not QHPs such that only individual and small group plans sold outside the Exchange must cover the State-required benefit. We note that a QHP generally may be sold outside the Exchanges in which case it would be subject to the new benefit requirements. States are cautioned, however, that imposing different benefit mandates depending on a plan’s status as a QHP or because it is sold through the Exchange may violate section 1252 of the Affordable Care Act. Under this section, State standards or requirements implementing, or related to, standards or requirements in title I of the Act must be applied uniformly within a given insurance market. Thus, if a State requires that non-QHPs in the VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 individual or small group market provide any benefits, under section 1252, the State must require QHPs sold through the Exchange to provide those same benefits, and consistent with our earlier stated policy at § 155.170(a)(2), States would generally be required to defray the cost of QHPs providing the required benefits if they were required through State action taking place after December 31, 2011. As noted earlier, the Protecting Affordable Coverage for Employees Act, enacted in October 2015, amended the definitions of small employer and large employer in section 1304(b) of the Affordable Care Act and section 2791(e) of the PHS Act such that a small employer is generally 19 an employer with 1–50 employees, with the option for States to expand the definition of small employer to 1–100 employees.20 We have proposed amendments to § 144.103 to reflect these statutory amendments. Several States have enacted benefit requirements that would apply to small group insurance plans offered to employers with 51–100 employees, but not to employers with 1–50 employees. This may arise because the Staterequired benefit was designed to apply only in the large group market when the large group market included employers with more than 50 employees, but the State has since then availed itself of the option to define a ‘‘small employer’’ as an employer with 1–100 employees. Section 2702 of the PHS Act and § 147.104 generally require an issuer to offer all approved products to any individual or employer in the market for which the product was approved and to accept any individual or employer that applies for any approved product in a given market. If a State elects to expand the definition of small employer so that it covers employers with 1–100 employees, all products approved for sale in the small group market (defined by the State as 1–100 employees) generally must be offered to employers with 1–100 employees. This effectively 19 Prior to enactment of the Protecting Affordable Coverage for Employees Act, small employer was defined to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed 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. In case of plan years beginning before January 1, 2016, a State was able to elect to define small employer by substituting ‘‘50 employees’’ for ‘‘100 employees’’. For ease of reference with regard to this section, we will refer to employers as having 1–50 or 1–100 employees. 20 States that elect to extend the small employer definition were requested to notify CMS of their election by October 30, 2015 at marketreform@ cms.hhs.gov. PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 means that existing State benefits mandates that apply to insurance coverage sold to employers with 51–100 employees would then effectively also apply to all products sold to employers with 1–100 employees. As long as the benefit was required by State action taken on or before December 31, 2011, the expansion of coverage would not trigger the requirement to defray, because the expansion was required to comply with Federal guaranteed availability laws. If a State does not opt to expand the definition of small employer to 1–100 employees, then any State-required benefits applicable in the large group market (including to employers with 51–100 employees) would continue to not apply in the small group market. If a State-required benefit was imposed by State action taking place January 1, 2012 or later, then defrayal generally would be required. 3. General Functions of an Exchange a. Functions of an Exchange (§ 155.200) We propose to amend § 155.200(a) to include reference to subpart M, which establishes oversight and program integrity standards for State Exchanges, and subpart O, which establishes quality reporting standards for Exchanges. These subparts were not originally incorporated into this paragraph because they were finalized after § 155.200(a) was finalized. We propose incorporating them now because we view them as providing important safeguards for consumers. We also propose to amend § 155.200 by adding a paragraph (f) to address SBE–FPs. This arrangement is intended to permit a State Exchange to leverage existing Federal assets and operations by relying on HHS services for performing certain Exchange functions, particularly eligibility and enrollment functions. The SBE–FP would also rely on HHS to perform certain consumer call center functions and casework processes, and maintain related information technology infrastructure. The SBE–FP would retain responsibility for plan management functions, subject to certain rules requiring the SBE–FP to require its QHP issuers to comply with certain FFE standards governing QHPs and issuers (as proposed in § 155.200(f)(2) of this proposed rule), and consumer support functions, subject to FFE rules governing consumer assistance functions. Under § 155.200(f)(1), we propose that a State may receive approval or conditional approval to operate an SBE– FP under proposed § 155.106(c) and meet its obligations under § 155.200(a) E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules by entering into a Federal platform agreement with HHS. In the Federal platform agreement, an SBE–FP would indicate its decision to rely on HHS for services related to the individual market Exchange, the SHOP Exchange, or both the individual market and SHOP Exchanges. The Federal platform agreement would specify the Federal services on which the State Exchange relies, the user fee that HHS will collect from issuers in that SBE–FP for the Federal services (as specified at § 156.50(c)(2)), and other mutual obligations relating to the arrangement, including obligations for the transfer of data. We intend to release the Federal platform agreement at a later date. We note that at this point the Federal services on which SBE–FPs may rely will come as an entire package. That is, HHS will not at this time offer a ‘‘menu’’ of Federal services from which an SBE– FP may select some but not other services on the Federal platform. However, we will explore the feasibility of doing so in the future. The Federal platform agreement would also specify expectations between the State and HHS across various operational areas. Although the SBE–FPs would retain primary, formal responsibility for overseeing QHPs and issuers, we propose under § 155.200(f)(2) to require an SBE–FP to establish and oversee certain requirements for its QHPs and QHP issuers that are no less strict than the requirements that apply to QHPs and QHP issuers on an FFE. We propose these requirements to include the existing and proposed standards under the following sections: § 156.122(d)(2) (the requirement for QHPs to make available published up-to-date, accurate, and complete formulary drug list on its Web site in a format and at times determined by HHS); § 156.230 (network adequacy standards); § 156.235 (essential community providers standards); § 156.298 (meaningful difference standards); § 156.330 (changes of ownership of issuers requirement); § 156.340(a)(4) (QHP issuer compliance and compliance of delegated and downstream entities requirements); § 156.705 (maintenance of records standard), § 156.715 (compliance reviews standard); and § 156.1010 (casework standards). Applying the changes of ownership issuers’ requirement to SBE–FPs will help fulfill the Federal platform’s need for data and technical consistency. It will ensure that HHS maintains the most accurate and updated information to present to consumers through its branded platform, HealthCare.gov. HHS must be able to monitor and provide VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 regulatory oversight over change in control situations. Change in control has a significant operational impact on the Federal platform and requires the expenditure of considerable technical resources to effectuate the change throughout the multiple systems that constitute the Federal platform. Applying the formulary drug list, network adequacy, meaningful difference, and essential community providers standards will ensure that all QHPs on HealthCare.gov meet a consistent minimum standard and that consumers obtaining coverage as a result of applying through Healthcare.gov are guaranteed plans that meet these minimum standards. For example, all QHP issuers must meet a ‘‘reasonable access’’ network adequacy standard, but FFE issuers must meet additional network adequacy standards. It is important to HHS that shoppers at HealthCare.gov do not enroll in plans that fail to meet these minimum standards, so we propose that SBE–FPs that wish to rely on the HealthCare.gov platform require its issuers to meet these minimum standards as well, since their consumers are obtaining the coverage through HealthCare.gov. SBE–FPs may exceed these minimum standards to the extent they do not present display problems on HealthCare.gov. Although the SBE–FPs are legally distinct from FFEs, this difference will not always be apparent to Healthcare.gov consumers. Not having these standards apply may lead to consumer confusion and dilution of consumer goodwill with respect to the plans available on HealthCare.gov. The States would conduct QHP certification reviews for these standards. Applying the QHP issuer compliance and compliance of delegated or downstream entities requirement at § 156.340(a)(4), which involves the maintenance of records standards of § 156.705 and the compliance reviews for QHP issuers standards of § 156.715, will ensure that the SBE–FP has authority at least as strong as that possessed by HHS to enforce compliance with these standards and will ensure that the SBE–FP and HHS are able to access all records upon request from the issuers in the SBE–FPs. Applying the casework standards at § 156.1010 will ensure that the SBE–FP and HHS can respond to problems about which they both bear responsibility. Since SBE–FPs must use the Health Insurance Casework System (HICS) for handling consumer casework and meeting casework resolution timeframes, the SBE–FP would not be overseeing casework processes. However, as with all other Exchange PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 75519 types, State Departments of Insurance will still handle appropriate consumer complaints related to issuers in their States. For cases that are Exchangerelated, or those in which the consumer has chosen to contact the Exchange even after contacting the appropriate Department of Insurance, HHS would oversee the routing and resolution of casework. HHS’ intent is to work collaboratively with the SBE–FP, similar to how HHS works with SPMs. Finally, we propose under § 155.200(f)(3) that HHS will work with SBE–FPs to enforce the FFE standards listed under § 155.200(f)(2) directly against SBE–FP issuers or plans, when the SBE–FP is not substantially enforcing one or more of these requirements. In that circumstance, we propose that HHS would have the authority to suppress a plan under § 156.815. This will ensure that consumers shopping for coverage on HealthCare.gov have access to plans that are in compliance with the FFE standards with which SBE–FP issuers must comply as a condition of offering QHPs through a State Exchange on the Federal platform. We intend to work closely and collaboratively with SBE–FPs, and believe that our collaboration with States that currently use the Federal platform with respect to enforcement matters has been close and effective. We seek comments on all aspects of this proposal. b. Consumer Assistance Tools and Programs of an Exchange (§ 155.205) We propose two amendments to § 155.205 to address functions of an SBE–FP. First, because an SBE–FP relies on HHS to carry out call center functions, we propose to amend § 155.205(a) to exempt an SBE–FP from the requirement to operate a toll-free call center, and instead provide that an SBE–FP must at a minimum operate a toll-free telephone hotline to respond to requests for assistance to consumers in their State, in accordance with section 1311(d)(4)(B) of the Affordable Care Act. We seek comments on this proposal. Secondly, we propose to amend § 155.205(b) by adding paragraph (b)(7) to provide that an SBE–FP must, at a minimum, operate an informational Internet Web site through which consumers can also be directed to HealthCare.gov, in accordance with section 1311(d)(4)(C) of the Affordable Care Act. We seek comments on this proposal. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75520 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules c. Standards Applicable to Navigators under §§ 155.210 and 155.215; Standards Applicable to Consumer Assistance Tools and Programs of an Exchange under § 155.205(d) and (e); and Standards Applicable to NonNavigator Assistance Personnel in an FFE and to Non-Navigator Assistance Personnel Funded through an Exchange Establishment Grant (§§ 155.205, 155.210 and 155.215) We have previously established a range of consumer assistance programs to help consumers apply for and enroll in QHPs and insurance affordability programs through the Exchange. These consumer assistance programs include the Navigator program described at section 1311(d)(4)(K) and (i) of the Affordable Care Act and § 155.210. Among other duties, section 1311(i)(3) of the Affordable Care Act requires Navigators to conduct public education activities to raise awareness of the availability of QHPs; to distribute fair and impartial information concerning enrollment in QHPs and the availability of Exchange financial assistance under the Affordable Care Act; to facilitate enrollment in QHPs; and to provide referrals to certain State agencies for any enrollee with a grievance, complaint, or question regarding their health plan, coverage, or a determination under such plan or coverage. We have also established under § 155.205(d) and (e) that each Exchange must provide consumer assistance, outreach, and education functions. These must include a Navigator program and can include a non-Navigator assistance personnel program. We propose to amend § 155.210(e) by adding a new paragraph (e)(8) that would require Navigators in all Exchanges to provide targeted assistance to serve underserved and/or vulnerable populations within the Exchange service area. Section 155.210(b)(2)(i) already requires Navigators to have expertise in the needs of underserved and vulnerable populations. We believe that also requiring Navigators to provide targeted assistance to underserved and vulnerable populations is critical to improving access to health care for communities that often experience a disproportionate burden of disease. In keeping with the spirit of section 1311(i)(3)(A) of the Affordable Care Act, which directs that Navigator entities must conduct public education activities to raise awareness about the availability of QHPs, we believe that Navigators should focus their outreach and enrollment assistance efforts on harder-to-reach populations and the remaining uninsured, to build increased VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 awareness of the coverage options available through the Exchange and to help new consumers find affordable health coverage that meets their needs. Because the characteristics of underserved and vulnerable populations may vary over time and from region to region, we do not propose to define and identify these populations for all Exchanges. Instead, we propose to permit each Exchange to define and identify the underserved and vulnerable populations in its service area, and to update these definitions as necessary. This could include an Exchange allowing its Navigator grantees to propose, for the Exchange’s approval (for example, in their grant applications), which communities to target. In Federally-facilitated Exchanges, we would identify populations as vulnerable or underserved through our Navigator Funding Opportunity Announcements, and would give FFE Navigator grant applicants an opportunity to propose additional communities to target during the grant application process. Vulnerable or underserved populations might include, for example, populations that are disproportionately without access to coverage or care, or are at a greater risk for poor health outcomes. We propose that these would be the primary criteria used to identify such populations within the FFEs. Members of these populations could be identified by age groups, demographics, disease, geography, or other characteristics as defined or approved by the Exchange. We believe reaching vulnerable or underserved populations is important to increasing awareness among the remaining uninsured of the coverage options available through the Exchange, helping new consumers find affordable coverage that meets their needs, and narrowing health disparities. In Federally-facilitated Exchanges, our proposal would apply beginning with the application process for Navigator grants awarded in 2018. We seek comment on all aspects of this proposal, including on how Exchanges, including the FFEs, should identify vulnerable or underserved populations in their service areas, and on the appropriate process and timeframes under which these populations would be identified. Additionally, although we have not proposed to extend this requirement to certified application counselors and non-Navigator assistance personnel subject to § 155.215, we encourage certified application counselors and non-Navigator assistance personnel to prioritize reaching and assisting the vulnerable and underserved populations PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 identified by the Exchange in their communities, and we recognize that many of these assisters already focus their efforts on such populations. We note that Navigators would not exclusively be serving these target populations, since all Navigators are required to assist any consumer seeking assistance. As we have explained in prior rulemakings, we interpret Navigators’ duty to provide fair and impartial information and services under § 155.210(e)(2) to require that all Navigators should have the ability to help any individual who seeks assistance, even if that consumer is not a member of the community or group the Navigator intends to target (see 78 FR 20589; 78 FR 42830; 79 FR 30270; 79 FR 30278). In § 155.210, we propose to add paragraph (e)(9) to specify that Navigators in all Exchanges would be required to help consumers with certain other types of assistance, including post-enrollment assistance. This proposal is designed to ensure that consumers would have access to skilled assistance beyond applying for and enrolling in health coverage, including, for example, assistance with the process of filing Exchange eligibility appeals or with applying through the Exchange for exemptions from the individual shared responsibility payment, providing basic information about reconciliation of premium tax credits, and understanding basic concepts related to using health coverage. Section 1311(i)(3)(D) of the Affordable Care Act and § 155.210(e)(4) already expressly require Navigators to provide post-enrollment assistance by referring consumers with complaints, questions, or grievances about their coverage to appropriate State agencies. This suggests that Congress anticipated that consumers would need assistance beyond the application and enrollment process, and that Navigators would maintain relationships with consumers and be a source of such assistance. Consistent with the requirements under section 1311(i)(3)(B) and (C) of the Affordable Care Act that Navigators distribute fair and impartial information concerning enrollment in QHPs and facilitate enrollment in QHPs, and pursuant to the Secretary’s authority under section 1321(a)(1)(A) of the Affordable Care Act, we propose at § 155.210(e)(9)(i) to require Navigators in all Exchanges to help consumers with the process of filing appeals of Exchange eligibility determinations. We are not proposing to establish a duty for Navigators to represent a consumer in an appeal, sign an appeal request, or file an appeal on the consumer’s behalf. We believe that helping consumers E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules understand Exchange appeal rights when they have received an adverse eligibility determination, and assisting them with the process of completing and submitting appeal forms, would help to facilitate enrollment and would help consumers obtain fair and impartial information about enrollment, including information about available exemptions from the individual shared responsibility payment that would help consumers decide whether or not to enroll in coverage. We would interpret this proposal to include helping consumers file appeals of eligibility determinations made by an Exchange (including SHOP Exchanges) related to enrollment in a QHP, special enrollment periods, exemptions from the individual shared responsibility payment that are granted by the Exchange, participation as an employer in a SHOP, and any insurance affordability program, including eligibility determinations for Exchange financial assistance, Medicaid, the Children’s Health Insurance Program (CHIP), and Basic Health Programs. We also propose at § 155.210(e)(9)(ii) to require that Navigators in all Exchanges help consumers understand and apply for exemptions from the individual shared responsibility payment that are granted by the Exchange. We believe that it would be consistent with the Secretary’s rulemaking authority under section 1321(a)(1)(A) of the Affordable Care Act to require Navigators to provide assistance with exemptions that the Exchange must grant under section 1311(d)(4)(H) of the Affordable Care Act. Additionally, we believe that this proposal is consistent with Navigators’ duty under section 1311(i)(3)(B) of the Affordable Care Act to distribute fair and impartial information concerning enrollment in QHPs, since impartial information concerning the availability of exemptions from the individual shared responsibility payment would help consumers make informed decisions about whether or not to enroll in coverage. This assistance with Exchangegranted exemptions would include informing consumers about the requirement to maintain minimum essential coverage and the individual shared responsibility payment; helping consumers fill out and submit Exchange-granted exemption applications and obtain any necessary forms prior to or after applying for the exemption; explaining what the exemption certificate number is and how to use it; and helping consumers understand and use the Exchange tool to find bronze plan premiums. This duty VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 would also include explaining the general purpose of Internal Revenue Service (IRS) Form 8965 to consumers, consistent with IRS published guidance on the topic, and explaining how to access this form and related tax information on irs.gov. Navigators may not provide tax assistance or interpret tax rules within their capacity as Exchange Navigators, and this proposal would not require Navigators to help consumers apply for exemptions claimed through the tax filing process. We would interpret this proposal, however, to require helping consumers generally understand the availability of exemptions claimed through the tax filing process and how to obtain them. This interpretation would help ensure that Navigators share information about the full scope of possible exemptions while not providing actual tax assistance or tax advice. We request comment on whether we should require that, prior to providing this assistance and information, Navigators provide consumers with a disclaimer stating that they are not acting as tax advisers and cannot provide tax advice within their capacity as Exchange Navigators. We seek comment on whether such a disclaimer would help avoid consumer misunderstandings and detrimental reliance on Navigator advice, or whether it might be unnecessary, impractical, or cause consumer confusion. We also seek comment on whether a Navigator’s duty to provide assistance with filing exemption applications under proposed § 155.210(e)(9)(ii) and filing appeals of exemption application denials under proposed § 155.210(e)(9)(i) should be limited, for example, to consumers who have applied for or have been denied coverage or financial assistance, or whether another limitation should apply. We are cognizant of the resource limitations that Navigators and their funding agencies may face, and do not want to reduce the assistance available to consumers seeking coverage, as opposed to those who only seek to avoid the individual shared responsibility penalty. At the same time, we recognize that consumers may be unable to access coverage for a wide variety of reasons, including their financial circumstances, coverage gaps, and other personal or systemic obstacles, and want to be sure that experienced help is available so that these consumers are fully aware of and can access their exemptions options. We seek comment on these issues. In addition, we propose at § 155.210(e)(9)(iii) to require Navigators to help consumers with the Exchange- PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 75521 related components of the premium tax credit reconciliation process, such as by ensuring they have access to their Forms 1095–A and receive general, high-level information about the purpose of this form that is consistent with published IRS guidance on the topic. This proposal stems from the requirement under section 1311(i)(3)(B) of the Affordable Care Act that Navigators distribute fair and impartial information concerning the availability of the premium tax credits under section 36B of the Code. Consumers who receive advance payments of the premium tax credit may need help with a variety of issues related to reconciliation. Navigators would be required to help consumers obtain IRS Forms 1095–A and 8962, and the instructions for both, and to provide general information, consistent with applicable IRS guidance, about the significance of the forms. Navigators would also be required to help consumers understand (1) how to report errors on the Form 1095–A; (2) how to find silver plan premiums using the Exchange tool; and (3) the difference between advance payments of the premium tax credit and the premium tax credit and the potential implications for enrollment and reenrollment of not filing a tax return and reconciling any advance payments of the premium tax credit that were paid on consumers’ behalf. As noted above, Navigators may not provide tax assistance or advice, or interpret tax rules and forms within their capacity as Exchange Navigators, but their expertise related to the consumer-facing aspects of the Exchange, including eligibility and enrollment rules and procedures, uniquely qualifies them to help consumers understand and obtain information from the Exchange that is necessary to the premium tax credit reconciliation process. Because this proposal would include a requirement that Navigators provide consumers with information and assistance understanding the availability of IRS resources, Navigators would be expected to familiarize themselves with the availability of materials on irs.gov, including the Form 8962 instructions, IRS Publication 974 Premium Tax Credit, and relevant FAQs, and to refer consumers with questions about tax law to those resources or to other resources, such as free tax return preparation assistance from the Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. Again, we request comment on whether we should require that, prior to providing this information and assistance, Navigators provide E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75522 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules consumers with a disclaimer stating that they are not acting as tax advisers and cannot provide tax advice within their capacity as Exchange Navigators. To help ensure consumers have seamless access to Exchange-related tax information beyond the basic information that Navigators can provide, we propose at 155.210(e)(9)(v) that Navigators be required to refer consumers to licensed tax advisers, tax preparers, or other resources for assistance with tax preparation and tax advice related to consumer questions about the Exchange application and enrollment process, exemptions from the requirement to maintain minimum essential coverage and the individual shared responsibility payment, and premium tax credit reconciliation. We interpret the Navigator duties to facilitate enrollment in QHPs in section 1311(i)(3)(C) of the Affordable Care Act, to distribute fair and impartial information concerning enrollment in QHPs under section 1311(i)(3)(B) of the Affordable Care Act, and to conduct public education activities to raise awareness about the availability of QHPs in section 1311(i)(3)(A) of the Affordable Care Act to include helping consumers understand the kinds of decisions they will need to make in selecting coverage, and how to use their coverage after they are enrolled. We have previously stated that one overall purpose of consumer assistance programs is to help consumers become fully informed and health literate. (See 79 FR 30276.) To improve consumers’ health literacy related to coverage generally, and to ensure that individual consumers are able to use their coverage meaningfully, we propose at § 155.210(e)(9)(iv) to require Navigators in all Exchanges to help consumers understand basic concepts related to health coverage and how to use it. These activities could be supported through the use of existing resources such as the HHS ‘‘From Coverage to Care’’ initiative, which we encourage Navigators to review, and which are now available in multiple languages at https://marketplace.cms.gov/c2c. This proposal would improve consumers’ access to health coverage information not just when selecting a plan, but also when using their coverage. For example, Navigators could help consumers understand (1) key terms used in health coverage materials, such as ‘‘deductible’’ and ‘‘coinsurance,’’ and how they relate to the consumer’s health plan; (2) the cost and care differences between a visit to the emergency department and a visit to a primary care provider under the coverage options available to the consumer; (3) how to VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 identify in-network providers to make and prepare for an appointment with a provider; (4) how the consumer’s coverage addresses steps that often are taken after an appointment with a provider, such as making a follow-up appointment and filling a prescription; and (5) the right to coverage of certain preventive health services without cost sharing. We anticipate that this assistance would vary depending on each consumer’s needs and goals. We invite comment on whether we should provide additional specificity for Navigators related to this proposed duty to help consumers understand and use their coverage, and if so, which additional topics should be included. We note that under § 155.215(b)(2), Navigators in FFEs must already be trained on the tax implications of enrollment decisions, the individual responsibility to have health coverage, eligibility appeals, and rights and processes for QHP appeals and grievances. To ensure that Navigators in all States receive training in every area for which there would be a corresponding Navigator duty, we propose to require all Exchanges, including State Exchanges, to provide training that would prepare Navigators for the additional areas of responsibility proposed in this rulemaking. In proposed § 155.210(b)(2)(v) through (viii), therefore, we would require Exchanges to develop and disseminate training standards to be met by all entities and individuals carrying out Navigator functions to ensure expertise in: The process of filing appeals of Exchange eligibility determinations; general concepts regarding exemptions from the requirement to maintain minimum essential coverage and the individual shared responsibility payment, including the application process for exemptions granted through the Exchange, and IRS resources on exemptions; the Exchange-related components of the premium tax credit reconciliation process and IRS resources on this process; and basic concepts related to health coverage and how to use it. We note that providing assistance with certain other post-enrollment issues already falls within the scope of existing required Navigator duties. We interpret the requirement to facilitate enrollment in a QHP under section 1311(i)(3)(C) of the Affordable Care Act, and the requirement at § 155.210(e)(2) to provide information that assists consumers with submitting the eligibility application, to include assistance with updating an application for coverage through an Exchange, including reporting changes in PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 circumstances and assisting with submitting information for eligibility redeterminations. Additionally, Navigators are already permitted, but not required, to help with a variety of other post-enrollment issues. For example, we interpret the requirements in § 155.210(e)(1) and (2) that Navigators conduct public education activities to raise awareness about the Exchange and provide fair and impartial information about the application and plan selection process to mean that Navigators may educate consumers about their rights with respect to coverage available through an Exchange, such as nondiscrimination protections, prohibitions on preexisting condition exclusions, and preventive services available without cost-sharing. We also interpret these requirements, together with the requirement in section 1311(i)(3)(B) of the Affordable Care Act that Navigators distribute fair and impartial information concerning enrollment in QHPs, and the availability of Exchange financial assistance, to mean that Navigators may assist consumers with questions about paying premiums for coverage or insurance affordability programs enrolled in through an Exchange. Finally, we interpret the requirement in section 1311(i)(3)(D) of the Affordable Care Act and § 155.210(e)(4) to provide referrals for certain post-enrollment issues to mean that Navigators may help consumers obtain assistance with coverage claims denials. We request comments on whether we should make any of the above interpretations explicit in the regulation and whether there are additional post-enrollment duties required or permitted by these provisions that should be made explicit as either required or simply permitted (but not required) duties, as well as whether there are other forms of postenrollment assistance that Exchanges should require Navigators to provide, commensurate with their general legal authority, but which are not already specifically required under our regulations. Although we have not proposed to extend any of the requirements under proposed § 155.210(e)(8) or (9) to nonNavigator assistance personnel subject to § 155.215, we note that the requirement to provide information that assists consumers with submitting the eligibility application under § 155.210(e)(2), which would include helping consumers report changes in circumstances and submit information for eligibility redeterminations, also applies to certain non-Navigator assistance personnel through § 155.215(a)(2)(i). We also note that E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules under § 155.215, the training requirements for these non-Navigator assistance personnel are the same as for Navigators in States with an FFE. We have also not proposed to extend any of these requirements to certified application counselors. However, nothing prevents non-Navigator assistance personnel or certified application counselors from helping with activities that are consistent with their existing regulatory duties. We request comments on whether we should extend these proposed requirements to help with postenrollment and other activities to these assisters. We propose to amend §§ 155.205(d) and 155.215(b)(1)(i) to specify that any individual or entity carrying out consumer assistance functions under § 155.205(d) and (e) or § 155.210, in both State Exchanges and FFEs, would be required to complete training prior to performing any assister duties, including before conducting outreach and education activities, as well as before providing application and enrollment assistance. Section 155.215(b), which establishes training standards for Navigators and nonNavigator assistance personnel in FFEs and for non-Navigator assistance personnel funded through Exchange Establishment grants under section 1311(a) of the Affordable Care Act, requires that these assisters must obtain certification by the Exchange prior to carrying out any consumer assistance functions under § 155.205(d) and (e) or § 155.210. We also propose to amend § 155.215(b)(1)(i) to specify that the consumer assistance functions referenced in that provision would include outreach and education activities. In addition, we propose to amend § 155.205(d) to specify that training would have to be completed not only before providing the assistance described in that paragraph, but also before conducting the outreach and education activities specified in paragraph (e). These proposals would require that Navigators, non-Navigator assistance personnel subject to § 155.215, and other entities and persons providing consumer assistance under § 155.205(d) and consumer outreach and education activities under § 155.205(e), complete training prior to carrying out any consumer assistance functions, including outreach and education activities. We note that nothing in the Exchange regulations prohibits individuals or organizations from conducting outreach about Exchanges and providing application and enrollment assistance without being trained and certified as VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 Navigators, non-Navigator assistance personnel, certified application counselors, or other kinds of Exchangeapproved assisters. However, this proposal would ensure that individuals and organizations do not perform any Exchange outreach and education activities or application and enrollment assistance while identifying as or holding themselves out to the public as Navigators, non-Navigator assistance personnel, or certified application counselors, prior to completing Exchange requirements, including training and certification. This proposal would also help ensure that Navigators and non-Navigator assistance personnel are providing accurate information when performing outreach and education activities. Section 155.210(d)(6) currently prohibits Navigators from providing to an applicant or potential enrollee any gifts unless they are of nominal value; or any promotional items that market or promote the products or services of a third party, when those promotional items are being used as an inducement for enrollment. Through a crossreference to § 155.210(d) in § 155.215(a)(2)(i) and a parallel provision in § 155.225(g)(4), this prohibition also applies to nonNavigator assistance personnel subject to § 155.215, and to certified application counselors. We have received questions indicating that there is general confusion about when gifts and promotional items can be provided to applicants and potential enrollees. To reduce this confusion, we propose to amend §§ 155.210(d)(6) and 155.225(g)(4) to specify that gifts of any value (including third-party promotional items of any value) should never be provided to applicants or potential enrollees as an inducement for enrollment. We also propose to specify that gifts that are not provided as an inducement for enrollment may be provided to applicants and potential enrollees if they do not exceed nominal value.21 This proposed nominal value restriction would apply both to each individual gift and to the cumulative value of multiple gifts, including promotional items, which are provided by these types of assisters to an applicant or potential enrollee. We further propose that the nominal value restriction on the cumulative value of multiple gifts would only apply to single encounters between the assister 21 We have previously defined ‘‘nominal value’’ as a cash value of $15 or less, or an item worth $15 or less, based on the retail purchase price of the item, regardless of the actual cost. (79 FR 15831 and 79 FR 30283). PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 75523 and an individual applicant or potential enrollee, and not to multiple encounters, so that assisters would not have to collect PII as a means of tracking the number and value of gifts provided to an individual consumer across multiple encounters, such as all encounters in a single calendar year or enrollment season. Since we anticipate that gifts or promotional items of a nominal value, such as pens, magnets or keychains, could be provided to consumers at outreach and education events or at other forums attended by members of the general public, we do not want to establish a nominal value restriction that would be difficult or burdensome for assisters to enforce, or that would require the unnecessary collection of PII from consumers. We would consider a single outreach or educational event to be a ‘‘single encounter’’; that is, assisters would not be permitted to provide multiple gifts to the same consumer at the same outreach event if the cumulative value of those gifts exceeded nominal value. We seek comments on all aspects of this proposal, including whether the nominal value restriction should apply to a single encounter with an individual consumer, as proposed, or whether a longer timeframe, such as all encounters with an individual consumer in a calendar year, in an enrollment season, or in total, would be preferable. Finally, to simplify the rule, we propose to define ‘‘gifts,’’ for purposes of §§ 155.210(d)(6) and 155.225(g)(4), to include gift items, gift cards, cash cards or cash, as well as promotional items that market or promote the products or services of a third party. We further propose to amend language in §§ 155.210(d)(6) and 155.225(g)(4) that currently provides that gifts, gift cards, or cash may exceed nominal value for the purpose of providing reimbursement for legitimate expenses incurred by a consumer in an effort to receive Exchange application assistance, such as travel or postage expenses. We propose to amend this language to indicate that the reimbursement of legitimate expenses, such as travel or postage expenses, when incurred by a consumer in an effort to receive Exchange application assistance, would not be considered a gift, and therefore, would not be subject to the proposed restrictions on providing gifts. Our proposal seeks to strike a balance between permitting these types of assisters to provide small gifts and promotional items as part of creative outreach and education strategies, while ensuring that gifts, including promotional items, are never provided to applicants and potential enrollees to E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75524 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules induce enrollment. We believe this outright prohibition on providing gifts and promotional items, of any value, to induce enrollment, is consistent with the duties of these assisters to provide information and services to consumers in a fair, accurate, and impartial manner, including clarifying the distinctions among health coverage options, and helping consumers make informed decisions during the health coverage selection process. We believe it would be inconsistent with these duties for an assister to try to influence the consumer’s decision about whether to enroll in coverage by providing them with a gift to induce enrollment. In addition, the duty of these assisters to provide information and services in a fair, accurate and impartial manner would make it inappropriate for them to engage in activities that give the appearance that they are endorsing, promoting, or marketing the products or services of third party business interests when performing their authorized activities and services. At the same time, we believe that any appearance that these assisters are endorsing, promoting, or marketing the products or services of a third party, is substantially mitigated if the items are only of nominal value and not provided to induce enrollment, since it is unlikely that gifts of a nominal value will influence a consumer’s health coverage selection and enrollment decisions. We also recognize that providing gifts, including promotional items, of a nominal value may help to attract applicants and potential enrollees to engage in a discussion with these assisters during an outreach event and encourage consumers to consider seeking Exchange application assistance. For these reasons, we do not want to entirely prohibit these types of assisters from using gifts and promotional items as part of their outreach efforts. Finally, we note that existing regulations under § 155.210(d)(7) already prohibit the use of Exchange funds to purchase gifts or gift cards, or promotional items that market or promote the products or services of a third party, that would be provided to any applicant or potential enrollee. We do not propose to amend this provision. We request comments on all aspects of our proposals. d. Ability of States To Permit Agents and Brokers To Assist Qualified Individuals, Qualified Employers, or Qualified Employees Enrolling in QHPs (§ 155.220) Section 1312(e) of the Affordable Care Act directs the Secretary to establish VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 procedures under which a State may permit agents and brokers to enroll qualified individuals and qualified employers in QHPs through an Exchange, and to assist individuals in applying for financial assistance for QHPs sold through an Exchange. Under § 155.220, we established procedures to support the States’ ability to permit agents and brokers to assist individuals, employers or employees with enrollment in QHPs offered through an Exchange, subject to applicable Federal and State requirements. At § 155.220(c), we established parameters for enrollment of qualified individuals through an Exchange with the assistance of an agent or broker. At § 155.220(c)(1), we established that an agent or broker who assists with enrollment through the Exchange must ensure completion of an eligibility verification and enrollment application through the Exchange Web site as described § 155.405. In § 155.220(c)(3), we established the standards that apply when a Web site of an agent or broker is used to complete the QHP selection. As described at § 155.220(d), an agent or broker that enrolls qualified individuals through an Exchange, or assists individuals in applying for Exchange financial assistance, must comply with the terms of a general agreement with the Exchange, as well as register with the Exchange and receive training in the range of QHP options and insurance affordability programs. In addition, all agents and brokers must execute the applicable privacy and security agreement required by § 155.260(b) to provide assistance with enrollment through the Exchange. In § 155.220(g), we established standards under which HHS may terminate an agent’s or broker’s general agreement with the FFEs for cause. We established that HHS may pursue termination with notice of an agent’s or broker’s agreement with the FFEs if, in HHS’s determination, a specific finding of noncompliance or pattern of noncompliance is sufficiently severe. As established, the termination for cause of the general agreement with notice means that after a 30-day opportunity to resolve the matter, HHS would take necessary steps to prohibit an agent or broker from assisting or enrolling individuals in a QHP offered through an FFE, or a web-broker’s ability to securely exchange information with HHS, if the matter is not resolved to the satisfaction of HHS. As of the date of termination, an agent or broker would no longer be registered with the FFEs and would not be able to assist with enrollment through the FFEs or exchange information with HHS. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 Certain obligations of the agent or broker would survive that termination, including the duty to protect and maintain the privacy and security of personally identifiable information (PII) it has created, collected, accessed, or acquired through its relationship with the FFEs. We established that an agent or broker may be considered noncompliant if HHS finds that the agent or broker violated: (a) Any standard specified under § 155.220; (b) any term or condition of its agreement with the FFEs required under paragraph (d) of this section, or if, the agent’s or broker’s FFE privacy and security agreements under § 155.260(b) are terminated; (c) any applicable State law; or (d) any other applicable Federal law. In § 155.220(h), we established a onelevel process through which an agent or broker may request reconsideration of HHS’s decision to terminate for cause an agreement required under § 155.220(d). We established that an agent or broker must submit a request for reconsideration to the HHS reconsideration entity within 30 calendar days of the date of the written termination notice from HHS. We established that the HHS reconsideration entity would provide the agent or broker with a written reconsideration decision within 30 calendar days of the date it receives the request for reconsideration. This decision constitutes HHS’s final determination. i. New Exchange Standards for WebBrokers As specified at § 155.220(c)(1), an agent or broker who assists with an enrollment through the Exchange must ensure that the applicant completes an eligibility verification and enrollment application through the Exchange Internet Web site. Under this standard, agents and brokers that use a nonExchange Web site to assist consumers in the QHP selection and enrollment process (‘‘direct enrollment’’ through a ‘‘web-broker’’) must redirect an applicant to go directly to the Exchange Web site to complete the application and receive an eligibility determination. HHS is considering an option under which an applicant could remain on the web-broker’s Web site to complete the application and enroll in coverage, and the web-broker’s Web site can obtain eligibility information from the Exchange to support the consumer in selecting and enrolling in a QHP with Exchange financial assistance. The intent is to have this information exchange occur through an Exchangeapproved web service as described below, enhancing the direct enrollment E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules process. This option would provide Exchanges offering direct enrollment and web-brokers more operational flexibility to expand front-end, consumer-facing channels for enrollment through a seamless consumer experience. HHS solicits comments related to the current consumer experience with webbrokers and the potential integration of the streamlined eligibility application if a non-FFE Web site is used for the entire process. We request comment on how much flexibility a web-broker should have relative to the consumer experience on its Web site, using the direct enrollment channel, to provide an end-to-end eligibility and enrollment experience. We propose that webbrokers be required to use the FFE single streamlined application without deviation from the language of the application questions and the sequence of information required for an eligibility determination or redetermination. This will ensure that the information gathered when an applicant completes an application on the Exchange Web site will also be collected to send to the Exchange for an eligibility determination or redetermination that is accurate and consistent across any channel used for enrollment. We seek comment on this standard. HHS is also considering how to ensure that consumers understand that they are applying for Exchange coverage, such as through specific branding or wording requirements if a non-FFE front-end Web site is used for the entire application and enrollment process, and we seek comment on this as well. Accordingly, we propose to revise § 155.220(c)(1) to ensure that an applicant who initiates enrollment directly with the web-broker for enrollment through the Exchange receives an eligibility determination for coverage through the Exchange Web site or through an Exchange-approved web service via the FFE single streamline application. This maintains the role of the Exchange in determining eligibility. We propose to adopt similar changes to the standards for the use of QHP issuer Web sites under § 156.265(b)(2)(ii). Please see section III.G.4.c for this accompanying preamble discussion. We seek comment on this proposal. We are also soliciting comments about the current agent and broker provisions in § 155.220 as applied to web-brokers. We are interested in feedback on consumer and agent/broker experiences with enrollment through web-brokers, any concerns with privacy and security of the information transmitted through web-brokers by expanding direct enrollment to incorporate the FFE single VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 streamlined application, and suggestions for improvements in the future, such as increased monitoring and oversight activities. For example HHS is considering expanding audits, requiring additional information display requirements (such as the lowest cost plan at each metal level) beyond those outlined in § 155.220(c)(3) to ensure that consumers understand basic information about cost and availability of qualified health plans, and requiring HHS approval of alternative enrollment pathway processes. Additional requirements to safeguard consumer information or enhancements to improve the consumer and web-broker experience are also being considered. These may include establishing more robust privacy and security requirements, requiring adoption of cyber security best practices, additional web-broker reporting requirements and specificity as to the collection and use of consumer information. We note that the current oversight provisions for the general agreement, registration, training, termination, and reconsideration in § 155.220(d) through (h), as well as the changes in paragraphs (f), (g), (j), and (k) proposed below, would apply to webbrokers. ii. New Standards for Termination of Agent and Broker Agreements With the FFEs We propose to amend existing paragraph (g)(2)(ii) that an agent or broker may be determined noncompliant if HHS finds that the agent or broker violated any term or condition of the agreement with the FFEs required under paragraph (d) of this section, or any term or condition of an agreement with the FFEs required under § 155.260(b). We propose to add paragraph (g)(5) to § 155.220(g) to address suspension or termination of an agent’s or broker’s agreements with the FFEs in cases involving potential fraud or abusive conduct. These cases would include cases in which there is an allegation of potential fraud or abusive conduct that HHS finds to be credible; or any report of potential fraud or abusive conduct made by a State or Federal agency or law enforcement. We propose to add this paragraph to give HHS authority to act quickly to terminate access to HHS systems in these instances to prevent further harm to consumers and to support the efficient and effective administration of the FFEs. We propose in § 155.220(g)(5)(i)(A) that if HHS reasonably suspects that an agent or broker may have engaged in fraud or abusive conduct using PII of Exchange applicants or enrollees, or in PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 75525 connection with an Exchange enrollment or application, HHS may suspend the agent’s or broker’s agreement and accompanying registration with the FFEs for up to 90 calendar days, with the suspension effective as of the date of the notice to the agent or broker. This would apply whether the activity or conduct in question was committed directly by the agent or broker, or through a third party who acts at the direction of or on behalf of the agent or broker. This immediate and temporary suspension would prohibit the agent or broker from assisting with or facilitating enrollment in coverage in a manner that constitutes enrollment through the FFEs, including enrollment through the FFE Application Programming Interface, while the investigation is conducted during this 90-day period. Immediate suspension is critical in these circumstances to stop additional potentially fraudulent enrollments through the FFE during the period of investigation. Although the agent or broker would not be provided with advance notice, we propose under § 155.220(g)(5)(i)(B) that the agent or broker may submit evidence to HHS to rebut the allegation during this 90-day period. If HHS determines that the agent or broker satisfactorily addresses the concerns at issue, HHS would lift the temporary suspension and notify the agent or broker. We further propose under § 155.220(g)(5)(i)(B) that failure to submit information during this 90-day period may result in termination of the agreement for cause effective immediately under § 155.220(g)(5)(ii). We propose in § 155.220(g)(5)(ii) that if HHS reasonably confirms the credibility of an allegation that an agent or broker engaged in fraud or abusive conduct using personally identifiable information of Exchange enrollees or applicants, or in connection with an Exchange enrollment or application, or is notified by a State or law enforcement authority of the State or law enforcement authority’s finding or determination of fraud or behavior that would constitute abusive conduct in such a circumstance, HHS will notify the agent or broker and terminate, immediately and permanently, the agent’s or broker’s agreements with the FFEs for cause. In contrast to termination for other violations listed in § 155.220(g), we propose that following an HHS reasonable confirmation of such an allegation or such a State or law enforcement notification, termination would occur without 30 days’ advance notice and would be effective upon the date of the termination notice. An agent or broker who engages in fraud or E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75526 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules abusive conduct may pose immediate harm to consumers and to HHS’s ability to properly administer the FFEs. Under this scenario, following the reasonable confirmation by HHS (that is, the FFE) of fraud or abusive conduct, HHS would notify the agent or broker of HHS’s termination action. We note that we would coordinate with OIG and other State and Federal agencies (including law enforcement) as appropriate when investigating these situations. Similar to any termination for cause described in paragraph (g)(1), any termination notice would include information on the agent’s or broker’s right to seek reconsideration as described in § 155.220(h). HHS currently works with States and local law enforcement to investigate and resolve suspected incidents of fraud. We note that termination proposed in § 155.220(g) only applies to the FFE agreement described in paragraph (d) of this section, and the agreements required under § 155.260(b)(2). While States remain the primary oversight authority for agents and brokers, HHS reserves the right to take any other permissible enforcement or remedial action against an agent or broker for violation of Federal requirements. In § 155.220(g)(5)(iii), we propose that during the 90-day suspension period, as well as following the termination of the FFE agreements for cause, the agent or broker would not be registered with the FFEs, or be permitted to assist with or facilitate enrollment of qualified individuals, qualified employers, or qualified employees through an FFE, or assist individuals in applying for Exchange financial assistance for QHPs. However, consistent with the FFE agreement described in § 155.260(b)(2), the agent or broker must continue to protect any PII accessed during the term of the agreement with the FFEs. Section 155.260(g) includes penalties for failure to continue protecting PII as described in the § 155.260(b)(2) agreement. For consistency with these proposed termination standards, we propose corresponding updates to paragraph (g)(4). We also propose to amend existing paragraph (f)(4) to remove the reference to paragraph (g) for further alignment of these regulatory provisions. We solicit comment on all aspects of these proposals, including: The appropriate length of time for the temporary suspension period under § 155.220(g)(5)(i); whether we should provide authority for HHS to suspend an agent’s or broker’s agreements with the FFEs for cause for conduct other than potential fraud or abusive conduct; and whether we should include a VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 provision permitting HHS to immediately terminate (that is, without the advance 30-day notice currently provided under § 155.220(g)(3)) an agent’s or broker’s agreements with the FFEs for cause for suspected conduct other than fraud or abusive conduct. We are also considering whether the notice requirements captured in § 155.220(f)(3)(i) that currently apply to agent or broker initiated terminations should also be extended to terminations for cause under § 155.220(g), including these proposed grounds for termination for cause under § 155.220(g)(5). In addition, see § 155.430 below for a discussion of proposals related to retroactive termination of coverage for consumers affected by potential fraudulent activity by a third party related to enrollment through the FFEs. iii. FFE Standards of Conduct for Agents and Brokers We propose adding a paragraph § 155.220(j) to establish standards of conduct for agents and brokers that assist consumers to enroll in coverage through the FFEs to protect consumers and ensure the proper administration of the FFEs. We are proposing these standards of conduct to protect against agent and broker conduct that is harmful towards consumers, or prevents the efficient operation of the FFEs. In § 155.220(j)(1)(i) through (iii), we propose to capture as part of these standards of conduct the requirements that an agent or broker that assists with or facilitates enrollment of qualified individuals, qualified employers, or qualified employees through an FFE, or assists individuals in applying for Exchange financial assistance for QHPs sold through the FFEs, must (i) have executed the required agreement under § 155.260(b)(2); (ii) be registered with the FFEs as described in paragraph (d)(1) of this section; and (iii) comply with the FFE standards of conduct proposed in this paragraph. We note that signing of the FFE agreement as well as all required registration steps must be completed prior to assisting with or facilitating enrollment of qualified individuals, qualified employers, or qualified employees through an FFE, or assisting individuals in applying for Exchange financial assistance for QHPs sold through the FFEs. In § 155.220(j)(2), we propose to capture as part of the standards of conduct the requirements that the agents and brokers described in paragraph (j)(1) must: (i) Provide consumers with correct information, without omission of material fact, regarding the FFEs, QHPs (including PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 SADPs 22) offered through the FFEs, and insurance affordability programs, and refrain from marketing or conduct that is misleading or coercive, or discriminates based on race, color, national origin, disability, age, sex, gender identity, or sexual orientation; (ii) provide the FFEs with correct information under section 1411(b) of the Affordable Care Act; (iii) obtain the consent of the individual, employer, or employee prior to assisting with or facilitating enrollment in coverage through an FFE, or assisting with the application for financial assistance for QHPs sold through the FFEs; (iv) protect consumer PII in accordance with § 155.260(b)(3) and the agreement described in § 155.260(b)(2); and (v) comply with all applicable Federal and State laws and regulations. We note that these proposed standards for conduct extend to naming of businesses and Web sites associated with agents, brokers or web-brokers, and that use of ‘‘Exchange,’’ ‘‘Marketplace,’’ or other words in a name or URL that would reasonably cause confusion with a Federal program or Web site may be considered misleading under paragraph (j)(1)(i). In § 155.220(j)(3), we propose that an agent or broker will be considered to be in compliance with the standard of conduct requirements to provide consumers and the FFEs with correct information if HHS determines that there was a reasonable cause for any failure to provide correct information and that the agent or broker acted in good faith. We further propose that violation of these standards of conduct may result in termination for cause of the agent’s or broker’s agreements with the FFEs as described in paragraph § 155.220(g) or the imposition of other penalties authorized by law. We will continue to coordinate our enforcement activities with States, other Federal agencies, and local and Federal law enforcement, and anticipate imposing penalties (beyond the termination of the FFE agreements) only in instances where States do not or are unable to act. We expect that States will continue to license and monitor agents and brokers, and will continue to have primary responsibility to oversee and regulate all 22 As detailed in the Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; Exchange Standards for Employers; Final Rule and Interim Final Rule (77 FR 18310, 18315) (March 27, 2012), with some limited exceptions, SADPs are considered a type of QHP. We expect agents, brokers, and web-brokers registered with the FFEs to comply with applicable rules and requirements in connection with SADPs, just as they must comply with those rules in connection with medical QHPs. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS agents and brokers, both inside and outside of the Exchanges. All State laws and regulations related to agents and brokers, including State requirements related to appointments, contractual relationships with issuers, and licensing and marketing requirements, will continue to apply. To avoid duplication of oversight activities related to agents and brokers assisting with enrollment through an FFE, we propose that HHS will continue to focus its oversight activities primarily on ensuring that agents and brokers assisting with enrollment through an FFE meet the standards outlined in § 155.220. In particular, HHS plans to focus on protecting the privacy and security of PII of applicants and enrollees through the FFEs, as well as the misuse of such PII, to the extent this is not already covered under existing State or Federal efforts. We will continue to collaborate with State regulators to resolve cases of potential misconduct and to further develop standard operating procedures for the FFEs that will be critical to HHS oversight of agents and brokers registered to assist with enrollment through the FFEs. iv. Penalties Other Than Termination of the Agreements With the FFEs In § 155.220(k), we propose penalties for agents and brokers registered with the FFEs other than termination of the agreements with the FFEs. In § 155.220(k)(1), we propose that if HHS determines that an agent or broker fails to comply with the requirements of § 155.220, he or she may be denied the right to enter into an agreement with the FFEs in future years, and may be subject to CMPs as described in § 155.285 if the violation involved the provision of false or fraudulent information to an Exchange or the improper use or disclosure of information. In § 155.220(k)(2), we propose that the denial of the right to enter into an agreement with the FFEs in future years would be subject to 30 calendar days’ advance notice and the reconsideration process established in § 155.220(h). The imposition of CMPs for the provision of false or fraudulent information to an Exchange or the improper use of disclosure of information would be subject to the advance notice and appeals process described in § 155.285. We are also proposing a denial of the right to enter into future agreements with the FFEs in cases where an agent or broker has not completed FFE registration requirements, and not entered into the required agreements with the FFEs, but has enrolled qualified individuals, qualified employers, or qualified employees in VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 coverage in a manner that constitutes enrollment through an FFE, or assisted individual market consumers with submission of applications for Exchange financial assistance through an FFE and has sought compensation based on the enrollment through the FFEs in his or her capacity as an agent or broker. We note that § 155.285 applies to agents and brokers, and we propose to specify here that agents and brokers may also be subject to CMPs as described in § 155.285 for noncompliance if the violation involved the provision of false or fraudulent information to an Exchange or the improper use or disclosure of information. We seek comment on these additional proposed penalties, including the length of time for which the prohibition on entering into an agreement with the FFEs would apply in these cases. We intend to continue to collaborate with State regulators to further develop standard operating procedures for an FFE that will be critical to HHS’s oversight of agents and brokers registered to assist with enrollment through an FFE and to ensure the efficient and effective administration of the FFEs. We encourage comment on the information required to carry out these activities, and on any definitions, timeframes, or procedures described in our proposed amendments to § 155.220. v. Agents and Brokers Assisting Consumers With Enrollment in Coverage Through SBE–FPs We propose adding § 155.220(l) to provide that an agent or broker who enrolls qualified individuals, qualified employers, or qualified employees in coverage in a manner that constitutes enrollment through an SBE–FP, or assists individual market consumers with submission of applications for Exchange financial assistance through an SBE–FP must comply with all applicable FFE standards in § 155.220. We believe it is important to extend the FFE standards in § 155.220 to agents and brokers who assist with enrollments through an SBE–FP due to the HHS’s role in operating the FFE infrastructure and the accompanying access that this provides to HHS data systems. We also propose that agents and brokers in SBE– FP States would be able to satisfy the requirement for training in § 155.220(d)(2) by taking FFE training offered by a vendor as described in § 155.222. e. Standards for HHS-Approved Vendors of FFE Training for Agents and Brokers (§ 155.222) At § 155.222, we previously established a process for HHS to PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 75527 approve vendors to offer training and information verification services through which State licensed agents and brokers could complete the training requirements necessary to assist consumers seeking coverage through the FFEs. As part of an approved training and information verification program, we stated that the vendor must require agents and brokers to successfully complete identity proofing, provide identifying information, and successfully complete the required curriculum. Further, we established that no vendor training program would be recognized unless it included an information verification component under which the vendor confirms the identity and applicable State licensure of the person who is credited with successful completion of the training program. We propose eliminating the § 155.222 requirement that vendors perform information verification functions, including State licensure verification and identity proofing. Section 155.220(e) requires an agent or broker that enrolls qualified individuals through the Exchange or assists with the submission of applications for financial assistance through an Exchange to comply with applicable State law, which includes requirements related to operating as an insurance producer, such as licensure. We expect that QHP issuers will adhere to the § 156.340(a)(3) requirement to ensure their delegated and downstream entities, which include affiliated agents and brokers, comply with the standards of § 155.220 with respect to assisting with enrollments in QHPs, including the requirement to comply with applicable State law. The FFE will continue to provide identity proofing services to facilitate the registration of agents or brokers as required by § 155.220(d)(1). We propose these changes to avoid duplication of efforts. If QHP issuers are ensuring that their affiliated agents and brokers are complying with State law, such as licensure, it is not necessary for vendors to do so as well. Consistent with this proposal, we propose amending § 155.222(a)(1) to provide that a vendor must be approved by HHS, and remove the reference to information verification. We also propose in § 155.222(a)(2) to remove the requirements that vendors must require agents and brokers to provide proof of valid State licensure. Consistent with these changes proposed for § 155.222(a), we propose amending § 155.222(b)(1) through (5) and (d) to remove standards for information verification, identity proofing, verification of agents’ and brokers’ valid State licensure, and all E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75528 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules related standards that support these functions. We propose to eliminate the requirements in paragraphs (b)(1)(i) through (ii) to submit an application demonstrating prior experience with verification of State licensure and identity proofing; instead, we propose to combine into paragraph (b)(1) the existing requirements to demonstrate prior experience with online training and technical support for a large customer base. In paragraph (b)(2), we propose to eliminate the requirement to adhere to HHS specifications for content, format, and delivery of information verification; separately, in (b)(2), we propose to include SBE–FP States in the requirement to offer continuing education units (CEUs) in five FFE States. In paragraph (b)(3), we propose to eliminate the requirement that vendors collect, store, and share with HHS all data from agent and broker users of the vendor’s training; instead we propose that vendors would only be required to collect, store and share with HHS FFE training completion data. In paragraph (b)(4), we propose to amend the standards for the agreement that vendors must execute with HHS, to eliminate the requirement that vendors implement information verification processes. We propose amending § 155.222(b)(5) and (d) to remove references to information verification. We solicit comment on the proposals to eliminate these requirements related to information verification. We propose adding a paragraph (b)(6) to require vendors to provide technical support to agent and broker users of the vendor’s FFE training as specified by HHS. Currently, paragraph (b)(1) requires vendors to demonstrate prior experience with providing technical support to a large customer base. We propose adding this requirement to specify that a vendor must provide tierone help desk support to assist agents and broker accessing the vendor’s FFE training platform from the CMS Enterprise Portal. Tier-one support includes, for any inquiry received by the vendor’s help desk, intake, initial response, and resolution of inquiry through a scripted response or rerouting to another help desk. The scope of inquiries that must be answered through scripted response will be provided by HHS in guidance. We seek comments on the requirement that a vendor must provide technical assistance as specified by HHS to agent and broker users of the vendor’s FFE training. We note that HHS has the authority to require approved vendors to provide technical support, as well as FFE training, in accordance with HHS VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 guidelines and in a manner and format that complies with Section 508 of the Rehabilitation Act of 1973. The World Wide Web Consortium’s Web Content Accessibility Guidelines (WCAG) 2.0 Level AA standards is an alternative that we propose would also be considered an acceptable national standard for Web site accessibility. For more information see, the WCAG Web site at https://www.w3.org/TR/WCAG20/. f. Standards Applicable to Certified Application Counselors (§ 155.225) This proposed rule would also require certified application counselor organizations to report performance data to an Exchange, in order to improve the ability of each Exchange to monitor the work of the organizations it has designated as certified application counselor organizations. In accordance with the Secretary’s authority under section 1321(a)(1)(A) of the Affordable Care Act to establish standards related to the operation of Exchanges, we propose to amend § 155.225(b)(1) to provide that certified application counselor designated organizations must, as a condition of their designation as certified application counselor organizations by the Exchange, provide the Exchange with information and data related to the number and performance of the organization’s certified application counselors, and about the consumer assistance being provided by the organization’s certified application counselors, upon request, in the form and manner specified by the Exchange. Section 155.225(b)(1)(ii) already requires certified application counselor designated organizations to maintain a registration process and method to track the performance of certified application counselors, but it does not specify the type of performance information that must be tracked, nor does it require that information to be provided to the Exchange. The proposed requirement would give Exchanges valuable information to aid in their oversight of certified application counselor programs, and would help improve Exchanges’ understanding of the scope of consumer assistance being provided in the Exchange service area. The proposed requirement would also improve the consumer assistance functions of the Exchange in other significant ways, for example, by providing information that could help an Exchange focus its outreach and education efforts, target its recruitment of certified application counselor organizations, and identify the need for increased technical assistance and support for certified application counselor organizations. PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 Under this proposal, Exchanges could establish reporting standards as they determine appropriate based on their own specific needs and objectives. In States with FFEs, HHS proposes that it would begin collecting information and data from certified application counselor designated organizations on a monthly basis beginning in January 2017. We propose that the kind of information and data that the FFEs would require from these organizations will include, at a minimum, data regarding the number of individuals who have been certified by the organization; the total number of consumers who received application and enrollment assistance from the organization; and of that number, the number of consumers who received assistance applying for and selecting a QHP, enrolling in a QHP, or applying for Medicaid or CHIP. We anticipate that the monthly reports submitted to the FFEs would provide information and data from the preceding month, and would be submitted electronically, through HIOS or another electronic submission vehicle. We also expect that some of the data that FFEs would require from certified application counselor designated organizations would be similar to what is collected from Navigator grantees in the FFEs.23 We do not expect this information collection to include consumers’ PII. HHS recognizes the importance of certified application counselors, and we intend that any FFE information collection would be straightforward and place little additional burden on certified application counselor organizations. We request comments on this proposal, on the scope of information and data that Exchanges should collect, and on HHS’s specific proposals for collecting information and data from certified application counselor organizations in the FFEs, including the proposed scope and timing of reports by these organizations to the FFEs. As discussed earlier in this preamble in a parallel proposal to amend § 155.210(d)(6), we propose to amend § 155.225(g)(4), which prohibits certified application counselors in all Exchanges from providing certain kinds of gifts and promotional items to an applicant or potential enrollee. For the 23 The data collection requirements for FFE Navigator grantees in 2015–2016 are specified in the Information Collection Request (OMB control number 0938–1215) under the Cooperative Agreement to Support Navigators in Federallyfacilitated and State Partnership Exchanges (see the PRA package associated with 80 FR 36810). https://www.reginfo.gov/public/do/ PRAViewDocument?ref_nbr=201507-0938-001. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules same reasons discussed above, we propose to amend § 155.225(g)(4) consistent with our proposed amendments to § 155.210(d)(6). We seek comment on all aspects of this proposal g. Privacy and Security of Personally Identifiable Information (§ 155.260) Section 155.260(a)(1) refers to insurance affordability programs, as defined in § 155.20. We propose to make a technical correction to this paragraph so that § 155.300, which contains the definition of insurance affordability programs, is referenced instead. h. Oversight and Monitoring of Privacy and Security Requirements (§ 155.280) Section 155.280(a) permits HHS to oversee and monitor the FFEs and nonExchange entities associated with FFEs to ensure compliance with the privacy and security standards established and implemented by an FFE under § 155.260. Section 155.280(a) also provides authority for HHS to monitor State Exchanges for compliance with the privacy and security standards established and implemented by the State Exchanges under § 155.260. We propose amending paragraph (a) to permit HHS to also oversee and monitor SBE–FPs’ compliance with the privacy and security standards established and implemented by an FFE under § 155.260. 4. Exchange Functions in the Individual Market: Eligibility Determinations for Exchange Participation and Insurance Affordability Programs a. Options for Conducting Eligibility Determinations (§ 155.302) We propose to amend § 155.302(a) by adding an option for an SBE–FP to satisfy the requirement of conducting eligibility determinations by relying on HHS to carry out eligibility determination activity and other requirements within subpart D, through a Federal platform agreement. We seek comments on this proposal. jstallworth on DSK7TPTVN1PROD with PROPOSALS b. Eligibility Process (§ 155.310(h)) We propose to amend § 155.310(h) related to the requirement that the Exchange must notify an employer that an employee has been determined eligible for Exchange financial assistance upon such determination. This notice serves two main purposes. First, it informs an employer that it may be liable for the payment assessed under section 4980H of the Code because one of the employer’s employees was determined eligible for Exchange VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 financial assistance.24 Second, it may reduce an employee’s tax liability because in the event an employer prevails in an employer appeal described in § 155.555, the Exchange will redetermine the employee’s eligibility (including for Exchange financial assistance) or notify the employee of the requirement to report changes in eligibility, as discussed in the preamble section III.F.6.g of this proposed rule. Currently under § 155.310(h), the Exchange is directed to notify an employer that an employee has been determined eligible for Exchange financial assistance. We propose to revise this requirement so that the Exchange must notify an employer that an employee has been determined eligible for Exchange financial assistance only if the employee has also enrolled in a QHP through the Exchange. For purposes of this provision, an employee is determined eligible for cost-sharing reductions when the employee is determined eligible for cost-sharing reductions based on income in accordance with § 155.305(g) or § 155.350(a). We believe this change better reflects the statutory requirement to send employer notices and will reduce confusion among employers and employees. The relevant statutes that address the employer notice requirement contemplate that employer notices will be provided for enrolled individuals who have been determined eligible for Exchange financial assistance. Sections 4980H(a)(2) and (b)(1)(B) of the Code provide that an assessable payment may be imposed on an employer if at least one full-time employee is certified as having enrolled in a QHP for which Exchange financial assistance is allowed or paid for the employee. In the case of an employee who has been determined eligible for Exchange financial assistance but has not enrolled in a QHP, it would be inaccurate and 24 Only certain employers (called applicable large employers) are subject to the employer shared responsibility provisions under section 4980H of the Code. In general, applicable large employers must either offer minimum essential coverage that is ‘‘affordable’’ and that provides ‘‘minimum value’’ to their full-time employees (and their dependents), or make an employer shared responsibility payment to the IRS if at least one full-time employee receives the premium tax credit under section 36B of the Code. For more information on which employers are subject the employer shared responsibility provisions and under what circumstances an applicable large employer will be subject to a payment (and how the payments are calculated), see Shared Responsibility for Employers Regarding Health Coverage; Final Rule, 79 FR 8544 (Feb. 12, 2014).). Liability for the employer shared responsibility payment is determined independently by the IRS. More information on the IRS process can be found at www.irs.gov. PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 75529 confusing to send a notice under § 155.310(h) because the employer receiving the notice would not be liable for a payment assessed under section 4980H of the Code if its employee does not enroll in a QHP through the Exchange (even if the employee could have received Exchange financial assistance if the employee had enrolled in a QHP). Futhermore, because sections 36B(b)(1) and (c)(2)(A) of the Code provide that a premium tax credit amount may not be allowed for any month in which, as of the first day of the month a tax filer (or the tax filer’s spouse or tax dependent) was not enrolled in a QHP through the Exchange, a notice under § 155.310(h) serves no purpose in protecting an employer from potential tax liability under section 4980H or an employee from tax liability under section 36B when the employee has been determined eligible for Exchange financial assistance but has not enrolled in a QHP through the Exchange. We also propose to revise paragraph (h)(2) so that a notice sent in accordance with § 155.310(h) must indicate that an employee has been determined eligible for Exchange financial assistance and has enrolled in a QHP through the Exchange. Additionally, for purposes of operational efficiency with regard to the timing of the employer notification required under paragraph (h), we propose that the Exchange may choose to either (a) notify employers on an employee-by-employee basis as eligibility determinations are made for Exchange financial assistance and enrollment in a QHP through the Exchange, or (b) notify employers for groups of employees who are determined eligible for Exchange financial assistance and enroll in a QHP through the Exchange. Under both options, the Exchange must notify employers within a reasonable timeframe following any month an employee was determined eligible for either form of Exchange financial assistance and enrolled in a QHP, with the goal to notify employers as soon as possible to provide the greatest benefit to enrollees. We seek comment on these proposals. c. Verification Process Related to Eligibility for Insurance Affordability Programs (§ 155.320) We propose to revise § 155.320(c)(3)(vi) to allow the Exchange to establish a reasonable threshold at which the Exchange must follow the alternate verification process for decreases in the annual household income between the applicant’s E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75530 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules attestation of projected annual household income and the annual income computed in accordance with § 155.320(c)(3)(ii)(A). The reasonable threshold would be subject to approval by HHS. Current regulations require the Exchange to follow the alternate verification process under § 155.320(c)(3)(vi) if either (1) the attested annual household income submitted by the consumer is more than 10 percent less than income data received from trusted data sources, or (2) if no data is available from trusted data sources. We recognize that many consumers have difficulty projecting their annual household income and complying with the verification requirements. Annual household income may fluctuate year to year and throughout the year, making it difficult for consumers to project their income for the year ahead. Income data from trusted data sources can be up to 2 years old. In addition, consumers with lower incomes have a smaller margin for error in dollar terms under the current percentage-based threshold. We recognize that the current threshold of 10 percent may not be adequate to allow for normal variation in a consumer’s annual household income, and may be too sensitive a threshold in terms of triggering the alternate verification process. Accordingly, we propose that the Exchange may set a reasonable threshold for when an applicant enters the alternate verification process in cases where the applicant’s attestation of projected annual household income is lower than income data received from trusted data sources. A reasonable standard would allow for a realistic variation in a consumer’s projected annual household income for the year for which they are seeking coverage from previous years’ income data received from trusted data sources and may be defined in terms of a percentage, or a percentage and a fixed dollar amount (for example, the greater of 20 percent or $5,000). A threshold set less than 10 percent would not be a reasonable standard since it would not allow for small projected reductions in income from a previous year. HHS will provide additional guidance on what constitutes a reasonable threshold. This proposal would allow the Exchange to establish a threshold that effectively maintains program integrity, while minimizing burdens to consumers to the extent possible. It would also allow the Exchange to make adjustments in future years as more data becomes available. We seek comment on this proposal. In § 155.320(d), we make certain proposals related to alternative VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 processes relating to verification of enrollment in an eligible employersponsored plan and eligibility for qualifying coverage in an eligible employer-sponsored plan. In paragraph (d)(3), we propose to redesignate paragraph (d)(3)(i) as (d)(3)(ii) and redesignate paragraph (d)(3)(ii) as (d)(3)(i). To preserve the accuracy of the redesignated paragraph (d)(3)(ii), we propose to update the cross-reference to paragraph (d)(3)(ii) with (d)(3)(i), and paragraph (d)(3)(iii) with (d)(4)(i), discussed below. We also propose to remove paragraph (d)(3)(iii), which requires the Exchange to select a statistically significant random sample of applicants for whom the Exchange does not have data as specified in paragraphs (d)(2)(i) through (iii) and take steps to contact any employer identified on the application for the applicant and the members of his or her household to verify whether the applicant is enrolled in an eligible employer-sponsored plan or is eligible for qualifying coverage in an eligible employer-sponsored plan for the benefit year for which coverage is requested. This process is referred to as ‘‘sampling.’’ We propose to modify this requirement, and describe that proposal in our discussion of proposed paragraph (d)(4) below. We believe these amendments to paragraph (d)(3) will organize and simplify the regulatory text. We propose to add paragraph (d)(4) concerning a survey of verification procedures. In paragraph (d)(4), we propose that the Exchange must follow the procedures described in paragraph (d)(4)(i) or, in the alternative, for benefit years 2016 and 2017, the Exchange may follow the procedures specified in paragraph (d)(4)(ii), for any benefit year for which it does not reasonably expect to obtain sufficient verification data as described in paragraphs (d)(2)(i) through (iii). For the purposes of this section, the Exchange reasonably expects to obtain sufficient verification data for any benefit year when, for the benefit year, the Exchange is able to obtain data about enrollment in and eligibility for qualifying coverage in an eligible employer-sponsored plan from at least one electronic data source that is available to the Exchange and has been approved by HHS, based on evidence showing that the data source is sufficiently current, accurate, and minimizes administrative burden, as described in paragraph (d)(2)(i). In paragraph (d)(4)(i), we propose that the Exchange may conduct sampling. This paragraph is substantially the same as current paragraph (d)(3)(iii), with three differences. First, we propose to PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 remove the absolute requirement to conduct sampling, and for benefit years 2016 and 2017, allow the Exchange to implement an alternate process approved by HHS. This proposal and rationale is described in more detail in the discussion of paragraph (d)(4)(ii), below. Second, we propose to remove the language that currently appears in paragraph (d)(3)(iv) since the relief it provided only applied to eligibility determinations that were effective before January 1, 2015. Third, we propose to replace two internal crossreferences to paragraph (d)(3)(iii) with appropriate cross-references to paragraph (d)(4)(i). We propose moving the sampling requirement from paragraph (d)(3) and adding it to new paragraph (d)(4) to more accurately reflect the role of the sampling process. Paragraph (d)(3) contains standards for ‘‘[v]erification procedures’’ applicable to all applicants for Exchange financial assistance. The sampling process, however, does not involve verification of eligibility information for all applicants, and is primarily intended to serve as a way for the Exchange to gain insight into whether consumers provide accurate information on the application regarding their enrollment in and eligibility for qualifying coverage in an eligible employer-sponsored plan and the effectiveness of an Exchange’s verification of such information. In paragraph (d)(4)(ii), we propose to permit an Exchange the option to implement an alternate process approved by HHS for the benefit years 2016 and 2017. We believe this option will provide Exchanges with needed flexibility as verification processes are refined and employer databases compiled over the next several years, to improve long-term verification programs. We seek comment on these proposals. d. Medicare Notices Over the course of the first two years of Exchange operations, we have realized the importance of providing notification to enrollees in coverage through the Exchange of their potential eligibility for Medicare. We recognize the importance of a smooth transition to Medicare coverage, and seek comment on whether and how to implement a notification that an enrollee may have become eligible for Medicare. For example, for enrollees in an FFE, we are considering ‘‘pop up’’ text on HealthCare.gov for individuals who are going to turn 65 during the benefit year. We seek comment on this and other ways to promote smooth coverage transitions. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS 5. Exchange Functions in the Individual Market: Enrollment in Qualified Health Plans a. Annual Eligibility Redetermination (§ 155.335(j)) In the Patient Protection and Affordable Care Act; Annual Eligibility Redeterminations for Exchange Participation and Insurance Affordability Programs; Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges final rule (79 FR 52994, 53000 (Sept. 5, 2014)), we established a renewal and reenrollment hierarchy at § 155.335(j) to minimize potential enrollment disruptions. To further minimize potential disruptions of enrollee eligibility for cost-sharing reductions, we propose to amend § 155.335(j)(1) to create a new re-enrollment hierarchy for all enrollees in a silver-level QHP that is no longer available for re-enrollment. Specifically, if such an enrollee’s current silver-level QHP is not available and the enrollee’s current product no longer includes a silver-level QHP available through the Exchange, the enrollee’s coverage would be renewed in a silver-level QHP in the product offered by the same issuer that is the most similar to the enrollee’s current product, rather than in a plan one metal level higher or lower than his or current silver-level QHP, but within the same product. Transitioning enrollees in this manner is an operationally efficient way of maintaining continuity for enrollees eligible for cost-sharing reductions, and, because the benchmark plans for establishing the amount of the premium tax credit for which an eligible taxpayer is eligible is a silver-level plan, continued enrollment in a silver-level plan, as opposed to enrollment in a plan at a different metal level but in the same product is likely to be more consumer protective. We request comment on this proposal, including the best means of determining which product is most similar to the enrollee’s current product. We also seek comment on whether the hierarchy should permit a QHP enrollee to be automatically re-enrolled into a plan not available through an Exchange, and under what circumstances such a re-enrollment should occur. In the 2016 Payment Notice proposed rule, we also noted that we are exploring a change to the re-enrollment hierarchy at § 155.335(j), which currently prioritizes re-enrollment with the same issuer in the same or a similar plan. As we discussed in that rulemaking, many consumers place a high value on low premiums when selecting a plan, and the approach we VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 were exploring would recognize that plans that have competitively priced premiums in one year may not continue to be the most competitively priced in subsequent years. As a result, default enrollment in the same or similar plan may sometimes encourage consumers to remain in plans that are significantly more expensive than the lowest cost plans available to the enrollee. We are considering an approach under which an enrollee in an FFE would be offered a choice of reenrollment hierarchies at the time of initial enrollment, and could thereby opt into being re-enrolled by default for the subsequent year into a low-cost plan, rather than his or her current plan or the plan specified in the current reenrollment hierarchy. The alternative enrollment hierarchy could be triggered if the enrollee’s current plan’s premium increased from the prior year, or increased relative to the premium of other similar plans (such as plans of the same metal tier), by more than a threshold amount, such as 5 percent or 10 percent. For example, in those conditions, the enrollee would be placed into a QHP of the same metal level with the lowest premium in the enrollee’s service area, or perhaps one of three such QHPs with the lowest premiums, by random allocation or another appropriate allocation process. As is the case under the existing approach, a consumer would retain the option to take action to enroll in a different plan during open enrollment if he or she wished to do so. We received a number of comments regarding the discussion in the 2016 Payment Notice proposed rule. Some commenters supported the approach generally. Other commenters stated that the approach does not give adequate deference to the plan an enrollee has selected during open enrollment, or to the impact of cost sharing. A number of commenters had concerns that consumers may not realize that opting into a default enrollment hierarchy based on low-cost premiums may result in other significant changes to their coverage, and emphasized the importance of education by the Exchanges with respect to this reenrollment hierarchy. We received a few alternative ideas for re-enrollment hierarchies, including basing reenrollment on factors consumers identify as most important to them, or basing re-enrollment on the consumer’s original choice of premium. Similarly, one commenter suggested implementing this approach only for those consumers currently enrolled in the lowest-cost or second-lowest cost silver plan. PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 75531 Continuing the discussion in the 2016 Payment Notice, we are requesting further comment on this concept to update our policy in the final rule. In particular, we are interested in understanding how to ensure that consumers understand the increased risk of being re-enrolled automatically in a plan with a significantly different provider network, benefits, cost-sharing structure, or service area. We seek comment on the timing and form of the notice related to plan re-enrollment that the Federally-facilitated Exchange would provide to consumers opting in to such an enrollment hierarchy. We seek comment on whether hierarchies that considered factors other than metal level or premiums, such as plan type (for example, HMO versus PPO) or network breadth could help to reduce the risk that consumers are re-enrolled automatically into a plan that does not suit their needs. We are interested in comments on what premium growth in the current plan (or what growth relative to other similar plans) would trigger re-enrollment into a low-cost plan, and how to determine which enrollees get assigned to which plans, for example if enrollees are allocated among one of the three lowest cost QHPs of the metal level in the enrollee’s service area. We seek comment on how best to deal with the risk of providing small plans with excess enrollment, in order to avoid destabilizing such plans with a deluge of new enrollments. As we did last year, we seek comment on how these types of default re-enrollment procedures have functioned in other programs and settings, and what lessons can be drawn from those experiences. Finally, we seek comment on the appropriate timeframe for implementing such an alternative hierarchy. b. Enrollment of Qualified Individuals into QHPs (§ 155.400) i. Rules for First Month’s Premium Payments for Individuals Enrolling With Regular, Special, and Retroactive Coverage Effective Dates. We propose to amend § 155.400(e) related to the payment of the first month’s premium (that is, binder payments), including deadlines, to codify previously released guidance in section 8.2 of the updated Federallyfacilitated Marketplace and Federallyfacilitated Small Business Health Options Program Enrollment Manual,25 that specified our interpretation of these requirements. Specifically, we propose to amend § 155.400(e)(1)(i) and (ii) to 25 Available at https://www.cms.gov/CCIIO/ Resources/Regulations-and-Guidance/Downloads/ Updated_ENR_Manual.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75532 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules provide that, for prospective coverage, the binder payment must consist of the first month’s premium. To provide added flexibility for issuers, we also would add to the rule to specify that the deadline for a binder payment related to prospective coverage with a prospective special effective date, would have to be no earlier than the coverage effective date and no later than 30 calendar days from the date the issuer receives the enrollment transaction or the coverage effective date, whichever is later. This would align the requirement for enrollments with prospective special effective dates with the requirement for enrollments with regular effective dates. We propose to add § 155.400(e)(1)(iii) to reflect our interpretation, intended to limit the risk that issuers would provide retroactive coverage without receiving sufficient premium payments from enrollees, that applicants requesting coverage being effectuated under retroactive effective dates, such as coverage in accordance with a special enrollment period or a successful eligibility appeal, must pay a binder payment that consists of all premium due (meaning the premium for all months of retroactive coverage). If the applicant pays only the premium for one month of coverage, we propose that the issuer would be required to enroll the applicant in prospective coverage in accordance with regular effective dates. We also propose to specify that the deadline for payment of all premium due must be no earlier than 30 calendar days from the date the issuer receives the enrollment transaction or notification of the enrollment. This change to the binder payment rules is intended to allow issuers flexibility to set a reasonable deadline for enrollees to submit payment of retroactive premium, the total amount of which may consist of payment for several months of coverage. Based on our experience implementing the grace period provisions under our previous rulemaking, particularly in cases involving advance payments of the premium tax credit, that require full payments of amounts due to avoid being put in a grace period and to avoid termination of enrollment, we have identified the need for additional flexibility for issuers to establish reasonable policies regarding premium collection that would allow issuers to collect a minimal amount of premium less than that which is owed without necessarily triggering the consequences for non-payment of premiums. For example, in the Exchange Establishment Rule, we established that enrollees VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 c. Annual Open Enrollment Period (§ 155.410) We propose this time period and these coverage effective dates to remain consistent with the 2016 open enrollment period. This time frame will continue to partially overlap with the annual open enrollment period for Medicare and most employer offerings, which will benefit consumers by facilitating smooth transitions between coverage and creating process efficiencies for issuers handling enrollments and re-enrollments during the same period. We seek comments on this proposal. We are also considering defining the open enrollment period for coverage year 2018, and seek comment on what that period should be. For example, we could incrementally shift to an earlier open enrollment period, while maintaining the same duration, such that the open enrollment period for benefit year 2018 would run from October 15, 2017 through January 15, 2018. Alternatively, we could shift to an earlier open enrollment period and shorten its duration simultaneously, such that the open enrollment period would run from October 15, 2017 through December 15, 2017. We note that open enrollment periods for health coverage typically end before the end of the year prior to the benefit year to promote full-year coverage. However, in the short run, as eligible consumers are learning about their options and the individual shared responsibility requirement and newly insured consumers are learning how to re-enroll into coverage for the next benefit year, we note that there is value in a longer open enrollment period. We would also face significant operational limitations in moving the beginning of the open enrollment period to an earlier time. However, if we do not shift the beginning of the open enrollment period to an earlier date, ending the period before the end of the year would result in a shorter open enrollment period. We seek comment on the length, start, and end of the open enrollment period for 2018 and subsequent years. In § 155.410, we propose to amend paragraph (e), which provides the dates for the annual open enrollment period in which qualified individuals and enrollees may apply for or change coverage in a QHP. We propose to amend paragraph (e)(2) to define the open enrollment period for coverage year 2017, which would be November 1 through January 31. We also propose to amend the annual open enrollment period coverage effective date provisions in paragraphs (f)(2)(i) through (iii) to include the coverage effective dates for 2017. d. Special Enrollment Periods (§ 155.420) Special enrollment periods are available to consumers under a variety of circumstances as described in § 155.420. We seek comment and any available data on existing special enrollment periods. In addition, we have heard concerns that these special enrollment periods may be subject to abuse. We seek comment regarding this, and data, if available. Elsewhere in this document, we propose an amendment to § 155.430(b)(2)(vi) that would allow the receiving advance payments of the premium tax credit have to pay full payments of all outstanding premiums owed in order to avoid entering a grace period or having their coverage terminated. In response to requests from issuers, we propose to add flexibility to this rule to allow issuers the option to adopt a premium payment threshold policy to avoid situations in which an enrollee who owes only a de minimis amount of premium has his or her enrollment terminated for non-payment of premiums. Accordingly, at new § 155.400(g), we propose to codify a provision related to premium payment threshold policies, thereby allowing additional issuer flexibility regarding when amounts collected will be considered to satisfy the obligation to pay amounts due, so long as issuers implement such a policy uniformly and without regard to health status and that the premium payment threshold adopted is reasonable. This would allow issuers flexibility to effectuate an enrollment, not to place an enrollee in a grace period for failure to pay 100 percent of the amount due, or not to terminate enrollments after exhaustion of the applicable grace period for enrollees who owe only a small amount of premium within the threshold. We seek comment on these proposals. ii. Reliance on HHS To Carry Out Enrollment and Related Functions. We also propose to amend § 155.400 by adding a new paragraph (h) to reflect that SBE–FPs must rely on HHS to implement the functions related to eligibility and enrollment within subpart E, through the Federal platform agreement. This reflects that eligibility and enrollment functions must be performed together in the FFE, and that neither function can be performed separately by an SBE–FPs at this time. We seek comments on this proposal. PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS Exchange to initiate cancellation or retroactive termination of an enrollee’s enrollment, after a determination has been made that the enrollment was due to fraudulent activity. We believe this proposal would provide us with an important tool for addressing potential gaming of these rules. e. Termination of Coverage (§ 155.430) Under our current rules, § 155.430(b)(1) requires an Exchange to permit an enrollee to cancel or terminate his or her coverage in a QHP following appropriate notice to the Exchange or the QHP issuer. We propose to add paragraph (b)(1)(iv) to allow an enrollee to retroactively cancel or terminate his or her enrollment in a QHP through the Exchange in the limited circumstances set forth below. For enrollees whose enrollment or continued enrollment in a QHP resulted from an error, misconduct, or fraud committed by an entity other than the enrollee, we aim to increase flexibility under the regulations to permit such enrollees to avoid the consequences of that entity’s actions by canceling the QHP coverage. To this end, we propose to redesignate current paragraph (b)(2)(vi) as (b)(2)(vii) and add a new paragraph (b)(2)(vi) to permit the Exchange to cancel an enrollee’s enrollment in a QHP under certain circumstances. This rule would permit cancellations of fraudulent enrollments that the Exchange discovers, even if the enrollee is never aware of the enrollment. New paragraph (b)(1)(iv)(A) would provide that the enrollee would be permitted to retroactively terminate his or her coverage or enrollment if he or she demonstrates to the Exchange that he or she attempted to terminate his or her coverage or enrollment and experienced a technical error that did not allow the enrollee to effectuate termination of his or her coverage or enrollment through the Exchange. Such an enrollee would have 60 days after he or she discovered the technical error to request retroactive termination. This aligns with our standard 60-day window for special enrollment periods. We propose a new paragraph (d)(9), which would provide that the retroactive termination date under paragraph (b)(1)(iv)(A) would be no sooner than 14 days after the earliest date that the enrollee could demonstrate that he or she contacted the Exchange to terminate his or her coverage or enrollment through the Exchange, unless the issuer agrees to an earlier effective date as set forth in § 155.430(d)(2)(iii). This 14-day window aligns with the regulation on voluntary, VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 enrollee-initiated prospective terminations. We propose in paragraph (b)(1)(iv)(B) to provide for cancellation for an enrollee who demonstrates to the Exchange that his or her enrollment in a QHP through the Exchange was unintentional, inadvertent, or erroneous and was the result of the error or misconduct of an officer, employee, or agent of the Exchange or HHS, its instrumentalities, or a non-Exchange entity providing enrollment assistance or conducting enrollment activities. Such an enrollee would have 60 days from the point he or she discovered the unintentional, inadvertent, or erroneous enrollment to request cancellation, to align with our standard 60-day special enrollment period window. In determining whether an enrollee has demonstrated to the Exchange that his or her enrollment meets the criteria for cancellation under this paragraph, the Exchange would examine the totality of the circumstances surrounding the enrollment, such as whether the enrollee was enrolled in other minimum essential coverage at the time of his or her QHP enrollment and whether he or she submitted claims for services rendered to the QHP. These factors would serve to indicate the intentions of the enrollee and whether the enrollment really was undesired and would be weighed in making a determination whether a cancellation is warranted. This approach offers a broad and fair analysis of the enrollee’s intentions and balances the interests and protection of consumers with the interests of issuers. For example, we believe that, without additional evidence to the contrary, one reasonably could assume that an enrollee who was enrolled in other minimum essential coverage at the time of his or her QHP enrollment and who submitted no claims to that QHP likely did not intend to enroll in such QHP. Conversely, claims submitted by an enrollee to the QHP would weigh against the enrollee’s request for cancellation because, barring contrary evidence, the Exchange would view submittal of such claims to constitute a ratification of the enrollee’s contract with the QHP issuer, even if the enrollee did not intend to enroll in QHP coverage. We seek comment on what other factors are indicative of an enrollee’s bona fide intent and can limit ‘‘gaming,’’ and should be considered in this analysis. In paragraph (b)(1)(iv)(C), we propose to allow cancellations for enrollees who are enrolled in a QHP without their knowledge or consent due to the fraudulent activity of any third party, including third parties who have no PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 75533 connection with the Exchange. Such an enrollee would have 60 days from the point at which he or she discovered the fraudulent enrollment to request cancellation, to align with our standard 60-day special enrollment period window. New paragraph (d)(10) would provide that for cancellation or retroactive terminations granted in accordance with paragraphs (b)(1)(iv)(B) and (C), the cancellation or termination date would be the original coverage effective date or a later date, as determined appropriate by the Exchange, based on the circumstances of the cancellation or termination. Under our current rules, § 155.430(b)(2) allows the Exchange to initiate termination of an enrollee’s coverage or enrollment in a QHP through the Exchange, and permits a QHP issuer to terminate such coverage or enrollment in certain circumstances. Amended paragraph (b)(2)(ii)(A) reflects the change to § 156.270(d) and (g) that gives an enrollee who, upon failing to timely pay premium, is receiving advance payments of the premium tax credit (APTC), a three-month grace period. The changes to § 156.270 are described in section ‘‘Termination of Coverage or Enrollment for Qualified Individuals’’ of the preamble. We propose in new paragraph (b)(2)(vi) that the Exchange could cancel an enrollee’s enrollment that the Exchange determines was due to fraudulent activity, including fraudulent activity by a third party with no connection with the Exchange. New paragraph (d)(11) would provide that for cancellations granted in accordance with paragraph (b)(2)(vi), the cancellation date would be the original coverage effective date. The Exchange only would send the cancellation transaction following reasonable notice to the enrollee (recognizing that where no contact information is available that notice may be impossible or impracticable). Our current guidance recognizes that at some point, the Exchange must discontinue the ability for enrollees to retroactively adjust coverage for the preceding coverage year. To this end, we are considering codifying a deadline for requesting cancellations or retroactive terminations. We seek comment on these proposals. 6. Appeals of Eligibility Determinations for Exchange Participation and Insurance Affordability Programs a. General Eligibility Appeals Requirements (§ 155.505) In § 155.505, we make certain proposals related to the general E:\FR\FM\02DEP2.SGM 02DEP2 75534 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS eligibility appeals requirements. Currently, paragraph (b)(1) of this section states that an applicant or enrollee has the right to appeal an eligibility determination made in accordance with subpart D. This right includes the right to appeal determinations of eligibility for QHP enrollment periods, such as special enrollment periods. To clarify the scope of applicants’ and enrollee’s right to appeal, we are proposing to add paragraph (b)(1)(iii) which would more explicitly state that applicants and enrollees have the right to appeal a determination of eligibility for an enrollment period. This change would apply to appeals provided by the HHS appeals entity and a State Exchange appeals entity. Similarly, we propose new paragraph (b)(5) to clarify that applicants and enrollees have the right to appeal a decision issued by the State Exchange appeals entity. Section 155.520(c) already provides that an appellant who disagrees with a decision of a State Exchange appeals entity may request an appeal to the HHS appeals entity within 30 days of the notice of appeal decision. New paragraph (b)(5) would clarify applicants’ and enrollees’ existing right to appeal any decision issued by a State Exchange appeals entity in accordance with § 155.545(b), in addition their right to appeal a denial of a request to vacate a dismissal made by a State Exchange appeals entity, as described in § 155.505(b)(4). Finally, in paragraph (b)(4), we propose to correct a typographical error by replacing the word ‘‘or’’ with the word ‘‘of,’’ and to replace ‘‘pursuant to’’ with ‘‘under,’’ so the last clause of the paragraph would read, ‘‘. . . made under paragraph (c)(2)(i) of this section. . .’’. We seek comment on these proposals. b. Appeals Coordination (§ 155.510) We propose to revise § 155.510(a)(1) to give the appeals entity and agencies administering insurance affordability programs more flexibility in obtaining documentation and information from appellants. To minimize burden on appellants, § 155.510(a)(1) currently prohibits the appeals entity or agency administering insurance affordability programs from asking an appellant to provide information or documentation that the appellant already provided. However, when such information or documentation is not available to the appeals entity or agency, this provision may also prevent the appeals entity or agency from obtaining information that is necessary to properly adjudicate the appellant’s appeal. As a result, the VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 appeals entity is deprived of documentation that could support a decision favorable to the appellant. Accordingly, we propose to revise paragraph (a)(1) to allow the appeals entity, the Exchange, or the agency administering insurance affordability programs to request information or documentation from the appellant that the appellant already has provided if the agency does not have access to such information or documentation and cannot reasonably obtain it. We believe this revision balances the need to minimize the burden on the appellant as well as the need to ensure that all information necessary for the appellant’s appeal is available to the appeals entity, Exchange, or agency administering the insurance affordability program, which ultimately will inure to the appellant’s benefit by helping to ensure a correct appeal decision and eligibility determination. We seek comment on this proposal. c. Appeal Requests (§ 155.520) We propose to add paragraph (d)(2)(i)(D), concerning appellants whose appeal request is determined invalid for failure to request an appeal by the date determined in paragraph (b) or (c) of this section. Currently, when an appellant’s request is invalid because it is untimely, it is not possible for the appellant to cure the defect as contemplated under § 155.520(d)(2)(i)(C). Therefore, the appeals entity dismisses the appeal in accordance with § 155.530(a)(3). If the appellant makes a written request within 30 days of the date of the notice of dismissal showing good cause why the dismissal should be vacated, the appeals entity must vacate the dismissal in accordance with § 155.530(d). Accordingly, an appellant who shows good cause why his or her appeal should proceed even though the appeal request was untimely (for example, an appellant who was unable to submit a timely appeal request because he or she was hospitalized with a serious condition) currently may proceed with an appeal, but the process is circuitous. This proposed addition of (d)(2)(i)(D) would require the appeals entity to notify an appellant that, in the event the appeal request is invalid because it was not timely submitted, the appeal request may be considered valid if the applicant or enrollee demonstrates within a reasonable timeframe determined by the appeals entity that failure to timely submit was due to exceptional circumstances and should not preclude the appeal. This would allow the appellant to demonstrate before the appeal is dismissed that failure to PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 submit a timely appeal request was due to exceptional circumstances constituting good cause why the appeal should proceed, which would minimize burden on the appellant as well as administrative burden on the appeals entity. The appeals entity may determine what constitutes an exceptional circumstance that should not preclude an appeal notwithstanding the appellant’s failure to timely submit an appeal request. An appeals entity may, for instance, find that circumstances making timely submission impossible constitute an exceptional circumstance. A weather emergency, such as a blizzard, a hurricane or a tornado, may cause power outages making it impossible to prepare, mail, or fax appeal requests to the appeals entity. Similarly, such disasters may cause consumers to lose access to the documents they need to complete and submit appeal requests. Likewise, if a consumer suffers a catastrophic medical event and is consequently unable to submit an appeal request on time, the appeals entity may determine that this constitutes an exceptional circumstance under the proposed exception. The appeals entity may also determine what is considered a reasonable timeframe for an appellant to demonstrate an exceptional circumstance. For example, if an appellant was unable to send an appeal request on time due to a snow storm and power outage and sent the request four months after the snow storm and power outage had been resolved, the appeals entity may find that the appellant experienced an exceptional circumstance as contemplated by this proposed rule, but that the appellant waited an unreasonable amount of time to demonstrate it. Without such flexibility for the appeals entity, appellants who experienced an exceptional circumstance would have an unlimited amount of time to request that the appeals entity consider their appeal. We seek comment on this proposal. d. Dismissals (§ 155.530) We propose to revise § 155.530(a)(4) to allow an appeal to continue when an appellant dies if the executor, administrator, or other duly authorized representative of the estate requests to continue the appeal. We seek comment on this proposal. e. Informal Resolution and Hearing Requirements (§ 155.535) In § 155.535, we propose amendments to the informal resolution and notice of hearing requirements. In § 155.535(a), E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS we propose a change to clarify that the requirements of the informal resolution process described in paragraphs (a)(1) through (4) apply to both the HHS appeals entity and a State Exchange appeals entity. In § 155.535(b), we propose providing two exceptions to the requirement that the appeals entity must send written notice to the appellant of the date, time, and location or format of the hearing no later than 15 days prior to the hearing date. In paragraph (b)(1), we propose an exception when an appellant requests an earlier hearing date. Currently, the 15-day notice requirement prevents an appellant from selecting a hearing date within 15 days even if such a date is available and desired by the appellant. In paragraph (b)(2), we propose an exception to the notice requirement under paragraph (b) when a hearing date sooner than 15 days is necessary to process an expedited appeal, as described in § 155.540(a), and the appeals entity and appellant have mutually agreed to the date, time, and location or format of the hearing. If finalized, this amendment would create efficiency for the appeals process as a whole and create a more agreeable experience for the appellant. In addition, it would allow for an earlier hearing when there is an immediate need for a health service. We seek comment on these proposals. f. Appeal Decisions (§ 155.545) We propose several changes to § 155.545. In paragraph (b)(1), we propose to remove the third appearance of the word ‘‘of’’ to correct a typographical error. We also propose to revise paragraph (c)(1)(i) to include cross references to § 155.330(f)(4) and (5), which discuss effective dates for certain special enrollment periods described in § 155.420. This change aligns with our proposed change § 155.505(b) to clarify that applicants and enrollees have the right to appeal a determination of eligibility for an enrollment period. Finally, we propose to revise § 155.545(c)(1)(ii) so that the coverage effective date for eligible appellants requesting a retroactive appeal decision effective date is the coverage effective date that the appellant did receive or would have received if the appellant had enrolled in coverage under the incorrect eligibility determination that is the subject of the appeal. This is consistent with the coverage effective dates consumers receive in comparable situations when given the option for retroactive coverage, such as in the case of certain special enrollment periods. We seek comment on this proposal. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 g. Employer Appeals Process (§ 155.555) We also propose to amend § 155.555(l) to give the Exchange more operational flexibility in implementing an employer appeal decision. Currently under § 155.555(l), when an employer appeal decision affects an employee’s eligibility, the Exchange is directed to redetermine the employee’s eligibility and the eligibility of the employee’s household members, if applicable. An employer’s appeal decision may affect an employee’s eligibility when the employer prevails in the appeal by establishing that it does offer the employee employer-sponsored coverage that meets the minimum value standard and is affordable for the employee, and the HHS appeals entity therefore finds that the employee is not eligible for Exchange financial assistance. We propose to amend § 155.555(l) by revising paragraph (l) and adding paragraphs (l)(1) and (2). Under proposed paragraph (l), after receipt of the notice under paragraph (k)(3) of this section, the Exchange must follow the requirements in either paragraph (l)(1) or (2) if the appeal decision affects the employee’s eligibility. Under proposed paragraph (l)(1), the Exchange must promptly redetermine the employee’s eligibility and the eligibility of the employee’s household members, if applicable, in accordance with the standards specified in § 155.305, as currently provided in paragraph (l). Under proposed paragraph (l)(2), the Exchange must promptly notify the employee of the requirement to report changes in eligibility as described in § 155.330(b)(1). The FFE intends to implement the latter procedure to give employees the opportunity to report any additional changes in their eligibility information to help ensure the most accurate redetermination of eligibility for insurance affordability programs. We believe this amendment will also give the Exchange greater operational flexibility. Additionally, we propose to make a technical correction to § 155.555(e)(1) by removing the cross-reference to paragraph (d)(3) of this section, which does not exist, and replacing it with paragraph (d)(1)(iii). We seek comment on these proposals. 7. Exchange Functions in the Individual Market: Eligibility Determinations for Exemptions a. Eligibility Standards for Exemptions (§ 155.605) We are proposing to clarify and streamline policies related to exemptions and are proposing to amend § 155.605 to reflect those changes. The PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 75535 proposed changes will simplify and streamline the process for members of health care sharing ministries, members of Indian tribes, and incarcerated individuals by directing consumers solely to the tax filing process to claim these exemptions. To claim one of these exemptions on a tax return, the individual needs only to file IRS Form 8965, Health Coverage Exemptions, with his or her tax return. Presently, the Exchange process requires that an application be submitted to the Exchange, and the Exchange review, process, and respond to the application. If the individual does not complete the Exchange application with all required information, the individual will be asked to submit the missing information before the application can be processed. The follow-up steps may result in a significant delay to the individual’s application if he or she does not submit the information on a timely basis. Further, the Exchange may only grant certain exemptions on a retrospective basis so that the individual may need to submit multiple applications throughout the year. Finally, the Exchange may not grant exemptions for members of health care sharing ministries and individuals who were incarcerated for the previous year if the individual requests the exemption after December 31 of the previous year. This adds confusion when many individuals are preparing their tax returns, assessing their exemption eligibility and discovering that they can apply with the Exchange. Corresponding requirements do not exist in the tax return process; consumers simply claim the exemption on IRS Form 8965 when filing the tax return. Therefore, we propose that the Exchange would no longer make eligibility determinations for exemptions based on membership in a health care sharing ministry, membership in an Indian tribe, or incarceration status, and therefore propose to delete paragraphs (d) through (f). We propose to redesignate paragraph (g) as paragraph (d). We also propose to add a new paragraph (e), under which we propose that certain exemptions authorized under Section 5000(A) of the Internal Revenue Code may be claimed during the tax filing process without obtaining an exemption certificate number (ECN) from the Exchange. In previous guidance, we identified these exemptions and provided that they may be claimed on a tax return without obtaining an ECN.26 The IRS has also 26 HHS Centers for Medicare & Medicaid Services, Shared Responsibility Guidance-Filing Threshold E:\FR\FM\02DEP2.SGM Continued 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75536 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules published guidance identifying these exemptions, and allowing eligible individuals to claim the exemption without first obtaining an ECN.27 These proposed regulations codify our prior guidance. An ECN is not required for an exemption that can be claimed on a tax return. Rather, an individual can simply list the appropriate code to claim the exemption per the instructions to Form 8965. The varying requirements between the IRS and the Exchange exemption processes may cause confusion for applicants. Further, we intend to permit individuals who have already been granted an ECN from the Exchange on a continuing basis (such as for members of Federally recognized tribes or individuals eligible for services through an Indian health care provider) to use their ECN on their Federal income tax return to claim this exemption until such time that they no longer are eligible for this exemption. An individual will be able to obtain information about his or her ECN after the Exchange ceases processing tribal membership exemptions. We also propose a clarifying amendment to § 155.605(b) to remove the crossreference to paragraphs (f)(2) and (g) and replace it with paragraphs (c)(2) and (d). We seek comment on all aspects of this proposal. We propose to redesignate § 155.605(g), which discusses hardship exemptions, as § 155.605(d), and reorganize and revise the newly redesignated paragraph (d). In newly redesignated § 155.605(d)(1), we propose to limit the amount of time a general hardship exemption may cover to the remainder of the calendar year from the date the hardship commenced plus the next calendar year, plus the month before the hardship began. We believe that such a maximum period for the hardship exemption provides the individual with a sufficient period of time during which he or she will be covered by the exemption, and sufficient time for the individual to recover from the hardship. We propose that an individual would need to submit a new hardship exemption application to the Exchange to request subsequent hardship exemptions on the same basis, however the Exchange may use the proof of hardship submitted with the previous application as long as it is within 3 years of an individual’s initial Hardship Exemption (Sept. 18, 2014), available at https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/Filing-ThresholdExemption-Guidance-9–18–14.pdf. 27 Notice 2014–76, 2014–50 I.R.B. 946 (December 8, 2014), available at https://www.irs.gov/pub/irsirbs/irb14–50.pdf. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 application for the hardship exemption. We propose that individuals would not be required to submit additional proof within 3 years of their initial application because we believe that this proof would be sufficiently current to support an additional exemption application. We seek comment on this proposal, in particular with respect to the timeframes—both the maximum timeframe for the length of the hardship exemption, and the 3-year timeline for submission of new supporting evidence. Next, we propose to revise newly redesignated § 155.605(d)(2) to set out specific examples of events and circumstances that qualify an individual for a hardship exemption under the umbrella of the general set of events and circumstances described under newly redesignated § 155.605(d)(1). We note that these specific proposed criteria are not intended to limit the Exchange’s ability to determine individuals’ eligibility for a hardship exemption based on other criteria provided through guidance, covering a specified duration, such as the exemption available to individuals enrolled in CHIP Buy-In plans in 2014. The specific illustrative criteria we propose to add are: • Homelessness; • Eviction or facing eviction or foreclosure; • Received a shut-off notice from a utility company; • Experienced domestic violence; • Experienced the death of a family member; • Experienced a fire, flood or other nature or human-caused disaster that caused substantial damage to your property; • Filed for bankruptcy; • Experienced unexpected increases in necessary expenses due to caring for an ill, disabled or aging family member; • Seeking categorical Medicaid eligibility under section 1902(f) of the Social Security Act (the Act) for ‘‘209(b)’’ States (codified at § 435.121); • Seeking Medicaid coverage provided to medically needy individuals under section 1902(a)(10(C) of the Act that is not included as government-sponsored minimum essential coverage under IRS regulations and not recognized as MEC by the Secretary of HHS in accordance with the CMS State Health Official (SHO) Letter #14–002; • Enrolled in Medicaid coverage provided to a pregnant woman that is not included as government-sponsored minimum essential coverage under IRS regulations and not recognized as minimum essential coverage by the Secretary of HHS in accordance with CMS SHO #14–002; PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 • Enrolled in CHIP coverage provided to an unborn child that includes comprehensive prenatal care for the pregnant mother; or • As a result of an eligibility appeals decision the individual is eligible for enrollment in a qualified health plan through the Exchange, lower costs on the individual’s monthly premiums or CSRs for a time period when the individual was not enrolled in a QHP through the Exchange. These criteria were previously laid out in Exchange guidance, and capture many of the reasons why an individual has requested a hardship exemption to date. We seek comment on this proposal. We propose to revise newly redesignated paragraph (d)(3) to require that a hardship event or circumstance must have occurred within 3 years from the date of the individual’s hardship application submitted to the Exchange. This proposed paragraph is in line with the requirement that an Exchange may only accept an application for a hardship exemption up to 3 calendar years after the month or months during which the applicant attests that the hardship occurred under § 155.610(h). The same hardship event or circumstance may qualify an individual for two ECNs that cover a period of 4 years total. For example, assume an individual experiences a hardship event in January 2015 and submits a hardship application to the Exchange in February 2015. If the individual otherwise qualifies for the exemption, the individual may be granted an ECN spanning December 2014 through December 2016. If the individual submits a second hardship application in January 2017 noting that the exemption is requested for the same event covered by the original ECN that occurred in January 2015, the individual may be granted a second ECN that extends through December 2018. Next, consider an individual who experiences a hardship event in January 2015 and submits a hardship application to the Exchange in January 2018. The individual is eligible for a hardship exemption from December 2014 through December 2016, and the individual may request a second ECN to cover through December 2018. Finally, consider an individual who experiences a hardship event in January 2015 and submits a hardship application to the Exchange in January 2019. The individual is not eligible for an exemption for the January 2015 event because it happened more than 3 years from the date of the individual’s exemption application. However, if the individual can show the Exchange that E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS the event continued or a new hardship qualifying event occurred anytime from January 2016 to January 2019, the individual would be eligible for a hardship exemption. We seek comment on this proposal and on whether 3 years is the appropriate length of time, or whether a shorter period is warranted. In addition, we propose to amend newly redesignated § 155.605(d)(5), which provides an exemption for a calendar year to an individual who has been determined ineligible for Medicaid for one or more months during a benefit year solely as a result of a State not implementing section 2001(a) of the Affordable Care Act. We propose to remove the requirement to obtain an eligibility determination from the individual’s appropriate State Medicaid office. Instead, we propose that this exemption be made available to an individual who would be determined ineligible for Medicaid for one or more months during a benefit year solely as a result of a State not implementing section 2001(a) of the Affordable Care Act. By removing the requirement to obtain a Medicaid determination, we believe that we are reducing State administrative costs and are alleviating a significant burden on individuals who do not request this exemption until the previous calendar year has passed and are therefore unable to obtain a Medicaid determination for the previous year. We anticipate that this proposed change will simplify the process for filing an exemption application with the Exchange. We seek comment on this proposal. Finally, we propose § 155.605(e)(4) to allow individuals to claim the exemption described in section F of I.R.S. Notice 2014–76 (Dec. 8, 2014), relating to certain individuals who reside in a State that did not expand Medicaid eligibility, on their Federal income tax return without first obtaining an ECN from the Exchange. We propose to allow this exemption to be claimed beginning for the 2015 tax year so that there is no gap in the ability for consumers to claim this exemption on a tax return. b. Required Contribution Percentage (§ 155.605(e)(3)) Under section 5000A of the Code, an individual must have minimum essential coverage for each month, qualify for an exemption, or make a shared responsibility payment with his or her Federal income tax return. Under section 5000A(e)(1) of the Code, an individual is exempt if the amount that he or she would be required to pay for minimum essential coverage (the required contribution) exceeds a VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 particular percentage (the required contribution percentage) of his or her actual household income for a taxable year. In addition, under § 155.605(g)(2) (redesignated as § 155.605(d)(2)), an individual is exempt if his or her required contribution exceeds the required contribution percentage of his or her projected household income for a year. Finally, under § 155.605(g)(5) (redesignated as § 155.605(d)(5)), certain employed individuals are exempt if, on an individual basis, the cost of individual coverage is less than the required contribution percentage, but the aggregate cost of individual coverage through employers exceeds the required contribution percentage, and no family coverage is available through an employer at a cost less than the required contribution percentage. Section 5000A established the 2014 required contribution percentage at 8 percent. For plan years after 2014, section 5000A(e)(1)(D) of the Code and 26 CFR 1.5000A–3(e)(2)(ii) provide that the required contribution percentage is the percentage determined by the Secretary that reflects the excess of the rate of premium growth between the preceding calendar year and 2013, over the rate of income growth for that period. In the 2015 Market Standards Rule (79 FR 30302), we established a methodology for determining the excess of the rate of premium growth over the rate of income growth for plan years after 2014. We also said future adjustments would be published annually in the HHS notice of benefit and payment parameters. Under the HHS methodology, the rate of premium growth over the rate of income growth for a particular calendar year is the quotient of (x) 1 plus the rate of premium growth between the preceding calendar year and 2013, carried out to ten significant digits, divided by (y) 1 plus the rate of income growth between the preceding calendar year and 2013, carried out to ten significant digits.28 As the measure of premium growth for a calendar year, we established in the 2015 Market Standards Rule that we would use the premium adjustment percentage. The premium adjustment percentage is based on projections of average per enrollee employersponsored insurance premiums from the National Health Expenditure Accounts (NHEA), which are calculated by the 28 We also defined the required contribution percentage at § 155.600(a) to mean the product of 8 percent and the rate of premium growth over the rate of income growth for the calendar year, rounded to the nearest one-hundredth of one percent. PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 75537 CMS Office of the Actuary. 29 In § 156.130 of this proposed rule, we propose the 2017 premium adjustment percentage of 1.1325256291 (or about 13.3 percent) over the period from 2013 to 2016. This reflects an increase of about 5.1 percent for 2015–2016. As the measure of income growth for a calendar year, we established in the 2015 Market Standards Rule that we would use per capita Gross Domestic Product (GDP), using the projections of per capita GDP used for the NHEA, which is calculated by the Office of the Actuary. However, as noted in the 2015 Market Standards Rule (79 FR 30304), we stated that we would consider alternative measures of income and premium growth should projections of those measures become available. As part of its projections of National Health Expenditures, the Office of the Actuary published projections of personal income (PI) for the first time in September 2014 and subsequently in July 2015. As a result, we are considering substituting this new measure of per capita PI for per capita GDP in the calculation for the required contribution percentage. We believe per capita PI better aligns with the statutory intent of measuring the income of an individual than per capita GDP. The projections of PI published by the Office of the Actuary are consistent with the measure published by the Bureau of Economic Analysis, which reflects income received by individuals from all sources, including income from participation in production. Specifically, it includes compensation of employees (received), supplements to wages and salaries, proprietors’ income with adjustments for inventory valuation and capital consumption, personal income receipts on assets, rental income, and personal current transfer receipts, less contributions for government social insurance. The Office of the Actuary’s PI projection is generated using the University of Maryland’s Long Term Inter-industry Forecasting Tool. The Long Term Inter-industry Forecasting Tool model is a macro-economic model that is based on the historical relationships that exist between PI growth, GDP growth, and changes in other macro-economic variables. For instance, the correlation between PI and GDP is influenced by fluctuations in 29 For any given year the premium adjustment percentage is the percentage (if any) by which the most recent NHEA projection of per enrollee employer-sponsored insurance premiums for the current year exceeds the most recent NHEA projection of per enrollee employer-sponsored insurance premiums for 2013. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75538 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules taxes and government transfer payments, depreciation of capital stock, and retained earnings and transfer payments of private business.30 Estimates of GDP in the NHE projections reflect economic assumptions from the 2015 Medicare Trustees Report and are updated to incorporate the latest available consensus data from the monthly Blue Chip Economic Indicators. These same economic assumptions are used for producing projections of PI and employersponsored insurance premiums, so using this estimate will generate an internally consistent estimate of the growth in premiums relative to growth in income. We welcome comments on whether to substitute per capita PI for per capita GDP in the calculation to establish the rate of income growth for the required contribution percentage. We will continue to consider other changes to the measures of income per capita and premium growth as additional information becomes available and as we gain experience with the current measures, and seek comment on other indices that we should develop or consider. For example, we have considered a measure of per capita personal income that does not include government transfers such as social security, Medicare, and Medicaid. We welcome comments on whether we should seek to develop such a measure of income, and whether we should use this or another alternative measure to establish the rate of income growth for the required contribution percentage. Since updating the required contribution percentage for 2017 requires calculating the cumulative difference between premium growth and income growth between the preceding calendar year and 2013, we propose to replace per capita GDP with per capita PI for all years beginning in 2013 and then calculate cumulative income growth through 2016. We propose this retrospective approach as it allows for consistency across all years with the most recent data available. We note that potential future changes based on new data that are not available for 2013 may be made on a prospective basis. Under this proposal, using the NHEA data, the rate of income growth for 2017 is the percentage (if any) by which the most recent projection of per capita PI 30 Projections of PI and GDP are available from Table 1 at: Centers for Medicare & Medicaid Services. National Health Expenditure Data: Projected. https://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/ NationalHealthExpendData/ NationalHealthAccountsProjected.html. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 for the preceding calendar year ($49,875 for 2016) exceeds the per capita PI for 2013, ($44,925), carried out to ten significant digits. The total rate of income growth for the 3-year period from 2013–2016 is estimated to be 1.1101836394 (or about 11.0 percent). This reflects an increase of about 2.68 percent for 2015–2016. Thus, using the proposed 2017 premium adjustment percentage, the excess of the rate of premium growth over the rate of income growth for 2013– 2016 is 1.1325256291/1.1101836394, or 1.0201245892. This results in a required contribution percentage for 2017 of 8.00*1.0201245892, or 8.16 percent, when rounded to the nearest onehundredth of one percent, an increase of 0.37 percentage points from 2016. The required contribution percentage is also used for 36B(b)(3)(A) and (c)(2)(C). c. Eligibility Process for Exemptions (§ 155.610) In § 155.610, we propose to delete a cross-reference and add a paragraph about the handling of incomplete exemption applications received by the Exchange. First, we propose to strike the crossreference to paragraph (f) in § 155.610(h)(1) as we propose elsewhere in this proposed rule that the Exchange will no longer process exemption applications related to membership in an Indian tribe. Second, we propose to add new paragraph § 155.610(k) regarding how the Exchange will handle incomplete exemption applications submitted to the Exchange. We propose that the Exchange will handle incomplete exemption applications similarly to how it handles incomplete health coverage applications under § 155.310(k). Specifically, when the Exchange receives an application that does not contain sufficient information to make an eligibility determination, the Exchange will: (1) Provide notice to the applicant indicating that information necessary to complete an eligibility determination is missing, specifying the missing information, and providing instructions on how to provide the missing information; (2) provide the applicant with a period of no less than 10 and no more than 90 days starting from the date on which the notice is sent to the applicant to provide the information needed to complete the application to the Exchange; and (3) if the Exchange does not receive the requested information, the Exchange will notify the applicant that the Exchange will not process the application and will provide appeal PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 rights to the applicant. We seek comment on this proposal. d. Verification Process Related to Eligibility for Exemptions (§ 155.615) In § 155.615, we propose deletions related to exemptions that we are proposing elsewhere in this proposed rule to remove from the Exchange exemption eligibility determination process, and an addition to align with newly added paragraphs pertaining to a general hardship exemption. First, we propose conforming edits to delete § 155.615(c), (d), (e), and (f)(3) in accordance with our proposal to remove the option to obtain an ECN from the Exchange for certain exemptions. Next, we propose to add paragraph § 155.615(c)(2) to align with the 3-year time frame requirement proposed in § 155.605(d)(3). We propose that if the hardship-qualifying event or circumstance in § 155.605(d)(1) began more than 3 years from the date the exemption application was submitted, and if the event or circumstance continued beyond the initial 3-year period, the Exchange must verify the applicant continued to experience the hardship to which he or she is attesting during a period that is within 3 years from the date of the exemption application submitted under § 155.605(d)(1). We believe that this requirement places minimum burden on the applicant while ensuring that the Exchange appropriately meets the requirements in paragraph (c)(1) of this section under the proposed 3-year time frame in § 155.605(d)(3). We seek comment on this proposal. e. Options for Conducting Eligibility Determinations for Exemptions (§ 155.625) We propose to amend § 155.625(a)(2) and (b) to remove the deadline after which a State Exchange was to be required to process exemption applications for residents of the State by the start of open enrollment for 2016, and to permit an Exchange to adopt an exemption eligibility determination made by HHS indefinitely. Based on HHS’s operation of this service to date, we have determined that the HHS exemption option is an efficient process for State Exchanges that has minimized confusion for consumers. This proposed rule follows an FAQ published on July 28, 2015 in which HHS stated that it will not take any enforcement action against State Exchanges that continue to use the HHS service for exemptions beyond the start of open enrollment for 2016. Therefore, we propose to delete paragraphs (b)(1), (2) and (3). We seek comment on this proposal. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS 8. Exchange Functions: Small Business Health Options Program (SHOP) a. Functions of a SHOP (§ 155.705) Sections 155.705(b)(2) and (3) set forth regulations related to employer choice in SHOPs. We are proposing to add new paragraphs (b)(3)(viii) and (ix) to specify that the FF–SHOPs would provide additional options for employer choice for plan years beginning on or after January 1, 2017. For plan years beginning in 2015, employers offering coverage in certain FF–SHOP States have two options for providing coverage: they can offer a single plan or they can offer ‘‘horizontal’’ choice, in which an employer selects a single actuarial value coverage level and makes all plans at that coverage level available to the qualified employees. These same two options are available to participating employers in all FF–SHOP States for plan years beginning on or after January 1, 2016. For plan years beginning on or after January 1, 2017, we propose to add paragraphs (b)(3)(viii) and (ix) to this section to add an additional employer choice option available to consumers participating in FF–SHOPs. We are proposing to add a ‘‘vertical choice’’ option for QHPs and SADPs under which employers will be able to offer qualified employees a choice of all plans across all available levels of coverage from a single issuer, for plan years beginning on or after January 1, 2017. We anticipate that this ‘‘vertical choice’’ option would be appealing to employers because it gives employees greater flexibility across coverage levels, and that it may encourage more issuers to participate in SHOPs because issuers would be able to offer all of their plans to employees. Issuers may also prefer this option because it minimizes the risk of adverse selection by limiting choices to their own plans. By offering multiple plans to an employer, the issuer may be more likely to enroll a greater share of the employer’s group than if multiple issuers offering coverage in a single coverage level were vying for members of the group. By doing so, the issuer would be likely to enroll a more diverse risk pool from the employer’s group, minimizing the risk of adverse selection. We note that existing SHOP regulations at § 155.705(b)(3)(i)(B) and (b)(3)(ii)(B) provide State-based SHOPs with the flexibility to provide employers with vertical choice or other options for providing employer choice in addition to ‘‘horizontal’’ choice, and these amendments would not affect Statebased SHOPs’ flexibility in this regard. We are also seeking comment on whether the FF–SHOPs should make VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 other employer choice options available. For example, we are considering allowing participating employers to select an actuarial value level of coverage, after which employees could choose from plans available at that level and at the level above it. We also seek comment on whether to give the State in which the FF–SHOP is operating an opportunity to recommend whether the FF–SHOP in that State should implement any additional model of employer choice. Under this approach, a State regulatory agency, such as the State Department of Insurance, could submit a letter to the Secretary with a recommendation for the employer choice models that should be offered in their State, based on the additional models of employer choice the FF– SHOP has made available. The FF– SHOP would then evaluate the State’s recommendation and determine whether to make the additional models of employer choice available in the State. In all States, the FF–SHOPs would continue to give employers the option of offering a single QHP (or SADP) as well as the option of offering a choice of all QHPs (or SADPs) at a single actuarial value level of coverage, and States would not be given an opportunity to recommend that these options not be implemented in their State. We also propose adding a new § 155.705(b)(3)(x) to provide that the employer choice models that would be available for SBE–FPs utilizing the Federal platform for SHOP enrollment functions would be the ones that are available through the FF–SHOP platform, because employer choice is an integral part of the FF–SHOP platform’s enrollment functionality and system build. If we finalize an approach under which States with an FF–SHOP would be given an opportunity to recommend whether the FF–SHOP in that State should implement any additional models of employer choice that would ultimately be finalized as a result of these proposals, the same opportunity would be made available to a State with an SBE–FP. We propose to amend paragraph (b)(4)(ii)(B) to specify the timeline under which qualified employers in a FF– SHOP must make initial premium payments. Specifically, we are proposing to add paragraph (b)(4)(ii)(B)(1) to specify that in the FFSHOPs, payment for the group’s first month of coverage must be received by the premium aggregation services vendor on or before the 20th day of the month prior to the month that coverage begins. This means electronic payments must be completed or the premium PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 75539 aggregation services vendor must have receipt of any hard copy check on or before the 20th day of the month prior to the month that coverage would begin. HHS currently advises employers participating in FF–SHOPs to submit initial premium payments electronically by the 15th of the month prior to the coverage effective date to ensure that there is sufficient time for the payment to be cleared. Selecting the 20th of the month provides sufficient time to cancel coverage prior to the effective date. Under this proposal, if an initial premium payment is not received by the premium aggregation services vendor on or before the 20th day of the month prior to the month that coverage would begin, coverage would not be effectuated. If this happens, the employer could apply to purchase coverage that would be effective at the beginning of another month during the year, as coverage would not have been effectuated. The group would not need to submit a new application, but would need to select a new coverage effective date. Therefore, the grace period and reinstatement opportunities under § 155.735(c)(2) that are provided to groups that do not make timely payments after coverage has taken effect are not relevant in this context, and we are proposing amendments to the introductory language of § 155.735(c)(2) to reflect this. In circumstances where an FF–SHOPs would be retroactively effectuating coverage for qualified employer groups, the FF–SHOP would need to receive payment prior to effectuating coverage. We seek comment on the timing of when premium payment must be received by an FF–SHOP when coverage is effectuated retroactively. We are considering a policy under which payments for the first month’s coverage and all months of the retroactive coverage would have to be received and processed no later than 30 days after the event that triggers the eligibility for retroactive coverage. We believe 30 days would provide sufficient time for groups to make these payments. In paragraph (b)(4)(ii)(C)(2) of this section, we propose to correct a cross reference to § 155.705(b)(4)(ii)(B)(1) that should have been updated to crossreference § 155.705(b)(4)(ii)(C)(1) when § 155.705(b)(4)(ii)(A) was added in the 2016 Payment Notice. We also propose amendments to § 155.705(b)(11)(ii), which governs employer contributions to premiums in FF–SHOPs and applies to both medical and dental plans. Section 155.705(b)(11)(ii) currently states that the FF–SHOP ‘‘must use’’ the reference plan contribution methodology E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75540 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules currently set forth at § 155.705(b)(11)(ii). We propose to amend this provision to provide for FF–SHOPs to use a ‘‘fixed contribution methodology,’’ in addition to the reference plan methodology set forth in the current regulation. The amendments would specify that when an employer decides to offer a single plan to qualified employees, the employer would be required to use the fixed contribution methodology. Specifically, when offering a single plan, the employer would contribute a fixed percentage of the plan’s premium for each qualified employee, and (if applicable) for each dependent of a qualified employee. This policy for employers offering a single plan is consistent with what was described in the preamble to the Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; Small Business Health Options Program rulemaking (78 FR 33233), in which we explained that when a choice of plans is not available to the employee, the single QHP offered by the employer would be the reference plan under the reference plan methodology described in the current regulation. See 78 FR 33236. While the proposed methodology would be consistent with our interpretation of the current regulation in circumstances where a choice of plans is not offered, we are proposing to codify how the contribution methodology would be handled operationally in those circumstances. Additionally, we propose to permit employers to choose between the reference plan contribution methodology set forth in the current regulation and the proposed fixed contribution methodology when offering a choice of plans. When offering a choice of plans, an employer opting for the fixed percentage contribution methodology would contribute a fixed percentage of the premiums across all plans in which any qualified employee and, if applicable, any dependent of a qualified employee, is enrolled. The dollar amount of the fixed percentage contribution would vary from enrollee to enrollee based on their age and the plan they choose. We believe that offering these two employer contribution methodologies to employers offering a choice of plans would provide employers with flexibility to contribute to their qualified employees’ plans in a manner that is appropriate for the group. We are also proposing to add language to § 155.705(b)(11)(ii) explaining that a tobacco surcharge, if applicable, would be added to the monthly premium after the employer contribution is applied to VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 the premium so that the financial impact of the surcharge is borne by the tobacco user, as opposed to being shared with the employer or other enrollees. We also propose to streamline the discussion of the reference plan contribution methodology described in § 155.705(b)(11)(ii), and propose removing § 155.705(b)(11)(ii)(D) because the FF–SHOPs are currently not able to support basing employer contributions on calculated composite premiums. We seek comment on these proposals. b. Eligibility Determination Process for SHOP (§ 155.715) We propose to amend § 155.715(g)(1), which sets forth what a SHOP must do if a qualified employer withdraws from the SHOP, to distinguish between terminations of enrollment and terminations of coverage. This regulation currently provides that, if an employer ceases to purchase coverage through a SHOP, the SHOP must ensure that each QHP terminates the coverage of the qualified employee who is enrolled in the QHP through the SHOP. Consistent with guaranteed availability and guaranteed renewability, coverage purchased through a SHOP might in many circumstances continue outside a SHOP in a manner no longer considered to be enrollment through the SHOP. Therefore, we propose to specify that the termination described in this paragraph would be a termination of the employer group’s enrollment through the SHOP, rather than a termination of the group’s coverage. For example, in many circumstances, an employer may offer to continue the same coverage outside of the SHOP, in which case the issuer should not terminate the coverage. We seek comment on this proposal. c. Enrollment Periods Under SHOP (§ 155.725) Section 155.725(c) discusses the annual employer election period. We are proposing to delete paragraph (c)(1) because it is outdated, redesignate current paragraph (c)(2) as (c) introductory text and redesignate the remaining paragraphs to reflect the new structure of paragraph (c). We propose to redesignate § 155.725(e) as § 155.725(e)(1) and add paragraph (e)(2). To provide adequate time for qualified employees in FF– SHOPs to make coverage selections during their annual open enrollment period, we propose adding paragraph (e)(2) to specify that qualified employers in the FF–SHOP must provide qualified employees an annual open enrollment period of at least one week. This proposed amendment, like all of PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 § 155.725(e), would apply only with respect to renewals. We are also proposing amendments to § 155.725(h)(2) to specify that the event that triggers a group’s coverage effective date in a FF–SHOP is not the plan selections of the individual enrollees, but the employer’s submission of all plan selections for the group (which we call the group enrollment), and to allow employers to opt for a coverage effective date later than the standard dates provided for under the rule. The proposed amendments would permit qualified employers to set enrollment periods for their qualified employees that could include plan selections both before and after the 15th of a month, and would also permit employers to select a coverage effective date later than the standard dates provided for under the rule. Employers would be able to select a coverage effective date up to 2 months in advance, provided that small group market rates are available for the quarter in which the employer would like coverage to take effect. This would allow employers to maximize their enrollment periods so that they could begin the SHOP enrollment process as soon as small group market rates are available for the quarter in which they would like coverage to take effect. Under the proposed amendments, if an employer submits its group enrollment by the 15th day of any month, the FF–SHOP would ensure a coverage effective date of the first day of the following month, unless the employer opts for a later effective date for which rates are available. If an employer submits its group enrollment between the 16th day of the month and the last day of the month, we propose that the FF–SHOP must ensure a coverage effective date of the first day of the second following month, unless the employer opts for a later effective date for which rates are available. We propose to amend § 155.725(i)(1), which currently provides that if a qualified employee enrolled in a QHP through a SHOP remains eligible for coverage, that qualified employee will remain in the QHP selected the previous year, unless certain exceptions apply. We propose to provide that a SHOP be permitted to, but need not, provide for auto-renewals of qualified employees, and also propose to revise the language of the provision for consistency with our interpretation of guaranteed renewability. If a SHOP does not provide for auto-renewals for qualified employees, qualified employees would have to review and provide a response to the employer’s renewal offer of coverage. If auto-renewal is available, E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS qualified employees need not take any action to continue in the prior year’s coverage through the SHOP. We are proposing this amendment to reflect current operational capabilities in the FF–SHOPs. Additionally, we propose to amend paragraph (j)(2)(i) of this section to remove a reference to § 155.420(d)(10), which was deleted in the 2016 Payment Notice. We also propose to amend the paragraph to specify that there would not be a SHOP special enrollment period when a qualified employee or dependent of a qualified employee experiences an event described in § 155.420(d)(1)(ii), which provides for a special enrollment period for individuals enrolled in a non-calendaryear group health plan. We seek comment on these proposals. d. Termination of SHOP Enrollment or Coverage (§ 155.735) For the reasons discussed above in the preamble discussion of our proposed amendments to § 155.705(b)(4), we are proposing to modify the introductory language of § 155.735(c)(2) to specify that the provisions related to termination of employer group health coverage for non-payment of premiums in FF–SHOPs under paragraph (c)(2) would not apply to premium payments for the first month of coverage. We are also proposing amendments to § 155.735(d). Under existing regulations at § 155.735(d)(2), terminations of FF– SHOP coverage or enrollment are effective on the last day of the month in which the FF–SHOP receives notice for enrollees that change from one QHP to another during the employer’s annual open enrollment period or during a special enrollment period. We propose that if an enrollee changes from one QHP to another during the annual open enrollment period or during a special enrollment period, the last day of coverage would be the day before the effective date of coverage in the enrollee’s new QHP. We believe that this would prevent any instances of double coverage as well as avoid a gap in coverage. We also propose to require at § 155.735(d)(2)(iii) that the FF–SHOPs send advance notices to qualified employees before their dependents age off of their plan. This notice would be sent 90 days in advance of the date when the child dependent enrollee is no longer eligible for coverage under the plan the employer purchased through the FF–SHOP because he or she has reached the maximum child dependent age for the plan. The notice would include information about the plan the dependent is currently enrolled in, the VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 75541 date the dependent would age off the plan, and information about next steps. In the FF–SHOPs, consistent with current § 155.735(d)(2) and proposed § 155.735(d)(2)(i), a dependent aging off of the plan loses eligibility for dependent coverage at the end of the month of the dependent’s 26th birthday or at the end of the month in which the issuer has set the maximum dependent age limit (but in some cases might have the option to keep the coverage for a period of time after that date under applicable continuation coverage laws). This notice is intended to be a courtesy notice as enrollees would still receive a termination notice when their coverage through the SHOP is terminating. flexibility under this proposal to opt for a prospective effective date because he or she did not want to pay retrospective premiums. We also propose to revise paragraph (l)(3) to specify that if eligibility is denied under an appeal decision, the effective date of the coverage or enrollment through the SHOP under the appeal decision would be the first day of the month following the date of the notice of the appeal decision. We seek comment on these proposals. e. SHOP Employer and Employee Eligibility Appeals Requirements (§ 155.740) In § 155.740, we make certain proposals relating to SHOP appeals. We propose to amend paragraphs (c)(2) and (d)(2) to provide that employers and employees may file an appeal not only if a SHOP fails to provide an eligibility determination in a timely manner but also if a SHOP fails to provide timely notice of an eligibility determination, in accordance with § 155.715(e) and (f). We propose these amendments in order to better align the SHOP appeals provisions with individual market Exchange appeals. We note that the FF– SHOPs provide the notice of eligibility automatically when an application is submitted. For the FF–SHOPs, the date of eligibility determination and eligibility notice are generally the same date. We also propose to amend paragraph (l)(3) to allow employers and employees who successfully appeal a denial of SHOP eligibility to select whether the effective date of coverage or enrollment through the SHOP under their appeal decision will be retroactive to the effective date of coverage or enrollment through the SHOP that the employer or employee would have had if they had correctly been determined eligible, or prospective from the first day of the month following the date of the notice of the appeal decision. The current version of paragraph (l)(3) requires all SHOP appeal decisions to be retroactive to the date the incorrect eligibility determination was made. This proposed change would grant employers and employees added flexibility regarding the effective date of coverage or enrollment through the SHOP under their appeal decision and would be better aligned with current and proposed policy for individual market Exchange appeals. For example, an employer or employee would have In the first few years of FFE operations, HHS has generally used an ‘‘open market’’ approach to QHP certification, accepting plans that met the minimum QHP certification criteria. As the new QHP market developed, it has been valuable to maintain predictability for issuers, and that remains an important consideration. For example, elsewhere in this rulemaking, we propose codifying and making transparent standards related to network adequacy. At the same time we are exploring the most useful tools to ensure that QHPs offer consumers a quality product. In this section, we seek comment on a means of improving product value by using the authority to deny certification to QHP applications. PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 9. Exchange Functions: Certification of Qualified Health Plans a. Certification Standards for QHPs (§ 155.1000) 1. Denial of Certification Section 1311(e)(1)(B) of the Affordable Care Act states that Exchanges may certify a health plan as a QHP if ‘‘(A) such health plan meets the requirements for certification as promulgated by the Secretary . . . and (B) the Exchange determines that making available such health plan through such Exchange is in the interests of qualified individuals and qualified employers.’’ Section 1311(e)(1)(B) thereby affords Exchanges the discretion to deny certification of QHPs that meet minimum QHP certification standards, but are not ultimately in the interests of qualified individuals and qualified employers. We interpret the ‘‘interest’’ standard to mean QHPs should provide quality coverage to consumers to meet the Affordable Care Act’s goals. Section 155.1000 provides Exchanges with broad discretion to certify health plans that otherwise meet the QHP certification standards specified in part 156. HHS will continue to focus denials of certification in the FFEs based on the ‘‘interest of the qualified individuals and qualified employers’’ standard to E:\FR\FM\02DEP2.SGM 02DEP2 75542 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules cases involving the integrity of the FFEs and the plans offered through them. Examples of issues that could result in non-certification of a plan include concerns related to an issuer’s material non-compliance with applicable requirements, an issuer’s financial insolvency, or data errors related to QHP applications and data submissions. Under this approach, HHS could consider an assessment of past performance, including with respect to oversight concerns raised through compliance reviews and consumer complaints received and the frequency and extent of any data submission errors. HHS would adopt a measured approach in exercising this authority that would take into consideration several factors, including available market competition and the availability of operational resources. As we consider this approach, we anticipate seeking more specific comment. We seek comment on this proposal generally, and on these and any other factors HHS should consider when evaluating QHPs to determine if they meet the interests of consumers and businesses. HHS would also ensure any future policy changes do not interfere with State activities. We seek comments, specifically from States and other stakeholders, on this aspect of the proposal. We note that the OPM has the sole discretion for contracting with multiState plans and as such retains the authority to selectively contract with multi-State plans. G. Part 156—Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges 1. Standardized Options jstallworth on DSK7TPTVN1PROD with PROPOSALS a. Standardized Option Definition (§ 156.20) The Affordable Care Act gives Exchanges considerable flexibility in certification and oversight of QHPs. An excessive number of health plan options makes consumers less likely to make any plan selection, more likely to make a selection that does not match their health needs, and more likely to make a selection that leaves them less satisfied. In studies of consumer behavior in Medicare Part D, Medicare Advantage, and Medigap, a choice of 15 or fewer plans was associated with higher enrollment rates, while a choice of 30 or more plans led to a decline in enrollment rates.31 In 2015, across the 31 Chao Zhou and Yuting Zhang, ‘‘The Vast Majority Of Medicare Part D Beneficiaries Still Don’t Choose The Cheapest Plans That Meet Their VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 37 Exchanges using the HealthCare.gov platform, the number of health plan choices available per county varied from 2 to 54 plans at the bronze level, 2 to 73 plans at the silver level, and 1 to 43 plans at the gold level.32 Our experience in the first two open enrollment periods suggests that many consumers, particularly those with a high number of health plan options, find the large variety of cost-sharing structures available on the Exchanges difficult to navigate. We believe that standardized options will provide these consumers the opportunity to make simpler comparisons of plans offered by different issuers within a metal level. Consumers will be able to focus their decision making on the providers in the plan networks, premiums, benefits, and quality, and will not be required to make complex tradeoffs among costsharing differences among a large number of plans. Taken together, standardized options, EHB, AV, and QHP certification standards can significantly simplify consumers’ ability to compare plans and make informed choices. To simplify the consumer plan selection process, HHS is proposing to establish ‘‘standardized options’’ in the individual market FFEs. These plans would have standardized cost sharing for a key set of EHB that comprise a large percentage of the total allowable costs for an average enrollee. We propose that issuers would not be required to offer standardized options in 2017 and would retain the flexibility to offer non-standardized plans, but we are considering ways that standardized options, when certified by an FFE, could be displayed on HealthCare.gov in a manner that makes it easier for consumers to find and identify them, including distinguishing them from non-standardized plans. We propose cost-sharing structures for standardized options at the bronze, silver (and associated silver cost-sharing reduction plan variations), and gold levels of coverage. At § 156.20, we propose adding a definition for standardized option. A standardized option would be defined as a QHP with a standardized cost-sharing structure specified by HHS and that is offered for sale through an individual market FFE (see Table 9 for proposed models). We envision standardized options to Medication Needs.’’ Health Affairs, 31, no.10 (2012):2259–2265. 32 The average number of plans available per county in 2015 were: 12 bronze plans, 15 silver plans, and 9 gold plans. Available at: https://www. cms.gov/cciio/resources/data-resources/ marketplace-puf.html. PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 include a single provider tier, a fixed innetwork deductible, a fixed annual limitation on cost sharing, and standardized copayments and coinsurance for a key set of EHB that comprise a large percentage of the total allowable costs for an average enrollee. We seek comment on this proposal. b. Standardized Option Design Principles We have designed one bronze standardized option, one silver standardized option, one standardized option for each silver CSR plan variation, and one gold standardized option. We are not proposing a platinum standardized option because only a small proportion of QHP issuers in the FFEs offered platinum plans in 2015. Silver plans are the most common and popular plans in the FFEs.33 As such, we encourage issuers to offer at least one standardized option at the silver level of coverage (along with the associated standardized silver CSR plan variations) to simplify the consumer shopping experience for the greatest number of enrollees. We intend to propose standardized option changes annually. We seek comment on these proposals. c. General Features of the Standardized Options To minimize market disruption, we have designed the standardized options to be as similar as possible to the most popular 2015 FFE QHPs (based on enrollment), and we have sought a costsharing structure that would generally not raise premiums. In arriving at these standardized option designs, we also consulted the standardized option designs offered in the SBEs that have provided standardized plans since the 2014 plan year (California, Connecticut, Massachusetts, New York, Oregon, and Vermont). i. Drug Formularies We propose that standardized options have the four drug tiers currently utilized in our consumer-facing applications at this time—generic, preferred brand, non-preferred brand, and specialty drug tiers. However, we propose to allow issuers to offer additional lower-cost tiers if desired. Slightly more than half (56 percent) of the proposed 2016 FFE QHPs have more than four drug tiers. We seek comment on this design element. 33 In 2015, across the FFEs, there were a total of: 263 catastrophic, 1864 bronze, 2500 silver, 1774 gold, and 551 platinum plans. Available at: https://www.cms.gov/cciio/resources/dataresources/marketplace-puf.html. E:\FR\FM\02DEP2.SGM 02DEP2 75543 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules ii. Provider Tiers We propose that standardized options have no more than one in-network provider tier. Varying cost sharing by provider tier affects the actuarial value of a plan, making it difficult to standardize a cost-sharing structure. Further, only 14 percent of FFE enrollees are currently enrolled in QHPs with more than one in-network tier, and only 6 percent of enrollees are covered by an issuer that does not offer a singletier plan in addition to a multi-tier plan in the same county. We seek comment on this design element. iii. Deductible-Exempt Services In designing the standardized options, we seek to exempt from the deductible certain routine services, such as primary care, specialist visits (at the silver and gold metal levels), and generic drugs, to ensure that access to coverage translates into access to care for routine and chronic conditions and that enrollees receive some up-front value for their premium dollars. Again, in terms of this feature, we designed the standardized options to be as similar as possible to the most popular 2015 FFE QHPs (based on enrollment). Among those 2015 FFE QHPs, over 85 percent of silver plan enrollees and over 50 percent of bronze plan enrollees selected plans that cover certain services prior to application of the deductible. (The figure for gold plan enrollees was over 90 percent. However, many gold plans have a $0 deductible, for which the concept of deductibleexempt services would not be meaningful.) Primary care and generic drugs are the services most likely to be covered without a deductible at all three metal levels. Other services that are also likely to be covered prior to the deductible, particularly by silver and gold plans, include specialist visits and mental/behavioral health and substance use disorder outpatient services. We seek comment on this design element. iv. Copayment vs. Coinsurance We sought to balance consumer preference for copayments over coinsurance with the potential impact on premiums. Research shows that consumers often prefer copayments to coinsurance because the former are more transparent and make it easier for consumers to predict their out-of-pocket costs. On the other hand, setting fixed copayments on a national level could lead to disparate premium effects due to regional and issuer-specific cost differences. We seek comment on this design element. d. Specific Standardized Option Designs The proposed 2017 bronze standardized option closely resembles a catastrophic plan, with a few key exceptions. The plan has a $6,650 deductible, an annual limitation on cost sharing equal to the maximum allowable annual limitation on cost sharing for 2017 (proposed to be $7,150), and 50 percent coinsurance. Primary care visits (for the first three visits) and mental health/substance use outpatient services are exempt from the deductible, and have a copayment of $45. Generic drugs are also exempt from the deductible and have a copayment of $35. Note that for all standardized options, cost-sharing rules for preventive services under § 147.130 apply (we do not list this benefit category in Table 9). The proposed 2017 silver standardized option has a $3,500 deductible, an annual limitation on cost sharing equal to the maximum allowable annual limitation on sharing for 2017, and a 20 percent enrollee coinsurance rate. Primary care visits, mental health/substance use outpatient services, specialist visits, urgent care visits, and all drug benefits are exempt from the deductible, and all of the deductible-exempt benefits have copayments instead of co-insurance, except for specialty drugs, which are subject to a 40 percent coinsurance rate. Emergency room services are subject to the deductible, with a $400 copayment applicable after the deductible. The proposed 2017 silver cost-sharing reduction standardized options reduce all cost sharing parameters successively to meet the 73 percent, 87 percent, and 94 percent AV requirements. Where possible, the cost-sharing reduction standardized options and the non-costsharing reduction standardized silver option maintain similar differentials between the cost sharing for certain benefits like primary care and specialty visits. The proposed 2017 gold standardized option has a $1,250 deductible, a $4,750 annual limitation on cost sharing, and a 20 percent enrollee coinsurance rate. Primary care visits, mental health and substance use outpatient services, specialist visits, urgent care visits, and all drug benefits are not subject to the deductible. All of the benefits not subject to the deductible have copayments except for specialty drugs. We seek comment on these designs, in particular with respect to whether particular cost-sharing elements, such as deductibles or copayments for particular services, should be modified. TABLE 9—PROPOSED 2017 STANDARDIZED OPTIONS Silver Silver 73% actuarial value variation Silver 87% actuarial value variation Silver 94% actuarial value variation Actuarial Value (%) ... Deductible ................. Annual Limitation on Cost Sharing. Emergency Room Services. jstallworth on DSK7TPTVN1PROD with PROPOSALS Bronze 61.8 ........................... $6,650 ....................... $7,150 ....................... 71.00 .................. $3,500 ................ $7,150 ................ 73.55 .................. $3,000 ................ $5,700 ................ 87.47 .................. $700 ................... $2,000 ................ 94.3 .................... $250 ................... $1,250 ................ 79.98. $1,250. $4,750. 50% .......................... Urgent Care .............. Inpatient Hospital Services. Primary Care Visit .... 50% .......................... 50% .......................... $400 (copay applies only after deductible. $75 (*) ................ 20% ................... $300 (copay applies only after deductible). $75 (*) ................ 20% ................... $150 (copay applies only after deductible). $40 (*) ................ 20% ................... $100 (copay applies only after deductible). $25 (*) ................ 5% ..................... $250 (copay applies only after deductible). $65 (*). 20%. $30 (*) ................ $30 (*) ................ $10 (*) ................ $5 (*) .................. $20 (*). $65 (*) ................ $30 (*) ................ $65 (*) ................ $30 (*) ................ $25 (*) ................ $10 (*) ................ $15 (*) ................ $5 (*) .................. $50 (*). $20 (*). Specialist Visit .......... Mental Health/Substance Use Disorder Outpatient Services. VerDate Sep<11>2014 $45 (* first 3 visits, then subject to deductible and 50% coinsurance). 50% .......................... $45 (*) ....................... 13:28 Dec 01, 2015 Jkt 238001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 Gold 75544 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules TABLE 9—PROPOSED 2017 STANDARDIZED OPTIONS—Continued Bronze Imaging (CT/PET Scans, MRIs). Rehabilitative Speech Therapy. Rehabilitative OT/PT Laboratory Services .. X-rays ....................... Skilled Nursing Facility. Outpatient Facility Fee. Outpatient Surgery Physician/Surgical. Generic Drugs .......... Preferred Brand Drugs. Non-Preferred Brand Drugs. Specialty Drugs ........ Silver Silver 73% actuarial value variation Silver 87% actuarial value variation Silver 94% actuarial value variation 50% .......................... 20% ................... 20% ................... 20% ................... 5% ..................... 20%. 50% .......................... 20% ................... 20% ................... 20% ................... 5% ..................... 20%. 50% 50% 50% 50% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 5% 5% 5% 5% ..................... ..................... ..................... ..................... 20%. 20%. 20%. 20%. .......................... .......................... .......................... .......................... ................... ................... ................... ................... ................... ................... ................... ................... ................... ................... ................... ................... Gold 50% .......................... 20% ................... 20% ................... 20% ................... 5% ..................... 20%. 50% .......................... 20% ................... 20% ................... 20% ................... 5% ..................... 20%. $35 (*) ....................... 50% .......................... $10 (*) ................ $50 (*) ................ $10 (*) ................ $50 (*) ................ $5 (*) .................. $25 (*) ................ $3 (*) .................. $5 (*) .................. $10 (*). $30 (*). 50% .......................... $100 (*) .............. $100 (*) .............. $50 (*) ................ $10 (*) ................ $75 (*). 50% .......................... 40% (*) .............. 40% (*) .............. 30% (*) .............. 25% (*) .............. 30% (*). jstallworth on DSK7TPTVN1PROD with PROPOSALS (*) = not subject to the deductible. We propose that an issuer may offer multiple plans through an FFE for each standardized option within a service area when the plans are meaningfully different, such as offering an HMO standardized option and a PPO standardized option at a certain metal level. We seek comment on this proposal. To reduce operational complexity, we do not propose to vary the standardized options by State or region. Instead, we propose one set of standardized options for all FFEs, including those in which States perform plan management functions. We recognize that some States regulate the level of cost sharing applied to certain benefits, such as emergency room services and specialty drugs. We invite comment from States and other stakeholders on the proposed standardized options, and how they may interact with State-specific costsharing laws or regulations, as well as any potential options for incorporating State cost-sharing requirements into the standardized option framework. We do not propose to limit the number of non-standardized options that an issuer may offer through an FFE; however, meaningful difference standards at § 156.298 and other QHP certification standards still apply. There is currently no such cap on the number of plans that an issuer offering a QHP through an FFE can offer, or on the number of issuers that can offer coverage at each metal level in an FFE. In this proposed rule, we do not propose to limit the total number of QHPs that may be sold through an FFE in a rating area or county. However, we may consider limiting the number of plan VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 options in future plan years, to further simplify the health plan shopping experience for consumers. We seek comment as to whether we should limit the number of non-standardized options an issuer may offer through an FFE in future years. We are considering making modifications to our consumer-facing plan comparison features to readily allow consumers to identify standardized options, and seek comment on how we should do so. We intend to conduct consumer testing to help us make this determination. We also anticipate providing information to explain the standardized option concept to consumers. We expect to provide information about specific design features through issuer testing of plan data and other fora. We seek comment on these proposals, including whether there should be a requirement on QHP issuers or web-brokers to differentially display standardized options when a non-FFE Web site is used to facilitate enrollment in an FFE. Multi-State plan issuers may use the standardized options noted above. OPM, at its discretion, may design additional standardized options applicable only to multi-State plan issuers, though we would not display these OPM options in a differential manner in order to preserve consistency in the standardized options identified on the FFE. 2. FFE User Fee for the 2017 Benefit Year (§ 156.50) Section 1311(d)(5)(A) of the Affordable Care Act permits an Exchange to charge assessments or user PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 fees on participating health insurance issuers as a means of generating funding to support its operations. In addition, 31 U.S.C. 9701 permits a Federal agency to establish a charge for a service provided by the agency. 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. Accordingly, at § 156.50(c), we specify 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 FFEs 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 years 2014 to 2016, issuers seeking to participate in an FFE in benefit year 2017 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 E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 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. • Enrollment processes. • Certification processes for QHPs (including ongoing compliance verification, recertification and decertification). • Administration of a SHOP Exchange. OMB Circular No. A–25R further states that user fee 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 2017 user fee rate for all participating FFE issuers at 3.5 percent. This user fee rate assessed on FFE issuers is the same as the 2014 to 2016 user fee rate. In addition, we intend to seek an exception from OMB Circular No. A–25R, which requires that the user fee charge be sufficient to recover the full cost to the Federal government of providing the special benefit. We seek this exception to ensure that the FFE can support many of the goals of the Affordable Care Act, including improving the health of the population, reducing health care costs, and providing access to health coverage, in cases where user fee collections do not cover the full cost of the special benefit. We seek comments on this proposal. Additionally, we have proposed under §§ 155.106(c) and 155.200(f) to allow State Exchanges to enter into a Federal platform agreement with HHS so that the State Exchange may rely on the Federal platform for certain Exchange functions to enhance efficiency and coordination between State and Federal programs, and to leverage the systems established by the FFE to perform certain Exchange functions. We propose in § 156.50(c)(2) to charge SBE–FP issuers a user fee for the services and benefits to the issuers provided by HHS. For 2017, these functions will include the Federal Exchange information technology and call center infrastructure used in connection with eligibility determinations for enrollment in QHPs and other applicable State health subsidy programs, as defined at section 1413(e) of the Affordable Care Act and enrollment in QHPs under § 155.400. As previously discussed, OMB Circular No. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 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. If our proposals under §§ 155.106(c) and 155.200(f) are finalized, issuers seeking to participate in an SBE–FP in benefit year 2017 will receive special benefits not available to the general public: The ability to sell health insurance coverage through a State Exchange that realizes efficiencies by relying on the Federal platform to enroll individuals determined eligible for enrollment in a QHP, including individuals who may be eligible for insurance affordability programs that may support premiums paid to issuers offering plans through the State Exchange by way of the Federal platform (HealthCare.gov), and the ability to sell health insurance coverage to small employers eligible to purchase QHPs for its employees through a SHOP exchange. Other services that will be provided to issuers offering plans through State Exchanges on the Federal platform include the Federal Exchange information technology and call center infrastructure used in connection with eligibility determinations for enrollment in QHPs and other applicable State health subsidy programs. We propose to charge issuers offering QHPs through an SBE–FP a user fee rate of 3.0 percent of the monthly premium charged by the issuer for each policy under a plan offered through an SBE–FP. This fee will recover funding to support FFE operations incurred by the Federal government associated with providing the services described above. The proposed user fee rate was calculated based on the proportion of FFE costs that are associated with the FFE information technology infrastructure, the consumer call center, and eligibility and enrollment services, and allocating a share of those costs to issuers in the relevant SBE–FPs. A significant portion of expenditures for FFE services are associated with the information technology, call center infrastructure, and personnel who conduct eligibility determinations for enrollment in QHPs and other applicable State health subsidy programs as defined at section 1413(e) of the Affordable Care Act, and who perform the functions set forth in § 155.400 to facilitate enrollment in QHPs. We intend to review the costs incurred to provide these special benefits each year, and revise the user fee rate for issuers in SBE–FPs accordingly in the annual HHS notice of PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 75545 benefit and payment parameters. Additional guidance on user fee collection processes will be provided in the future. While a user fee rate of 3.0 percent is reflective of HHS’s actual costs, we recognize that States that are currently using the Federal platform may find the abrupt change of the proposed user fee in 2017 challenging for their health insurance markets. Therefore, HHS is also considering reducing for the 2017 benefit year the user fee rate by one half or one third (that is, to 1.5 or 2.0 percent) for the issuers in State Exchanges utilizing the Federal platform, to provide these States additional time to integrate this user fee rate. In future years, issuers in SBE–FPs would be charged the full user fee rate for SBE–FPs to cover their full share of costs incurred by the FFE for those services. We seek comment on this proposal and this possible reduction. Additionally, to ease administrative burdens on issuers and States, at the request of SBE–FPs, pursuant to the authority under the Intergovernmental Cooperation Act of 1968 (IGCA), HHS will seek to offer States the option to have HHS collect an additional user fee from issuers at a rate specified by the State to cover costs incurred by the State-based Exchange for the functions the State retains. If HHS grants requests to provide such services, States may be required to reimburse HHS any additional costs that are associated with HHS’s provision of such service. This coordination between the State and Federal programs will reduce administrative burden on issuers as well as the SBEs–FP. 3. Single Risk Pool (§ 156.80) In the small group market, an issuer may update rates on a quarterly basis, provided that any changes to rates have effective dates of January 1, April 1, July 1, or October 1. In the preamble to the second Program Integrity Rule (78 FR 65067), we explained that any new rates set by an issuer would apply for new or renewing coverage on or after the rate effective date, and would apply for the entire the plan year. We propose to codify this policy in § 156.80(d)(3)(ii), and to make non-substantive changes to the wording of that paragraph, including to delete an outdated reference to when quarterly rate changes could first be implemented. For all issuers, we also reiterate that § 156.80(d)(2) permits a health insurance issuer to vary the planadjusted index rate for a particular plan from its market-wide index rate adjusting only for the explicitly stated factors. Any plan level adjustment not E:\FR\FM\02DEP2.SGM 02DEP2 75546 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules specifically stated, including adjusting for morbidity of plan enrollees, is not permissible. 4. Essential Health Benefits Package jstallworth on DSK7TPTVN1PROD with PROPOSALS a. Prescription Drug Benefits (§ 156.122) Current § 156.122(c) requires plans providing EHB to have procedures in place that allow an enrollee, the enrollee’s designee, or the enrollee’s prescribing physician (or other prescriber) to request and gain access to clinically appropriate drugs not covered by the plan. Such procedures must include a process to request an expedited review based on exigent circumstances. Under the expedited process, the issuer must make its coverage determination no later than 24 hours after it receives the request. This requirement, commonly referred to as the ‘‘exceptions process,’’ applies to drugs that are not included on the plan’s formulary drug list. For plan years beginning in 2016, these processes must also include certain processes and timeframes for the standard review process, and have an external review process if the internal review request is denied. The costs of the non-formulary drug provided through the exceptions process count towards the annual limitation on cost sharing and AV of the plan. As discussed in the 2016 Payment Notice (80 FR 10750), the exceptions process established in this section is distinct from the coverage appeals process established under § 147.136. Specifically, the drug exceptions process applies to drugs that are not included on the plan’s formulary drug list, while the coverage appeals regulations apply if an enrollee receives an adverse benefit determination for a drug that is included on the plan’s formulary drug list. Because these two processes serve different purposes, we believe they are not duplicative and we do not propose to change these definitions. However, we also clarified in the 2016 Payment Notice that ‘‘nothing under this policy (§ 156.122(c)) precludes a State from requiring stricter standards in this area.’’ Since finalizing the rule, we have received additional comment regarding States’ coverage appeals laws and regulations and non-formulary drugs. For example, if a State is subjecting nonformulary drugs to the standards under § 147.136 as opposed to § 156.122(c), the State’s coverage appeals laws or regulations would provide the enrollee with a different process for review, and as a result a different process for obtaining coverage of the non-formulary drug. Specifically, § 147.136 has VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 separate requirements for its external review process. Also, § 147.136(b)(ii)(G) allows for a secondary level of internal review before the final internal review determination for group plans. Therefore, if the State is subjecting nonformulary drugs to § 147.136 and the issuers are also required to comply § 156.122(c), the issuer may have to satisfy two standards for non-formulary drugs. We are considering amending the rule to establish that a plan, in a State that has coverage appeals laws or regulations that are more stringent than or are in conflict with our exceptions process under § 156.122(c), and that include reviews for non-formulary drugs, satisfies § 156.122(c) if it complies with the State’s coverage appeals laws or regulations. The purpose of § 156.122(c) is to ensure that an enrollee has the ability to request and gain access to clinically appropriate drugs not covered by the plan. Regardless of whether a State’s coverage appeals laws or regulations are satisfying § 156.122(c) or if the issuer is meeting § 156.122(c) through its exception process, we would expect that an enrollee would retain the ability to request and gain access to clinically appropriate drugs not covered by the plan. Therefore, we solicit comments on the scope of application of State appeals laws or regulations that are allowing determinations for nonformulary drugs for this purpose, especially under medical necessity provisions and whether these provisions would allow the enrollee the ability to request and gain access to clinically appropriate drugs not covered by the plan in all cases through a State’s coverage appeals laws or regulations. As the State is the primary enforcer of the EHB requirements, the State would determine whether its coverage appeals laws or regulations would satisfy § 156.122(c) and therefore, would allow the issuers in the State to defer to the States’ coverage laws or regulations. We note that we consider multi-State plans that comply with OPM’s coverage appeals requirements to satisfy § 156.122(c), and we are considering codifying this interpretation. We are also considering amending the process at § 156.122(c) to allow for a second level of internal review. For example, we are considering using the same timelines as the first level of internal review, 72 hours for the standard review request and 24 hours for the expedited review request. We seek comments on all of these proposals. Lastly, opioid abuse has become a public health crisis in recent years. In 2013, nearly 2 million Americans PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 abused prescription painkillers, and each day, nearly 7,000 people receive emergency department care for misusing these drugs. We recognize that medication-assisted treatments for substance use disorders might not be available to all consumers as an essential health benefit. Therefore, we seek comment on whether the substance use disorder requirement in essential health benefits needs additional clarification with regard to medicationassisted treatment for opioid addiction. b. Premium Adjustment Percentage (§ 156.130) 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 three parameters detailed in the Affordable Care Act: The maximum annual limitation on cost sharing (defined at § 156.130(a)), the required contribution percentage by individuals for minimum essential coverage the Secretary may use to determine eligibility for hardship exemptions under section 5000A of the Code, and the assessable payment amounts under section 4980H(a) and (b) of the Code. 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. Under the methodology established in the 2015 Payment Notice and amended in the 2015 Market Standards Rule for estimating average per capita premium for purposes of calculating the premium adjustment percentage, the premium adjustment percentage is calculated based on the projections of average per enrollee employer-sponsored insurance premiums from the NHEA, which is calculated by the Office of the Actuary. Accordingly, using the employersponsored insurance data, the premium adjustment percentage for 2017 is the percentage (if any) by which the most recent NHEA projection of per enrollee employer-sponsored insurance premiums for 2016 ($6,076) exceeds the most recent NHEA projection of per enrollee employer-sponsored insurance premiums for 2013 ($5,365).34 Using 34 See https://www.cms.gov/Research-StatisticsData-and-Systems/Statistics-Trends-and-Reports/ NationalHealthExpendData/Downloads/ ProjectionsMethodology.pdf, https://www.cms.gov/ Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/NationalHealthExpendData/ Downloads/ProjectionsMethodology2012.pdf and E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules this formula, the proposed premium adjustment percentage for 2017 is 13.25256291 percent. We note that the 2013 premium used for this calculation has been updated to reflect the latest NHEA data. Based on the proposed 2017 premium adjustment percentage, we propose the following cost-sharing parameters for calendar year 2017. Maximum Annual Limitation on Cost Sharing for Calendar Year 2017. Under § 156.130(a)(2), for the 2017 calendar year, cost sharing for self-only coverage may not exceed the dollar limit for calendar year 2014 increased by an amount equal to the product of that amount and the premium adjustment percentage for 2017, 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 down to the next lowest multiple of 50. Using the premium adjustment percentage of 13.25256291 percent for 2017 we established above, 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, 2013,35 we propose that the 2017 maximum annual limitation on cost sharing would be $7,150 for self-only coverage and $14,300 for other than self-only coverage. jstallworth on DSK7TPTVN1PROD with PROPOSALS c. Reduced Maximum Annual Limitation on Cost Sharing (§ 156.130) 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 established 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 Table 17 (located in the NHE Projections 2014– 2024—Tables link) found here https:// www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/ NationalHealthExpendData/ NationalHealthAccountsProjected.html in https:// www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/ NationalHealthExpendData/Downloads/ Proj2012.pdf for additional information. 35 See https://www.irs.gov/pub/irs-drop/rp-1325.pdf. VerDate Sep<11>2014 17:59 Dec 01, 2015 Jkt 238001 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 Affordable Care Act 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 section 1402(c)(1)(B)(i) of the Affordable Care Act (that is, 73 percent, 87 percent, or 94 percent, depending on the income of the enrollee). Accordingly, we propose to use a method we established in the 2014 Payment Notice for determining the appropriate reductions in the maximum annual limitation on cost sharing for cost-sharing plan variations. As we proposed above, the 2017 maximum annual limitation on cost sharing would be $7,150 for self-only coverage and $14,300 for other than selfonly group coverage. We analyzed the effect on AV of the reductions in the maximum annual limitation on cost sharing described in the statute to determine whether to adjust the reductions so that the AV of a silver plan variation will not exceed the AV specified in the statute. Below, we describe our analysis for the 2017 benefit year and our proposed results. Consistent with our analysis in the 2014, 2015, and 2016 Payment Notices, we developed three test silver level QHPs, and analyzed the impact on AV of the reductions described in the Affordable Care Act to the estimated 2017 maximum annual limitation on cost sharing for self-only coverage ($7,150). The test plan designs are based on data collected for 2016 plan year QHP certification to ensure that they represent a range of plan designs that we expect issuers to offer at the silver level of coverage through the Exchanges. For 2017, the test silver level QHPs included a PPO with typical costsharing structure ($7,150 annual limitation on cost sharing, $2,175 deductible, and 20 percent in-network coinsurance rate), a PPO with a lower annual limitation on cost sharing ($4,800 annual limitation on cost sharing, $2,775 deductible, and 20 percent in-network coinsurance rate), and an HMO ($7,150 annual limitation on cost sharing, $3,000 deductible, 20 percent in-network coinsurance rate, and the following services with copayments that are not subject to the deductible or coinsurance: $500 PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 75547 inpatient stay per day, $350 emergency department visit, $25 primary care office visit, and $50 specialist office visit). All three test QHPs meet the AV requirements for silver level health plans. We then entered these test plans into the proposed 2017 AV Calculator developed by HHS and observed how 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 test 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 2017 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 approximately 2⁄3, as specified in the statute, and as shown in Table 10. These proposed reductions in the maximum annual limitation on cost sharing should adequately account for unique plan designs that may not be captured by our three model QHPs. We also note that 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 2017. We note that for 2017, as described in § 156.135(d), States are permitted to E:\FR\FM\02DEP2.SGM 02DEP2 75548 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules submit for approval by HHS Statespecific data sets for use as the standard population to calculate AV. No State submitted a data set by the September 1 deadline. TABLE 10—REDUCTIONS IN MAXIMUM ANNUAL LIMITATION ON COST SHARING FOR 2017 Reduced maximum annual limitation on cost sharing for selfonly coverage for 2017 Eligibility category Reduced maximum annual limitation on cost sharing for other than self-only coverage for 2017 $2,350 $4,700 2,350 4,700 5,700 11,400 jstallworth on DSK7TPTVN1PROD with PROPOSALS 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) .......................................................................................................................................................... d. AV Calculation for Determining Level of Coverage (§ 156.135) Section 2707(a) of the PHS Act and section 1302 of the Affordable Care Act direct issuers of non-grandfathered health insurance 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 (78 FR 12833) implementing section 1302(d) of the Affordable Care Act that required 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 generally to be calculated using the AV Calculator developed and made available by HHS for a given benefit year. In the 2015 Payment Notice (79 FR 13743), we established at § 156.135(g) provisions for updating the AV Calculator in future plan years and provided an overview of how we would consider each of these updates and our approach towards making these updates. As discussed in the 2015 Payment Notice, we recognize the importance of balancing the interests of ensuring that the AV Calculator accurately reflects the current market and that changes to the AV Calculator minimize disruption to current plan designs through keeping AVs stable. In considering updates to the AV Calculator under the factors established under § 156.135(g), we found the need for greater flexibility than provided for under current regulations to better ensure updates to the AV Calculator achieve these objectives. For example, in the preamble of the 2015 Payment Notice, we established our methodology for developing the VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 trend factor. We stated that ‘‘when updating the trending factor in the AV Calculator, we will 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.’’ 36 However, in considering options for updating the trend factor annually under this policy, we found that this policy unduly limits our options. For instance, costs for specific services, such as specialty drugs, are currently increasing at a significantly different rate than other medical services. Trending costs based on each service type could capture those different rates of cost growth more accurately and better ensure that the trend adjustments in the AV Calculator reflect the actual market. We propose to revise § 156.135(g) to allow for additional flexibility in our approach and options for updating of the AV Calculator in the future. We propose that HHS will update the AV Calculator annually for material changes that may include costs, plan designs, the standard population, developments in the function and operation of the AV Calculator and other actuarially relevant factors. Specifically, we would not be required to make each of these changes each year, but we could include these types of material changes in our annual updating of the AV Calculator. Under this proposed policy, we will continue to make updates to the AV Calculator, as we have in previous years, including updates to the trend factor, algorithms changes and user interface changes. We will also update the claim data and demographic distribution being used in the AV Calculator as needed and continue to update the AV Calculator’s annual limitation on cost sharing based 36 79 PO 00000 FR 13811. Col 1. [March 11, 2014]. Frm 00062 Fmt 4701 Sfmt 4702 on a projected estimate to allow for compliance with § 156.130(a). The major difference under the proposed § 156.135(g) will be that the methodology, data sources, and trigger for making updates in the AV Calculator would be more flexible than the current § 156.135(g). For instance, we propose that specific timelines and materiality thresholds for updating the continuance tables to reflect more current enrollment and claims data will no longer be specified by the regulation. This will allow us more options in considering approaches to making changes in the AV Calculator, particularly as the health insurance market and the AV Calculator evolve, new methodological approaches are developed, and new data becomes available. In developing the annual updates to the AV Calculator, we will continue to take into consideration stakeholder feedback on needed changes to the AV Calculator (through actuarialvalue@cms.hhs.gov) and to publicly release a draft version of the AV Calculator and the AV Calculator Methodology for comment before releasing the final AV Calculator. We also understand the importance for issuers and States to have time to use the final version of the AV Calculator to develop and adjust plan designs and we hope that by providing the additional flexibility under proposed § 156.135(g), we will have more options that could allow us to release the AV Calculator sooner. We solicit comments on the proposed § 156.135(g). e. Application to Stand-Alone Dental Plans Inside the Exchange (§ 156.150) In § 156.150, we propose revisions to increase the annual limitation on cost sharing for SADPs. In the 2015 Payment Notice, we established that the annual limitation on cost sharing for an SADP covering the pediatric dental EHB under E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS § 155.1065 in any Exchange may not exceed $350 for one covered child and $700 for two or more covered children. To make adjustments to the annual limitation on cost sharing in subsequent years to keep pace with inflation, we propose in paragraph (a)(1) that for a plan year beginning after 2016, the dollar limit applicable to a SADP for one covered child be increased by an amount equal to the product of that amount and the quotient of consumer price index for dental services for the year 2 years prior to the benefit year, divided by the consumer price index for dental services for 2016. In paragraph (a)(2), we propose that the dollar limit for two or more covered children be twice the dollar limit for one child described in paragraph (a)(1) of this section. We considered using the premium adjustment percentage defined in § 156.130(e), but ultimately decided that the dental CPI would be a more appropriate adjuster for the annual limitation on cost sharing as it is based on dental services. The annual limitation on cost sharing should increase over time to keep pace with inflation and moderate potential increases in premium. This is similar to the approach for medical QHPs. We seek comment on whether the premium adjustment percentage defined in § 156.130(e) should be used instead. We would propose and finalize the annual increase to the dental annual limitation on cost sharing in the annual Payment Notice. In paragraph (c), we propose to define the dental CPI, which is a subcomponent of the U.S. Department of Labor’s Bureau of Labor Statistics Consumer Price Index specific to dental services. We would use the annual dental CPI published by the Department of Labor. In paragraph (d), we propose that increases in the annual dollar limits for one child that do not result in a multiple of $25 will be rounded down, to the next lowest multiple of $25. We believe this provision will result in stability in SADPs, making changes in annual limits that are based on round figures in moderate increments. We seek comment on these proposals. 5. Qualified Health Plan Minimum Certification Standards a. Network Adequacy Standards (§ 156.230) At § 156.230, we established the minimum criteria for network adequacy that health and dental plan issuers must meet to be certified as QHPs, including SADPs, in accordance with the VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 Secretary’s authority in section 1311(c)(1)(B) of the Affordable Care Act. Section 156.230(a)(2) requires all issuers to maintain a network that is sufficient in number and types of providers to assure that all services will be accessible without unreasonable delay. Section 156.230(b) sets forth standards for access to provider directories requiring issuers to publish an up-to-date, accurate, and complete provider directory for plan years beginning on or after January 1, 2016 and § 156.230(c) requires QHPs in the FFE to make this provider directory data available on its Web site in an HHS specified format and also submit this information to HHS in a format and manner and at times determined by HHS. i. State Selection of Minimum Network Adequacy Standards The National Association of Insurance Commissioners’ (NAIC’s) Network Adequacy Model Review Subgroup has been doing significant work in the area of network adequacy, which includes work towards development of a Network Adequacy Model Act that States could adopt in whole or in part. We will continue to monitor the NAIC work and look forward to partnering with States and the NAIC in developing and promulgating network adequacy protections. In the interest of furthering this work, we are proposing standards related to network adequacy below, but will take into consideration the NAIC’s final recommendation as we assess these policies. In recognition of the traditional roles States have in developing and enforcing network adequacy standards, we propose that FFEs would rely on State reviews for network adequacy in States in which an FFE is operating, provided that HHS determines that the State uses an acceptable quantifiable network adequacy metric commonly used in the health insurance industry to measure network adequacy, approved by HHS. We anticipate that HHS would determine that a State’s network adequacy assessment methodology meets the standard above if the State selects one or more standards from a list of metrics provided by HHS and applies them prospectively to the QHP issuers in the State. HHS intends to detail the specific criteria and process for meeting the standard in each annual Letter to Issuers, but we anticipate including at least the following metrics: • Prospective time and distance standards at least as stringent as the FFE standard. • Prospective minimum providercovered person ratios for the specialties PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 75549 with the highest utilization rate for its State. HHS would discuss with States their selection in advance of the start of the certification cycle to determine whether the State’s network adequacy standard would be acceptable under the standard above. We would thereafter notify issuers via subregulatory guidance whether the State standards or Federal default standards apply. If HHS determines that a State’s nework adequacy standard is acceptable under the standard above, the State would certify to the FFE which plans meet the network adequacy standard, and the FFE in that State would rely on the State’s review for purposes of determining whether a QHP meets the requirements under § 156.230(a)(2), although those issuers would still be required to submit to HHS provider data, attest to the HHS network adequacy certification requirements, and meet other applicable HHS standards, including the other standards under § 156.230. We welcome comments on this proposal, including suggestions for additional State network adequacy methodologies that the FFEs could rely on, and other factors we might consider. In States that do not review for network adequacy, or do not select a standard as described above, the FFE would conduct an independent review under a Federal default standard. We propose the Federal default standard at § 156.230(d) to be a time and distance standard. For the certification cycle for plan years beginning in 2017, we anticipate evaluating the QHP issuer networks under this standard based on the numbers and types of providers, in addition to their general geographic location. In particular, we propose to calculate a time and distance standard at the county level. We are considering using standards similar to those used in Medicare Advantage, utilizing the National Provider Identifier database, and focusing on the specialties that enrollees most generally use. HHS is also carefully considering other network standards, including those of individual States, accrediting entities, and Federal health care programs, as it develops the time and distance standards for the FFEs. We solicit comments on whether these proposed standards are appropriate. We also seek comment specifically on whether they are appropriate for SADPs, and, if not, what standards for SADPs would be more appropriate, and the basis for any deviation. The county-specific time and distance parameters that plans will be required to meet, including specifications for E:\FR\FM\02DEP2.SGM 02DEP2 75550 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS specific provider and facility types, would be detailed annually in conjunction with the Letter to Issuers. We also propose that issuers that are unable to meet the specified standards would be able to submit a justification to account for any variances, and that the FFE would review the justification to determine whether the variance is reasonable based on circumstances, such as the availability of providers and variables reflected in local patterns of care. It is not our intent in establishing these default standards to prohibit certification of plans with narrow networks or otherwise impede innovation in plan design. Instead, we intend to establish a minimum floor consistent with the levels generally maintained in the market today, so that generally a very small number of plans would be idenfitied as having networks deemed inadequate. The Federal default standard would provide issuers with more transparency regarding our certification processes and will be designed and implemented to achieve results similar to those yielded by the reviews conducted by the FFEs in prior certification cycles. We believe this will promote predictability for issuers in the course of certification. We note that multi-State plan options will be considered to meet the network adequacy requirements under § 156.230(a)(2) if they meet network adequacy standards established by OPM. We seek comments on this proposal, including how we might develop time and distance standards appropriate for the FFEs, the use of Medicare Advantage or other standards and other factors we should examine in measuring network adequacy, and suggestions of other models we might consider. ii. Additional Network Adequacy Standards We also propose other additional network-related standards under § 156.230(e) and (f). In the new § 156.230(e)(1), we propose to require QHP issuers in all FFEs to notify enrollees about a discontinuation in their network coverage of a contracted provider. We believe that it is important for enrollees to be notified of changes to the network on a timely basis. Consumers need accurate information about which providers are in-network to ensure that they can optimize their health insurance coverage and make cost effective choices. Therefore, we propose that a QHP in an FFE be required to make a good faith effort to provide written notice of a discontinued provider, 30 VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 days prior to the effective date of the change or otherwise as soon as practicable, to all enrollees who are patients seen on a regular basis by the provider or receive primary care from the provider whose contract is being discontinued, irrespective of whether the contract is being discontinued due to a termination for cause or without cause, or due to a non-renewal. We propose that a discontinued provider includes cases of where the provider is being removed and where the provider is leaving the network. We solicit comments on this proposed provision, including the timeframe for notification and whether separate timeframe requirements are needed for primary care providers versus other types of providers that a patient sees on a regular basis. We also solicit comments on an appropriate definition of ‘‘regular basis,’’ or whether the implementation of that phrase should be left to the good faith interpretation of the issuer. For instance, we considered whether we should define regular basis if the enrollee has seen the provider within the last 3 months, 6 months or 12 months. To satisfy this requirement, we expect the issuer to try to work with the provider to obtain the list of affected patients or to use their claims data system to identify enrollees who see the affected providers. As part of the notice, we encourage issuers to notify the enrollee of other comparable in-network providers in the enrollee’s service area, provide information on how an enrollee could access the plan’s continuity of care coverage, and encourage the enrollee to contact the plan with any questions. In developing the proposed notification standard under § 156.230(e)(1), we considered Medicaid Managed Care and Medicare Advantage’s notification requirements and considered the work by the NAIC’s Network Adequacy Model Review Subgroup. For instance, Medicare Advantage’s notification requirements are similar to the proposed § 156.230(e)(1), and require that the Medicare Advantage organization make a good faith effort to provide written notice of a termination of a contracted provider at least 30 calendar days before the termination effective date to all enrollees who are patients seen on a regular basis by the provider whose contract is terminating, irrespective of whether the termination was for cause or without cause. Medicare Advantage also requires that when a contract termination involves a primary care professional, all enrollees who are patients of that primary care PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 professional must be notified.37 Medicaid Managed Care, on the other hand, requires the Managed Care Organization, the Prepaid Inpatient Health Plan, and, when appropriate, the Prepaid Ambulatory Health Plan or Primary Care Case Manager, to make a good faith effort to give written notice of termination of a contracted provider, within 15 days after receipt or issuance of the termination notice, to each enrollee who received his or her primary care from, or was seen on a regular basis by the terminated provider.38 We seek comments on other standards for notifying enrollees about their network coverage in cases of discontinuation, including States’ standards and whether exceptions should be allowed for States’ that already require notification to enrollees when a provider leaves the network. We are also proposing in § 156.230(e)(2) a provision for QHP issuers in all FFEs to ensure continuity of care for enrollees in cases where a provider is terminated without cause. Specifically, we propose to require the issuer, in cases where the provider is terminated without cause, to allow an enrollee in active treatment to continue treatment until the treatment is complete or for 90 days, whichever is shorter, at in-network cost-sharing rates. Additionally, in proposed paragraph (e)(2), we propose a definition of active treatment as meaning: (1) An ongoing course of treatment for a life-threatening condition; (2) an ongoing course of treatment for a serious acute condition; (3) the second or third trimester of pregnancy; or (4) an ongoing course of treatment for a health condition for which a treating physician or health care provider attests that discontinuing care by that physician or health care provider would worsen the condition or interfere with anticipated outcomes. Under the proposed definition of active treatment, an ongoing course of treatment would include treatments for mental health and substance use disorders that fall within the proposed definition. For the purposes of the active treatment definition, we propose to interpret a life-threatening condition as a disease or condition for which likelihood of death is probable unless the course of the disease or condition is interrupted; and a serious acute condition as a disease or condition requiring complex on-going care which the covered person is currently receiving, such as chemotherapy, postoperative visits, or radiation therapy. Finally, under paragraph (e)(2)(ii), we 37 42 38 42 E:\FR\FM\02DEP2.SGM CFR 422.111(e). CFR 438.10(f)(5). 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules propose that any decisions made for a request for continuity of care be subject to the health benefit plan’s internal and external grievance and appeal processes in accordance with applicable State or Federal law or regulations. We solicit comments on this proposed section of the regulation, including the definitions of ‘‘active treatment,’’ ‘‘life-threatening condition,’’ and ‘‘serious acute condition’’ and whether exceptions should be allowed for States’ standards that already require coverage of continuity of care for enrollees. We also solicit comments about whether enrollees in their second or third trimester of pregnancy should be allowed to extend obstetric care through the postpartum period, which could require the continuity of care standard to extend beyond 90 days. If these enrollees were allowed to extend obstetric care through the postpartum period, we solicit comment on the definition of the postpartum period, such as for 6 weeks after birth, and whether the allowance of care through the postpartum period should apply for broader types of care than for obstetric care. We also solicit comments on proposed § 156.230(e)(1) and (2) on the distinction between a termination with or without cause versus when a provider leaves the network because the provider’s contract is non-renewed. Specifically, we solicit comments on whether § 156.230(e)(2) should incorporate cases where the provider’s contract is non-renewed or whether we should consider a non-renewal of the provider’s contract as a termination without cause under § 156.230(e)(1) and (2). Lastly, we seek comments about what other possible provisions may be needed to protect an enrollee when a provider contract is terminated and can be implemented with limited burden on issuers. In general, our network adequacy rules for QHPs require that a network plan maintain a network sufficient to assure that all services will be accessible without unreasonable delay. However, there may be occasions when an enrollee obtains an EHB outside the QHP’s network because the enrollee unknowingly receives out-of-network care. An enrollee may have made reasonable efforts to stay within the QHP’s network when obtaining an EHB service, but then unknowingly received care from an out-of-network provider in an in-network setting (for example, an anesthesiologist or pathologist). To address these circumstances, we propose to add a new § 156.230(f). In that paragraph, we propose to require, notwithstanding § 156.130(c) of the subpart, for a network to be deemed VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 adequate, each QHP that uses a provider network must count cost sharing paid by an enrollee for an EHB provided by an out-of-network provider in an innetwork setting under certain circumstances towards the enrollee’s annual limitation on cost sharing. That is, if an enrollee received an EHB in an in-network setting, such as an innetwork hospital, but as part of the provision of the EHB the enrollee was charged out-of-network cost-sharing for an EHB provided by an out-of-network provider (such as anesthesiology or pathology services, for example), that cost-sharing would apply towards the annual limitation on cost-sharing. The enrollee could still be responsible for out-of-network cost sharing, and balance billing, for other benefits received from an out-of-network provider at any time, but not for cost sharing for a covered EHB provided in-network or out-ofnetwork in a circumstance described in this paragraph after the annual limitation is met. Alternatively, the plan could provide a written notice to the enrollee at least 10 business days before the provision of the benefit that additional costs may be incurred for EHB provided by an out-ofnetwork provider in an in-network setting, including balance billing charges, unless such costs are prohibited under State law, and that any additional charges may not count toward the in-network annual limitation on cost sharing. Such notice could be provided during preauthorization. If the plan provides such notice, this rule would not require the plan to apply the out-of-network cost sharing towards the enrollee’s annual limit on cost sharing or to be responsible for covering out-ofnetwork cost sharing above the annual limit. This alternative would not be available if fewer than 10 business days’ notice is provided, including in cases where that amount of time is not available (for example, in urgent but non-emergency care situations). We believe that this proposal balances financial protection for consumers against surprise out-of-network cost sharing, while maintaining the larger part of the QHP’s cost-sharing structure. The 10 business days’ advance notice provision is intended to allow the enrollee to arrange for an in-network provider to provide the EHB; we solicit comments on whether this time frame should be shorter or longer. We would expect the issuer would provide this notification to the enrollee at the time it notifies the provider with any preauthorization documents. The issuer would also be permitted to send a ‘‘form’’ document—that is, one that is not customized to the particular PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 75551 situation at issue—but it could not rely on a blanket notification through its Web site or provided at enrollment, for example. We seek comment on this proposal and if we should instead require the issuer to provide customized information to the consumer including information on potential in-network providers. We acknowledge that some States and issuers may offer consumers in these scenarios protections which go beyond what we are proposing here for QHPs. Several States have enacted laws that similarly provide consumers financial protection from the high out-of-pocket expenditures associated with receiving out-of-network care. States, relying on their authority to regulate both providers and issuers, generally impose requirements on both, whereas our proposal focuses on QHP issuers. States have generally included in their laws mechanisms to address the level of reimbursement an issuer must pay an out-of-network provider. For example, States have required payment of all charges, set the rate at a percentage of a fee schedule, and set forth a process through which providers and issuers must resolve disputes about charges. Some States have also prohibited balance billing consumers for certain out-of-network services, ranging from only emergency services to any covered service. This proposal is not intended to preempt any State laws that would be more consumer protective. We note that this proposal would apply to QHPs in all Exchanges. We seek comment on these proposals. We are also soliciting comments regarding other network adequacy standards that may be appropriate to apply to QHPs in an FFE in future years, including standards included in the work being done by the NAIC’s Network Adequacy Model Review Subgroup. One policy we are considering is whether a QHP in an FFE should have a network resilience policy for disaster preparedness. Network resilience refers to the provider network’s capacity to withstand and recover from natural or man-made disasters that may threaten enrollees’ continuous access to quality care. Disasters may negatively impact an issuer’s network and can result in delay in services. Therefore, issuers who have a network resilience policy will be better prepared to ensure that their network can provide reasonable access under adverse circumstances. Some examples of appropriate network resilience policies might include business continuity planning, consideration of temporary policy changes in the event of a disaster, and/ or disclosure or communication plans. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75552 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules We solicit comments on this possible future policy and the examples provided, including thoughts on what type of policy would be reasonable and operationally feasible. In addition, certain States measure network adequacy based on enrollee wait times for scheduled appointments. As a result, we are interested in comments on the variation in wait times depending on the type of provider, such as for primary care or non-primary care services. Additionally, we also solicit comments as to whether we should add a wait time standard as an option under the proposed permissible State standards mentioned in this preamble, or if we should apply a broad wait time standard across QHPs in the FFEs. We are also soliciting comments on whether an issuer should be required to survey all of its contracted providers on a regular basis to determine if a sufficient number of network providers are accepting new patients. Additionally, we solicit comments on transparency of issuers’ standards for selecting and tiering of participating providers for QHPs in an FFE and whether issuers should be required to make available their selecting and tiering criteria for review and approval by HHS and the State upon request. We are proposing § 156.230(e) as a requirement for QHPs in the FFEs and § 156.230(f) as a requirement for QHPs in all Exchanges. However, we solicit comments on whether these provisions should apply to all QHPs or only QHPs in the FFEs. We also solicit comments on applying § 156.230(e) and (f) to SADPs and whether other standards should be provided for these provisions for stand-alone dental plans. We note that § 156.230(f) applies to cost sharing incurred in connection with EHB, and, of dental benefits, only pediatric dental is EHB. In addition to the policies above, we are also considering providing on HealthCare.gov a rating of each QHP’s relative network coverage. This rating or classification could be made available to a consumer when making a plan selection. We believe that such a rating would help an enrollee select the plan that best meets his or her needs, and we anticipate that this analysis would compare the breadth of the QHP network at the plan level as compared to the breadth of the other plan networks for plans available in the same geographic area. We anticipate analyzing the QHP network by calculating the number of specific providers that are accessible within specified time and distance standards. We would then classify the QHP networks into three categories. We VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 are considering performing the calculation based on the provider information submitted by all QHP issuers in the existing network adequacy FFE QHP certification template, but comments on potential additional data collections are welcome. This network breadth rating would allow an enrollee to better understand plans’ design, and, like other consumer tools, could help improve plan satisfaction. We anticipate providing additional details about how we would classify networks in the Letter to Issuers and in the QHP certification instructions, and solicit comments on what types of methods should be used to identify each network’s breadth, what specific specialties should be included in the analysis, what sorts of adjustments should be made to address provider shortages, and other possible data sources to obtain information about available providers in the area. We welcome comments on the best way to make this information available to consumers, and any other comments related to this topic. b. Essential Community Providers (§ 156.235) On June 5, 2015, we proposed through a Paperwork Reduction Act notice a provider petition process to update the ECP list against which issuer compliance with the ECP standard is measured. We expect that this data collection for the 2017 benefit year should be completed by the end of 2015, although HHS will provide additional opportunities for ECPs to submit provider data to HHS for benefit years beyond 2017. If the degree of provider participation in this data collection effort through the ECP petition allows HHS to assemble a more complete listing of ECPs, we believe the proposals described below would strengthen the ECP standard. We propose that, for the 2017 QHP certification cycle, HHS will continue to credit a health plan seeking certification to be offered through an FFE with multiple providers at a single location counting as a single ECP toward both the available ECPs in the plan’s service area and the issuer’s satisfaction of the ECP participation standard. For QHP certification cycles beginning with the 2018 benefit year, we solicit public comment on crediting issuers for multiple contracted full-time equivalent (FTE) practitioners at a single location, up to the number of available FTE practitioners reported to HHS by the ECP facility through the provider petition process and published on the HHS ECP list. HHS would apply this credit in the numerator of an issuer’s PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 percentage satisfaction of the general ECP standard described in paragraphs (a)(1) and (2) of this section. The denominator of an issuer’s percentage satisfaction of the ECP standard would reflect the number of available FTE practitioners reported to HHS by each ECP facility that appears on the HHS ECP list located in the issuer’s plan service area. Once we have collected this FTE practitioner data through the provider petition process, we believe that crediting an issuer for multiple contracted FTE practitioners at a single location would more accurately reflect the issuer’s ECP participation in its network. Therefore, we propose for QHP certification cycles beginning with the 2018 benefit year to revise § 156.235(a)(2)(i) to credit an issuer for multiple contracted FTE practitioners at a single location, up to the number of available FTE practitioners reported to HHS by the ECP facility and reflected on the HHS ECP list, toward the issuer’s satisfaction of the ECP participation standard. In the final 2016 Payment Notice, we stated that we would consider disaggregating certain ECP categories to ensure better access to a wider variety of health care services. However, our analysis of the available ECPs in each of the additional categories considered for disaggregation (that is, children’s hospitals, rural health clinics, freestanding cancer centers, community mental health centers, and hemophilia treatment centers) does not support further ECP category disaggregation at this time. We believe there are too few ECPs within each of these additional categories appearing on our HHS ECP list to afford issuers sufficient flexibility in their contracting. We may revisit this consideration in the future and encourage QHP issuers to include in their networks these additional providers to best meet the needs of the populations they serve. For the same reasons described for our proposal to revise § 156.235(a)(2)(i), we propose in § 156.235(b)(2)(i) that issuers that qualify for the alternate ECP standard described in § 156.235(a)(5) that seek certification to be offered through an FFE (or SBE–FP) be credited for multiple contracted FTE practitioners at a single location toward the issuer’s satisfaction of the alternate ECP standard described in paragraphs (b)(1) and (2) of this section, beginning with the 2018 benefit year. We propose that for the 2017 benefit year, HHS will continue to credit an issuer that qualifies for the alternate ECP standard and is seeking certification to be offered through an FFE with multiple providers at a single location counting as a single E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules ECP toward both the available ECPs in the plan’s service area and the issuer’s satisfaction of the ECP participation standard. We seek comment on these proposals. jstallworth on DSK7TPTVN1PROD with PROPOSALS c. Enrollment Process for Qualified Individuals (§ 156.265) Under § 156.265(b)(2), if an applicant initiates enrollment directly with the QHP issuer for enrollment through the Exchange (direct enrollment through an issuer), the QHP issuer must redirect an applicant to go directly to the Exchange Web site to complete the application and receive an eligibility determination. HHS is considering options under which an applicant could remain on the QHP issuer’s Web site to complete the application and enroll in coverage, and the QHP issuer’s Web site can obtain eligibility information from the Exchange in order to support the consumer in selecting and enrolling in a QHP with Exchange financial assistance. The intent is to have this information exchange occur through an Exchange-approved web service, as described in § 155.220, enhancing the current direct enrollment process. This option would provide Exchanges offering direct enrollment and QHP issuers more operational flexibility to expand front-end, consumer-facing channels for enrollment through a more seamless consumer experience. For a discussion of the options we are considering in the direct enrollment scenario, see the discussion regarding direct enrollment by web-brokers in our discussion of changes to § 155.220. We seek comment on these options, and whether standards should differ for a web-broker compared to a QHP issuer, and how to maintain privacy and security. Accordingly, we propose to revise § 156.265(b)(2)(ii) to ensure that an applicant who initiates enrollment directly with the QHP issuer for enrollment through the Exchange receives an eligibility determination for coverage through the Exchange through the Exchange Web site or through an Exchange-approved web service via the FFE single streamline application. This maintains the role of the Exchange in determining eligibility. We seek comment on this proposal. d. Termination of Coverage or Enrollment for Qualified Individuals (§ 156.270) We propose to amend § 156.270(d) to specify that a QHP issuer must provide a 3-month grace period to an enrollee who, upon failing to timely pay his or her premiums, is receiving advance payments of the premium tax credit. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 75553 Because we believe that changing the length of an enrollee’s grace period during the middle of such a grace period would be confusing to enrollees and could result in otherwise avoidable terminations for failure to pay premium, enrollees receiving APTC who enter a grace period for failing to timely pay premiums and who lose their eligibility for APTC during the grace period would be able to complete the remaining portion of the grace period as though the loss of eligibility for APTC did not occur. The proposed amendment to § 156.270(d) also eliminates language limiting the 3-month grace period for enrollees who are receiving APTC to only those enrollees who made a payment during the benefit year. This would permit enrollees renewing coverage that does not require a binder payment who fail to pay January premiums in full (or fail to pay within an issuer’s premium payment threshold policy, if applicable) to receive the full grace period of 3 months. This change would align more closely with our interpretation of the interaction between grace periods, guaranteed availability and renewability, and the binder payment requirement, that a binder payment is not necessary when an enrollee enrolls, either actively or passively, in a plan within the same insurance product, and would prevent enrollees who re-enroll in the same plan or product from unfairly losing their right to a grace period because they do not make a payment for January coverage. Finally, we propose to codify with regard to the grace period standards our policy described in the preamble for § 155.400 of this part that if an enrollee receiving advance payments of the premium tax credit can satisfy the requirement to pay all outstanding premiums, or if the enrollee satisfies an issuer’s premium payment threshold implemented under § 155.400(g), if applicable, the QHP issuer must not terminate for nonpayment of premium the enrollee’s enrollment through the Exchange. This change to the rule would reflect the extension of the premium threshold policy to enrollees who are in a grace period for non-payment of premium. SHOP. Specifically, the proposed amendments would provide that the issuer must send enrollment reconciliation files on at least a monthly basis according to a process and timeline established by the FF–SHOP, and in a file format specified by the FF– SHOP. We are also proposing to delete § 156.285(d)(2) consistent with our interpretation of guaranteed availability and renewability. If a qualified employer withdraws from a SHOP, the SHOP, not the issuer, should terminate the group’s enrollment through the SHOP, and coverage might in many circumstances continue outside the SHOP. e. Additional Standards Specific to SHOP (§ 156.285) Sections 155.720(g) and 156.285(c)(5) currently provide that SHOPs and QHP issuers must reconcile enrollment information on no less than a monthly basis. We propose to amend § 156.285(c)(5) to specify additional details about how a QHP issuer offering a QHP through a FF–SHOP should reconcile enrollment files with the FF– g. Other Considerations We remind issuers that certain other Federal civil rights laws impose nondiscrimination requirements. Issuers that receive Federal financial assistance, including in connection with offering a QHP on an Exchange, are subject to Title VI of the Civil Rights Act of 1964, the Age Discrimination Act of 1975, section 504 of the Rehabilitation Act of 1973, and section 1557 of the Affordable PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 f. Meaningful Difference Standard for Qualified Health Plans in the FederallyFacilitated Exchanges (§ 156.298) At § 156.298, we propose modifications to the meaningful difference standard for QHPs in the FFEs. We propose to remove the criterion in paragraph (b)(5) that otherwise identical plans would be considered meaningfully different on the basis of one QHP being health savings account eligible. A QHP’s health savings account eligibility is a costsharing status that may be assessed by examining the QHP’s cost sharing, which is included at paragraph (b)(1). This criterion is therefore redundant. We also propose to delete ‘‘self-only’’ and ‘‘non-self-only’’ from paragraph (b)(6). Self-only (that is, individual) plans do not allow any dependent relationships, while non-self-only (that is, enrollee group) plans allow at least one dependent relationship type. An individual can enroll in individual and enrollee group plans. The allowance of dependents is the only difference between two plans if they are identified as individual or enrollee group only. We have determined that these statuses alone are not indicative of meaningful differences among QHPs. We will maintain the ‘‘child-only’’ versus nonchild-only status. We further propose to redesignate paragraph (b)(6) as paragraph (b)(5) and add the word ‘‘or’’ to paragraph (b)(4). We seek comment on the proposed changes. E:\FR\FM\02DEP2.SGM 02DEP2 75554 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS Care Act. The Office for Civil Rights (OCR), which enforces these statutes, published a notice of proposed rulemaking on September 9, 2015 (80 FR 54172) on the requirements of section 1557. Issuers that intend to seek certification of one or more QHPs are directed to that proposed rule and to https://www.hhs.gov/ocr/civilrights for additional information. We also seek to foster market-driven programs that can improve the management of costs and care. We note that innovative issuer, provider, and local programs or strategies may be successful in promoting and managing care, potentially resulting in better health outcomes and lower rates while creating important differentiation opportunities for market participants. We seek comment on ways in which we can facilitate such innovation, and in particular on whether there are regulations or policies in place that we should modify in order to foster this innovation. 6. Standards for Qualified Health Plan Issuers on Federally-Facilitated Exchanges and State-Based Exchanges on the Federal Platform To make it operationally feasible for a State-based Exchange to rely on the Federal platform for eligibility and enrollment functions, issuers and plans offered on the SBE–FP must comply with rules, as interpreted and implemented in policy and guidance related to the Federal eligibility and enrollment infrastructure. These would be the same requirements related to eligibility and enrollment that are applicable to QHP issuers and plans on FFEs. For example, SBE–FP special enrollment periods must be administered within the guidelines of the FFE special enrollment periods, as it is not possible at this time for the FFE to accommodate State customization in policy or operations, such as Statespecific SEPs, application questions, display elements in plan compare, or data analysis. Additionally, if the FFE is to perform eligibility and enrollment functions, the FFE would also need to provide for certain consumer tools (plan compare, premium estimator, secondlowest cost silver plan tool, etc.) to support those functions. Thus, the FFE would need SBE–FP QHP plan data by the dates specified in the annual Letter to Issuers to provide for enough time for adequate testing and loading of the data into the various consumer tools the FFE offers. Issuers must also comply with certain FFE enrollment policies and operations (for example, premium payment and grace period rules, effective date logic, acceptable VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 transaction codes, and reconciliation rules) for the FFE to successfully process 834 transactions with issuers and minimize any data discrepancies for reconciliation. Therefore, we propose to add § 156.350 to address eligibility and enrollment standards for QHP issuers participating on an SBE–FP. In paragraph (a) of new § 156.350, we would require QHP issuers participating in an SBE–FP to comply with HHS regulations, and guidance related to the eligibility and enrollment functions for which the State-based Exchange relies on the Federal platform. For example, those issuers would be required to comply with operational standards in the Federally-facilitated Marketplace and Federally-facilitated Small Business Health Options Program Enrollment Manual. We provide in paragraph (a) a list of provisions with which QHP issuers participating in an SBE–FP would be required to comply. These provisions relate to eligibility and enrollment functions directly, or are critical to enabling HHS to assess compliance with eligibility and enrollment functions. For example, we would require QHP issuers to comply with the requirements regarding compliance reviews of QHP issuers to the extent relating directly to applicable eligibility and enrollment functions. Without this requirement, we would be severely limited in our ability to determine whether an issuer is complying with the requirements related directly to the Federal platform’s eligibility and enrollment functions. In paragraph (b), we propose to permit these issuers to directly enroll applicants in a manner that is considered to be through the Exchange, under § 156.1230, just as QHP issuers on FFEs are permitted. In paragraph (c), we propose that if an SBE–FP does not substantially enforce the eligibility and enrollment standards described in paragraph (a), then HHS may enforce against the issuer or plan using the enforcement remedies and processes described in subpart I of part 156. We also propose that the administrative review process in subpart J of part 156 would apply to enforcement actions taken against QHP issuers or plans under proposed § 156.350. Because timely compliance with paragraph (a) is vital to the smooth functioning of the Federal platform and because the Federal platform would apply a uniform compliance and enforcement regime for reasons of efficiency and speed, we believe it is appropriate that HHS have this authority in this circumstance. PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 Because this proposal would insert a section applicable to SBE–FPs in subpart D, which currently describes only standards for QHP issuers on the FFEs, we propose to amend the title of subpart D to read Standards for Qualified Health Plan Issuers on Federally-Facilitated Exchange and State-Based Exchanges on the Federal Platform. We seek comment on this proposal. 7. Enforcement Remedies in FederallyFacilitated Exchanges (§§ 156.800, 156.805, 156.810, and 156.815) We propose to revise paragraph § 156.805(d). We believe paragraph (d) provides insufficient information on the effect of appealing a CMP. In the interest of aligning our CMP and decertification regulations, we propose to rename paragraph (d) ‘‘Request for hearing.’’ Next, we propose to revise paragraph (d)(1) to state affirmatively the issuer’s right to file a request for hearing on the assessment of a CMP. Finally, we propose to add paragraph (d)(2), stating that the request for hearing will suspend the assessment of CMP until a final administrative decision on the appeal. A similar provision exists in the decertification regulation at § 156.810. We propose to amend § 156.810 by revising paragraph (e) to present the appeal rights of QHP issuers and the impact of an appeal more clearly. Specifically, we propose to provide for the issuer’s appeal right in paragraph (e). Then in paragraph (e)(1) and its paragraphs, we propose to explain how an appeal will affect the effective date of a decertification depending on whether the decertification is standard or expedited. Previously, we finalized § 156.800(c), in which we stated that sanctions will not be imposed on a QHP issuer on an FFE if it has made good faith efforts to comply with applicable requirements for calendar years 2014 and 2015. We are not proposing to extend this policy. Starting in the 2016 calendar year and beyond, sanctions may be imposed if a QHP issuer on an FFE fails to comply with applicable standards, even if the QHP issuer has made good faith efforts to comply with these requirements. Section 156.810 contains bases for decertification of a QHP. One of the bases for decertification, § 156.810(a)(5), authorizes decertification if a QHP issuer is hindering the efficient and effective operation of a Federallyfacilitated Exchange. We interpret the efficient and effective operation of the FFEs to include displaying plans that will provide coverage to enrollees who purchase coverage under that plan. Where an issuer has informed HHS that E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules it cannot continue to provide coverage under a QHP, HHS will interpret this information to mean that the efficient and effective operation of the FFE will be hindered because it will incorrectly display plans on the FFE platform. In such a case, HHS may take all necessary steps to suppress and/or decertify the QHP. We propose to add new bases for decertification to § 156.810 to address situations where a QHP issuer is the subject of a pending or existing State enforcement action, including a consent order, or where HHS has reasonably determined that an issuer lacks the funds to continue providing coverage to its consumers for the remainder of the plan year. Under its obligation to determine that making a plan available on the FFEs is in the interest of qualified individuals and employers, HHS is proposing to adopt these decertification bases as a consumer protection measure. We welcome comments on these proposals. 8. Quality Standards jstallworth on DSK7TPTVN1PROD with PROPOSALS a. Patient Safety Standards for QHP Issuers (§ 156.1110) In § 156.1110, we established the first phase of patient safety standards, beginning on January 1, 2015, for QHP issuers to verify that certain contracted hospitals meet Medicare Hospital Conditions of Participation requirements regarding a quality assessment and performance improvement program and a discharge planning process. We propose to strengthen QHP patient safety standards in accordance with section 1311(h) of the Affordable Care Act for plan years beginning on or after January 1, 2017. In addition to hospital requirements to meet certain quality and patient safety standards delineated in the Medicare Conditions of Participation, HHS has engaged with several initiatives such as the Patient Safety Organization (PSO) program, Hospital Engagement Networks and the Quality Improvement Organizations, to broaden the national impact on reducing patient harm. By leveraging the successful work already being done at national, regional, and local hospital systems for health care quality improvement and harm reduction, we believe that alignment of the QHP issuer standards with effective patient safety interventions will achieve greater impact. Therefore, we propose amending § 156.1110 to capture the current patient safety standards that continue to apply for plan years beginning before January 1, 2017 in new paragraph (a)(1). We also propose to add VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 new paragraph (a)(2)(i)(A) to specify that for plan years beginning on or after January 1, 2017, a QHP issuer that contracts with a hospital with greater than 50 beds must verify that the hospital uses a patient safety evaluation system as defined in 42 CFR 3.20. The patient safety evaluation system is defined in the PHS Act as the collection, management, or analysis of information for reporting to or by a Patient Safety Organization.39 We propose in § 156.1110(a)(2)(i)(B) to require that a QHP issuer that contracts with a hospital with greater than 50 beds must ensure that the hospital implemented a comprehensive person-centered discharge program to improve care coordination and health care quality for each patient. We believe that use of a data-driven approach, analytic feedback, and shared learning to advance patient safety, such as working with a PSO, are essential to implementing meaningful interventions to improve patient health care quality. In accordance with the flexibility provided to the Secretary under section 1311(h)(2) of the Affordable Care Act to establish reasonable exceptions to the QHP issuer patient safety requirements, we propose in § 156.1110(a)(2)(ii), that the hospital may implement evidencebased initiatives to reduce all cause preventable harm,40 prevent hospital readmission, improve care coordination and improve health care quality through the collection, management and analysis of patient safety events by a means other than reporting of such information to or by a PSO. For example, a QHP issuer may comply with the proposed patient safety standards if the applicable QHP issuer-contracted hospital participates through the Partnership for Patients initiative as part of a Hospital Engagement Network.41 We believe this would allow for flexibility and promote alignment for hospitals that already engage in effective national, State, public and private patient safety programs. Although hospital patient safety programs are diverse, we believe that promoting a common goal of preventing the risk of patient harm in an effective, sustainable way is important. We also believe it is important to recognize the core components of a 39 See, 42 U.S.C. 299b–21(6); and https:// www.pso.ahrq.gov/regulations/fnlrule01.pdf. 40 All cause preventable harm or all adverse events-any event during the care process that results in harm to a patient, regardless of cause (https://www.cms.gov/Medicare/ProviderEnrollment-and-Certification/ SurveyCertificationGenInfo/Downloads/Surveyand-Cert-Letter-13-19.pdf). 41 https://partnershipforpatients.cms.gov/aboutthe-partnership/ aboutthepartnershipforpatients.html. PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 75555 hospital patient safety program, including development of comprehensive patient safety systems to identify, report and analyze data; tracking of process and outcome measures; encouraging a culture of safety with leadership and health care provider support and expertise; and engaging patients and families in quality improvement and action plans. Over time, as PSO activities continue to expand in scope, maturity and effectiveness to advance efforts to ensure patient safety, we anticipate continuing to reassess the reasonable exceptions to the QHP issuer patient safety requirements outlined in § 156.1110(a)(2)(ii). We expect that QHP-issuer contracted hospitals with more than 50 beds will contract with a PSO and implement a comprehensive person-centered discharge program to improve care coordination and health care quality for each patient. HHS will continue to monitor the status of the PSO program and other patient safety initiatives and will develop additional requirements or guidance, if needed, to support effective patient safety strategies and harmonization of evidence-based standards and requirements under § 156.1110. In addition, HHS strongly supports hospital tracking of patient safety events using the Agency for Healthcare Research and Quality Common Formats,42 which are a useful tool for a hospital regardless of what patient safety interventions are implemented for ongoing, data-driven quality assessment. The Agency for Healthcare Research and Quality anticipates releasing version 2.0 of the Common Formats for Event Reporting—Hospitals, which would define a systematic process for reporting adverse events, near misses and unsafe conditions, and allow a hospital to report harm from all causes. We believe that use of Common Formats, and aligning with existing HHS recommendations for hospitals,43 is integral whether a hospital chooses to work with a PSO to comply with the proposed requirement in § 156.1110(a)(2)(i) or implements the alternative approach under the reasonable exception provision as proposed in § 156.1110(a)(2)(ii). We believe these proposed amendments to QHP issuer patient safety requirements would support these common aspects and goal, and also align with the established 42 https://www.pso.ahrq.gov/common. 43 https://www.cms.gov/Medicare/ProviderEnrollment-and-Certification/ SurveyCertificationGenInfo/Downloads/Surveyand-Cert-Letter-13-19.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75556 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules requirements in § 156.1130 for a QHP quality improvement strategy, specifically the outlined quality improvement strategy topic areas from section 1311(g) of the Affordable Care Act, including implementation of activities to prevent hospital readmissions and implementation of activities to improve patient safety and reduce medical errors. We propose in § 156.1110(b) to amend the documentation requirement to specify that, for plan years beginning on or after January 1, 2017, a QHP issuer to collect information from each of its contracted hospitals with greater than 50 beds to demonstrate that those hospitals meet the patient safety standards required in paragraph (a)(2) of this section. Such information could include a copy of the current agreement to partner with a PSO, a Hospital Engagement Network, or a Quality Improvement Organization. The documentation should reflect implementation of PSO activities, such as PSOs and hospitals working together to collect, report and analyze patient safety events, and implementation of a comprehensive person-centered hospital discharge program to demonstrate compliance with the proposed requirements in § 156.1110(a)(2)(i); or implementation of other patient safety initiatives to reduce all cause preventable harm, prevent hospital readmission, improve care coordination and improve health care quality through the collection, management and analysis of patient safety events to demonstrate compliance with the reasonable exception provision proposed to be captured in § 156.1110(a)(2)(ii). We also propose to remove paragraph (d) from section § 156.1110 because it is no longer needed given the clarifying proposed effective date language within paragraphs (a) and (b). We clarify that, at this time, HHS does not intend to amend the number of hospital beds threshold authorized by section 1311(h)(3) of the Affordable Care Act and does not intend to begin implementing the provisions in section 1311(h)(1)(B) regarding non-hospital health care providers. We seek comment on the proposed amendments to paragraphs (a) and (b), and the proposed deletion of paragraph (d). We seek comment specifically on the proposals to require that a QHP issuer that contracts with a hospital with greater than 50 beds must verify that the hospital uses a patient safety evaluation system and implements a comprehensive person-centered discharge program to improve care coordination and health care quality for each patient. We also seek comment on VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 the reasonable exception provision under which the QHP issuer-contracted hospital with greater than 50 beds may implement evidence-based initiatives other than working with a PSO to reduce all cause preventable harm, prevent hospital readmission, improve care coordination and improve health care quality through the collection, management and analysis of patient safety events. We are considering providing that QHP issuers must ensure that their contracted hospitals as described in section 1311(h) are standardizing reporting of patient safety events with the use of the Agency for Healthcare Research and Quality Common Formats, and we seek comment regarding this potential requirement. We seek comment on the types of information, such as hospital agreements with PSOs, HENs or QIOs, that may be submitted to a QHP issuer to comply with the proposed standard in § 156.1110(b)(2). We also seek comment on the proposed documentation standard, including the burden and costs, to require a QHP issuer to track information and demonstrate compliance with meeting the new patient safety standards described in paragraph (a)(2). 9. Qualified Health Plan Issuer Responsibilities a. Payment and Collections Processes (§ 156.1215) In the 2015 Payment Notice, HHS established a monthly payment and collections cycle for insurance affordability programs, user fees, and premium stabilization programs. In 2017, as discussed elsewhere in this document, we are proposing to charge issuers in State-based Exchanges that utilize the Federal platform for eligibility and enrollment services a user fee for the use of the platform. To streamline our payment and collections process, we propose that, for 2017 and later years, for purposes of the netting process, the reference to FFE user fees in § 156.1215(b) would be interpreted to include any fees for issuers in Statebased Exchanges using the Federal platform, as well as user fees that HHS collects on behalf of the State-based Exchange using the Federal platform. In the 2015 Payment Notice, we established in § 156.1215(c) that any amount owed to the Federal government by an issuer and its affiliates is the basis for calculating a debt owed to the Federal government. Similarly, we propose that, for 2015 and later years, for purposes of calculating the debt owed to the Federal government, we would interpret the reference to FFE PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 user fees to include any fees for issuers in State-based Exchanges using the Federal platform, as well as user fees that HHS collects on behalf of the Statebased Exchange using the Federal platform. We solicit comments on these proposals, including whether the current regulations should be amended to reflect this interpretation. b. Administrative Appeals (§ 156.1220) In the 2015 Payment Notice (79 FR 13818), we established an administrative appeals process for issuers. We established a three-tiered appeals process: a request for reconsideration under § 156.1220(a); a request for an informal hearing before a CMS hearing officer under § 156.1220(b); and a request for review by the Administrator of CMS under § 156.1220(c). We note that should we finalize our proposal around SBE–FPs, we would interpret this administrative appeals process to apply to user fee payments that we collect from SBE–FP QHP issuers that offer plans on an SBE– FP. Under § 156.1220(a), an issuer may only file a request for reconsideration based on the following: a processing error by HHS, HHS’s incorrect application of the relevant methodology, or HHS’s mathematical error. For example, an issuer may file a request for reconsideration that challenges the assessment of a default risk adjustment charge if the issuer believes the default charge was assessed because HHS incorrectly applied its methodology regarding data quantity and data sufficiency standards; however, the issuer may not file a request for reconsideration to challenge the methodology itself. We note that we are seeking comment on the proposed requirements related to the data quantity and data sufficiency methodology for the reinsurance and risk adjustments programs elsewhere in this proposed rule. We also clarify that an issuer may not file a request for reconsideration regarding issues arising from the issuer’s failure to load complete and accurate data to its dedicated distributed data environment within the data submission window. Errors by the issuer are not appealable. We seek to clarify these grounds for appeal for the risk adjustment and reinsurance programs, as follows. In line with our proposal to delete § 153.710(d), we propose to make conforming amendments to modify § 156.1220 to remove cross-references to the interim discrepancy reporting process. Under § 156.1220(a)(4)(ii), a reconsideration relating to risk adjustment or E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules reinsurance may only be requested if, to the extent the issue could have been previously identified by the issuer to HHS under the final discrepancy reporting process proposed to be redesignated at § 153.710(d)(2), it was so identified and remains unresolved. As proposed to be redesignated, § 153.710(d)(2) states that an issuer must identify to HHS any discrepancies it identified in the final distributed data environment reports. We clarify that issuers may identify issues during the discrepancy reporting process under newly designated § 153.710(d)(2) that are not subject to appeal; issuers may identify issues that are not processing errors by HHS, HHS’s incorrect application of the relevant methodology, or HHS’s mathematical errors. We clarify that, in contrast, an issuer may only request a reconsideration of unresolved issues that were identified under the final discrepancy reporting process proposed to be redesignated at § 153.710(d)(2), if contesting a processing error by HHS, HHS’s incorrect application of the relevant methodology, or HHS’s mathematical error. The existence of an unresolved discrepancy is not alone a sufficient basis on which to request a reconsideration. We also seek to clarify the grounds for appeal for the risk corridors program. An issuer may not file a request for reconsideration to challenge the standards for the risk corridors program, including those established in §§ 153.500 through 153.540 and in guidance issued by HHS. In addition, appeals related to data for programs other than risk corridors covered in § 156.1220(a) cannot be grounds for risk corridors appeals. We also propose to shorten the deadline for filing a request for reconsideration in § 156.1220(a)(3) from 60 to 30 calendar days. This proposal will permit HHS to resolve administrative appeals, calculate final payments and charges, and make payments in a more expedited manner. Additionally, we propose to clarify that an issuer must pay the full amount owed to HHS as set forth in the applicable notification, even if the issuer files a request for reconsideration under § 156.1220. Failure to pay an amount owed will result in interest accruing after the applicable payment deadline. Therefore, if an appeal is unsuccessful, and the issuer has not already remitted the charge amount owed, the issuer would owe the debt plus the interest, and administrative fees which accrue from delayed payment. If an appeal is successful, HHS will refund the amount paid in VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 accordance with the final appeal decision. Therefore, we propose that the request for reconsideration must be filed in accordance with the following timeframes: (i) For the premium tax credit and cost-sharing reduction portions of the advance payments, or FFE user fee charges, within 30 calendar days after the date of the final reconsideration notification specifying the aggregate amount of such advance payments or 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 the date of the notification under § 153.310(e); (iii) for a reinsurance payment, within 30 calendar days of the date of the notification provided under § 153.240(b)(1)(ii); (iv) for a default risk adjustment charge, within 30 calendar days of the date of the notification of such charge; (v) for reconciliation of the cost-sharing reduction portion of the advance payments, within 30 calendar days of the date of the notification of such payment or charge; and (vi) for a risk corridors payment or charge, within 30 calendar days of the date of the notification of such payment or charge for the purposes of § 153.510(d). We propose to clarify that the last submission of data to which the issuer has attested serves as the notification for purposes of § 153.510(d). We seek comment on this proposal. c. Third Party Payment of Qualified Health Plan Premiums (§ 156.1250) On March 19, 2014, we published in the Federal Register an interim final rule (IFR) with comment period titled, Patient Protection and Affordable Care Act; Third Party Payment of Qualified Health Plan Premiums (79 FR 15240). The IFR requires individual market QHP issuers, including SADP issuers, to accept premium and cost-sharing payments made on behalf of enrollees by: The Ryan White HIV/AIDS Program; other Federal and State government programs that provide premium and cost sharing support for specific individuals; and Indian tribes, tribal organizations, and urban Indian organizations. The IFR applies the requirements at § 156.1250 to all individual market QHPs and SADPs, regardless of whether they are offered through an FFE, an SBE, or outside of an Exchange. The IFR also amended § 156.805 to ensure that § 156.1250 could be enforced. Specifically, the IFR amended § 156.805(a)(1) to: Provide that § 156.805 targets violations of issuer standards and requirements of part 153 that are PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 75557 applicable to issuers; clarify that substantial non-compliance with any Exchange standard or requirement applicable to issuers in the FFE is grounds for imposing CMPs; and explicitly reference part 156 to clarify that substantial non-compliance with the Exchange standards applicable to issuers offering QHPs in the FFEs under part 156, including new § 156.1250, may be a basis for the imposition of CMPs under § 156.805. Prior to publishing the IFR, HHS issued two ‘‘Frequently Asked Questions’’ documents regarding premium and cost-sharing payments made by third parties on behalf of QHP enrollees. In an FAQ issued on November 4, 2013 (the November FAQ), HHS encouraged QHP issuers not to accept third-party payments made on behalf of enrollees by hospitals, other healthcare providers, and other commercial entities due to concerns that such practices could skew the insurance risk pool and create an uneven field in the Exchanges.44 On February 7, 2014, HHS issued another FAQ (the February FAQ) clarifying that the November FAQ did not apply to third party premium and cost-sharing payments made on behalf of enrollees by Indian tribes, tribal organizations, and urban Indian organizations; State and Federal government programs (such as the Ryan White HIV/AIDS Program); or private, not-for-profit foundations that base eligibility on financial status, do not consider enrollees’ health status, and provide assistance for an entire year.45 In the February FAQ, HHS affirmatively encouraged QHP issuers to accept such payments given that Federal or State law or policy specifically envisions third party payment of premium and cost-sharing amounts by these entities. We received 174 comments in response to the March 19, 2014 IFR. The comments ranged from general support of or opposition to the IFR’s provisions to very specific questions or comments. Based on these comments, we propose to make some modifications to the policy finalized in the IFR. Several commenters requested that final regulations clarify that ‘‘Federal and State government programs’’ include programs administered by a State’s political sub-divisions (for example, counties and municipalities). Several other commenters expressed confusion regarding the definition of 44 https://www.cms.gov/CCIIO/Resources/FactSheets-and-FAQs/Downloads/third-party-qa-11-042013.pdf. 45 https://www.cms.gov/CCIIO/Resources/FactSheets-and-FAQs/Downloads/third-partypayments-of-premiums-for-qualified-health-plansin-the-marketplaces-2-7-14.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75558 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules ‘‘State and Federal government programs,’’ particularly in the case where an entity is both a (Federal or State) government program as well as a health care provider. These commenters expressed concern that § 156.1250 does not make a distinction between government programs (such as Ryan White HIV/AIDS programs) and programs that involve Federal grantees receiving considerable public funding. Other commenters expressed concern that the category of Federal and State government programs is too broad, and does not provide adequate notice of which payments must be accepted. We propose to amend § 156.1250 to clarify that a Federal or State government program includes programs of the political subdivisions of the State, namely counties and municipalities, which we refer to as ‘‘local governments.’’ Including this clarification in regulations will ensure that States have the flexibility to distribute care and Exchange financial assistance to their vulnerable populations through local governments, consistent with their statutory and regulatory authority. In terms of the distinction between programs sponsored and operated by the government (such as the Ryan White HIV/AIDS programs) and programs that involve Federal grantees that receive considerable public funding, we acknowledge that programs such as the Ryan White HIV/AIDS program operate by working with cities, States, and local community-based organizations to provide services in line with their statutory authority. Sections 2604(c)(3)(F), 2612(c)(3)(F), and 2651(c)(3)(F) of the PHS Act authorize Ryan White HIV/AIDS program grantees and sub-grantees to use program funds for premium and cost-sharing assistance. These grantees and subgrantees must provide the assistance through third-party payments as they are prohibited from making payments directly to patients. Though many Ryan White HIV/AIDS program grantees are State and local governments, not all are; similarly, many of the State and local government grantees administer funds through sub-grantees that are not government entities. We propose to distinguish government programs from government grantees such that the requirement at § 156.1250 applies to government programs, but not necessarily to entities that are government grantees, unless specifically authorized and funded by the Federal, State, or local government program to make the payments on behalf of the program, consistent with the government programs’ statutory and VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 regulatory authority to provide premium and cost-sharing assistance through grants and grantees. In other words, if such Federal, State, and local governments are authorized to administer their premium and costsharing assistance through grantees or sub-grantees, the payments may not be rejected on the grounds that they did not come directly from the government programs. In such cases, the source of the Exchange financial assistance is the government program, and administration or distribution of that assistance through grants and grantees is authorized under statute or regulation. We seek comment on this proposal and also on whether final regulations should list out the specific entities that qualify as government programs for purposes of this provision. We also propose to require entities that make third party payments of premiums under this section to notify HHS, in a format and timeline specified in guidance. We propose that the notification must reflect the entity’s intent to make payments of premiums under this section and the number of consumers for whom it intends to make payments. We seek comment on this requirement, and on what information entities should provide as part of this notification. We also propose to clarify that while issuers offering individual market QHPs, including SADPs, generally do not collect cost-sharing payments, they are required to accept third party costsharing payments on behalf of enrollees in circumstances where the issuer or the issuer’s downstream entity accepts costsharing payments from plan enrollees. Although generally cost-sharing payments are made to providers, rather than to issuers, there are certain contractual circumstances where an issuer’s non-provider downstream entity engages in activities on behalf of the issuer, including the collection of costsharing payments. For example, an issuer’s pharmacy benefits manager may collect cost-sharing payments from the issuer’s plan enrollees for prescription drugs. We propose to clarify that in such situations, the rules at § 156.1250 regarding third-party payments would apply to cost sharing. We seek comment on these proposals. We received a number of comments requesting that final regulations require issuers to accept third-party payments from not-for-profit, charitable organizations. Several comments stated that requiring QHP issuers to accept third party payments from Ryan White HIV/AIDS programs but not from other disease-specific programs is unfair to those individuals with other diseases or PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 conditions. Several other commenters expressed that many not-for-profit foundations and charitable organizations offer premium and costsharing assistance to individuals based on both financial status and diagnosis of a particular condition or disease. We are considering whether we should expand the list of entities from whom issuers are required to accept payment under § 156.1250 to include not-for-profit charitable organizations organizations in future years. If we did include not-for-profit charitable organizations, we would intend to include guardrails intended to minimize risk pool impacts, such as limiting assistance to individuals not eligible for other MEC and requiring assistance until the end of the calendar year. In making this determination, we intend to carefully review data provided by entities currently making third party premium payments and data related to the overall risk pool to better understand the impact of these payments. d. Other Notices (§ 156.1256) We propose to add a new § 156.1256, which would add a requirement for issuers, in the case of a plan or benefit display error included in § 155.420(d)(4), to notify their enrollees within 30 calendar days after the error is identified, if directed to do so by the FFE. We believe that enrollees should be made aware of any error that may have impacted their QHP selection and enrollment and any associated monthly or annual costs. Therefore, we are proposing a requirement for issuers to notify their enrollees of such error, should such error occur, as well as the availability of a special enrollment period, under § 155.420(d)(4), for the enrollee to select a different QHP, if desired. We seek comment on this proposal. H. Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements 1. Definitions (§ 158.103) To ensure consistency in the definitions of ‘‘large employer’’ and ‘‘small employer’’ between the MLR regulation and the market reform requirements, and to reflect the recent amendments to section 2791(e) of the PHS Act and section 1304(b) of the Affordable Care Act that were made by the Protecting Affordable Coverage for Employees Act (Pub. L. 114–60), we propose to revise the regulatory definitions of ‘‘large employer’’ and ‘‘small employer’’ in § 158.103 to cross- E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS reference the definitions of those terms in § 144.103. 2. Reporting of Incurred Claims (§§ 158.103 and 158.140(a)) The MLR December 1, 2010 interim final rule (75 FR 74864) and the May 16, 2012 technical corrections thereto (77 FR 28788) direct issuers to report incurred claims with a 3-month run-out period, and define unpaid claim reserves to mean reserves and liabilities established to account for claims that were incurred during the MLR reporting year but had not been paid within 3 months of the end of the MLR reporting year. The run-out period improves the accuracy of reported incurred claims by using the actual claims payments that take place during the run-out period, instead of the estimated claims liabilities and reserves, in the calculation of claims incurred in the reporting year. Prior to the 2014 MLR reporting year, the deadline for submitting MLR reports to the Secretary was June 1 of the year following the reporting year. The 2014 Payment Notice (78 FR 15410) moved the reporting deadline from June 1 to July 31 of the year following the reporting year to accommodate inclusion of the transitional reinsurance and risk adjustment amounts, which HHS generally publishes by June 30, in the MLR and risk corridors calculations. Because the MLR reporting deadline applicable to the 2014 and later reporting years occurs later in the year, the incurred claims valuation can also occur later in the year. Therefore, we propose to amend the definition of unpaid claims reserves in § 158.103 and the requirements for reporting incurred claims in § 158.140(a) to utilize a 6month, rather than a 3-month run-out period beginning with the 2015 reporting year. This proposed amendment would require incurred claims to be calculated as of June 30, rather than March 31, of the year following the reporting year. We note that this approach is consistent with the proposal outlined in section III.D.3.a. of this preamble regarding the treatment of incurred but not received claims for the risk corridors program. We seek comment on this proposal. Finally, we are inviting comment on whether we should modify the treatment of a health insurance issuer’s investments in fraud prevention activities for MLR reporting purposes in the final rule. We are considering amending the MLR regulation to permit the counting of a health insurance issuer’s investments in fraud prevention activities among those expenses attributable to incurred claims. We VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 solicit comments on this approach, including whether safeguards against potential abuse should be included (for example, an upper limit on this allowance, such as a percentage based on the ratio of issuers’ fraud reduction expenses reported under § 158.140(b)(iv) and issuers’ earned premium as defined in § 158.130); whether we should collect fraud prevention activity expense data as an informational item on the MLR Annual Reporting Form before amending the regulation; as well as on potential alternative treatment of these expenses for MLR reporting or rebate calculation purposes. We seek comment on this issue from all stakeholders, and specific actual data, if available, including with respect to the additional incentives that would result for health plan investments of this sort. IV. Collection of Information Requirements Under the Paperwork Reduction Act of 1995, we are required to provide 60day 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 11. To fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 (PRA) 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 a 35 percent increase for fringe benefits and overhead) for estimating the burden associated with the ICRs.46 46 See May 2014 Bureau of Labor Statistics, Occupational Employment Statistics, National Occupational Employment and Wage Estimates at https://www.bls.gov/oes/current/oes_nat.htm. PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 75559 A. ICRs Regarding Submission of Risk Corridors Data (§ 153.530) We are proposing to amend the risk corridors program requirements at § 153.530 to require issuers to true-up claims liabilities and reserves used to determine the allowable costs reported for the preceding benefit year to reflect the actual claims payments made through June 30 of the year following the benefit year. Although this proposal would require issuers to submit data indicating the difference between their incurred liability estimated as of March 31 and June 30, we believe that issuers will be recording these amounts as part of their normal business practices, and that there will be no new data elements and no additional burden as a result of this proposal. Therefore, in accordance with the implementing regulations of the PRA at 5 CFR 1320.3(b)(2), we believe the burden associated with this requirement would be exempt as it associated with a usual and customary business practice. B. ICRs Regarding Submission of Rate Filing Justification (§ 154.215) This proposed rule would require health insurance issuers to submit a Unified Rate Review Template for all single risk pool coverage regardless of whether there is a plan within a product that experiences a rate increase. The existing information collection requirement is approved under OMB Control Number 0938–1141. This includes the unified rate review template and instructions for rate filing documentation that issuers currently use to submit rate information to HHS for rate increases of any size for single risk pool coverage and rate increases that meet or exceed the subject to review threshold for non-single risk pool coverage. As detailed in the accompanying preamble discussion, we believe most issuers already report this information. Therefore, we do not expect issuers to incur a burden associated with this proposed regulation. Prior to the deadline for the submission of rate information to CMS for rates for single risk pool coverage effective on or after January 1, 2017, HHS intends to solicit public comment on and seek OMB approval for revisions to the information collection template and instructions approved under OMB Control Number 0938–1141. C. ICRs Regarding Election To Operate an Exchange After 2014 (§ 155.106) This proposed rule would modify the dates for application submission and approval for States seeking to operate an SBE, and have an approved or E:\FR\FM\02DEP2.SGM 02DEP2 75560 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS conditionally-approved Exchange Blueprint application and operational readiness assessment. HHS does not propose modifying the documents that States already must submit as part of the required Exchange Blueprint application. Therefore, HHS does not anticipate any additional impact to the administrative burden associated with the proposed regulatory changes to § 155.106. HHS proposes utilizing the existing PRA package approved under OMB Control Number 0938–1172 for the Exchange Blueprint application. D. ICRs Regarding Standards for Certified Application Counselors (§ 155.225(b)(1)(iii)) Section 155.225(b)(1)(ii) requires certified application counselor designated organizations to maintain a registration process and methodology to track the performance of certified application counselors. This proposed rule would add a new § 155.225(b)(1)(iii) requiring certified application counselor designated organizations to provide the Exchange with information and data regarding the performance of the organization’s certified application counselors, and the consumer assistance they provide. Although the current requirement at § 155.225(b)(1)(ii) does not specify the type of performance information that must be tracked, or require that the information be provided to the Exchange, we expect that certified application counselor designated organizations already have a tracking process in place to collect performance information from individual certified application counselors, and that individual certified application counselors are already recording and submitting this required information to their organization. Therefore, we expect this proposal to have minimal impact on individual certified application counselors and on certified application counselor designated organizations. The proposed § 155.225(b)(1)(iii) would add a new burden of compiling the performance information and submitting it to the Exchanges. In States with FFEs, HHS anticipates that, beginning in January 2017, it would collect three performance data points each month from certified application counselor designated organizations: The number of individuals who have been certified by the organization; the total number of consumers who received application and enrollment assistance from the organization; and of that number, the number of consumers who received assistance applying for and selecting a QHP, enrolling in a QHP, or applying for Medicaid or CHIP. We VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 anticipate that this data would be reported to FFEs electronically, through HIOS or another electronic submission vehicle. For the purpose of estimating costs and burdens, we assume that State Exchanges will collect the same information with the same frequency, although our proposal gives Exchanges the flexibility to determine which data to collect and the form and manner of the collection. We estimate that certified application counselor designated organizations will have a mid-level health policy analyst prepare the reports and a senior manager will review each monthly report. HHS expects that a midlevel health policy analyst (at an hourly wage rate of $40.64) will spend 2 hours each month to provide the required monthly submissions and a senior manager (at an hourly wage rate of $91.31) will spend 3⁄ fxsp0;8 hour to review the submissions. Therefore, we estimate each monthly report will require 2.375 hours and a cost burden of $115.52 per month per organization, or 28.50 hours with a cost (12 monthly reports) of $1,386.25 annually per certified application counselor designated organization. Nationwide, we estimate there are 5,000 certified application counselor designated organizations, resulting in an annual cost burden of $6,931,200 and 142,500 hours for certified application counselor designated organizations. Under proposed § 155.225(b)(1)(iii), if an Exchange requests these certified application counselor reports, the Exchange would also need to review the reports. We assume that all Exchanges will require monthly reports and will utilize in-house staff to review them. We assume that an employee earning a wage that is equivalent to a mid-level GS–11 employee would review monthly report submissions from certified application counselor designated organizations.47 We estimate that a mid-level employee (at an hourly wage rate of $43.13) will spend 10 minutes reviewing each monthly report for a cost burden of approximately $7.19 per monthly report per certified application counselor designated organization. For State Exchanges, we estimate that there are 1,500 certified application counselor designated organizations resulting in a cost burden of 3,000 hours and approximately $129,390 annually. Costs to the FFEs are estimated separately in the Regulatory Impact Analysis section of this proposed rule. 47 Federal wage rates are available at https:// www.opm.gov/policy-data-oversight/pay-leave/ salaries-wages/salary-tables/pdf/2015/GS_h.pdf. PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 E. ICRs Regarding Network Adequacy Standards (§ 156.230(e) and (f)) Proposed § 156.230(e) would require that QHP issuers make a good faith effort to provide written notice of discontinuation of a provider 30 days prior to the effective date of the change or otherwise as soon as practicable, to enrollees who are patients seen on a regular basis by the provider or who receive primary care from the provider whose contract is being discontinued, irrespective of whether the contract is being discontinued due to a termination for cause or without cause, or due to a non-renewal. This is a third-party disclosure requirement. We estimate that a total of 475 issuers participate in the FFE and would be required to comply with the proposed standard. We propose an estimate of 5 percent of providers discontinue contracts per year and that an issuer in the FFE covers 7,500 National Provider Identifiers, which means that we estimate an issuer would have 375 provider discontinuations in a year. For each provider discontinuation, we propose an estimate that it will take a database administrator 30 minutes for data analysis to produce the list of affected enrollees at $55.37 an hour and an administrative assistant 30 minutes to develop the notification and send the notification to the affected enrollees, at $29.93 an hour. The total costs per an issuer would be $15,993.75. The total annual costs estimate would be $7,597,031. Because we are already collecting information regarding network classifications as part of the existing QHP certification process, we do not believe that this proposal described in the preamble will result in additional information collection requirements for issuers. Proposed § 156.230(f) would require QHP issuers to provide a notice to enrollees of the possibility of out-ofnetwork charges from an out-of-network provider in an in-network setting at least 10 business days prior to the benefit being provided to avoid counting the out-of-network costs against to the annual limitation on cost sharing. This provision would apply to all QHPs, which includes 575 issuers. We estimate it would take an issuer’s mid-level health policy analyst (at an hourly wage rate of $54.87) approximately 6 minutes to create a notification and send the proposed information. We estimate that approximately 2 notices would be sent for every 100 enrollees. Assuming approximately 9 million enrollees in QHPs 2017, we estimate QHPs would send approximately 180,000 total E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules notices, for a total hours of 18,000, with a total cost of $987,660. F. ICR Regarding Monthly SHOP Enrollment Reconciliation Files Submitted by Issuers (156.285(c)(5)) Proposed amendments to § 156.285(c)(5) would specify that issuers in a Federally-facilitated SHOP would send monthly enrollment reconciliation files to the SHOP according to a process, timeline and file format established by the FF–SHOP. CMS anticipates that it would require FF–SHOP issuers to submit a standard file with specific data elements and submit their files in a process set out by the SHOP, no less frequently than on a monthly basis. Issuers of QHPs available through the SHOP are already required under the current version of § 156.285(c)(5) ‘‘to reconcile enrollment files with the SHOP at least monthly.’’ Therefore, we expect this proposal to have minimal impact on SHOP issuers. G. ICR Regarding Patient Safety Standards (§ 156.1110) In § 156.1110(a)(2), we propose that for plan years beginning on or after January 1, 2017, a QHP issuer that contracts with a hospital with greater than 50 beds must verify that the hospital uses a patient safety evaluation system and implements a mechanism for comprehensive person-centered hospital discharge to improve care coordination and health care quality for each patient. We also propose in § 156.1100(a)(2)(ii) to establish reasonable exceptions to these new QHP issuer patient safety requirements such that the hospital may implement evidence-based initiatives to reduce all cause preventable harm, prevent hospital readmission, improve care coordination and improve health care quality through the collection, management and analysis of patient safety events (rather than requiring reporting of such information to or by a Patient Safety Organization). The burden estimate associated with the information collection, recordkeeping, and disclosure requirements to demonstrate compliance with these standards includes the time and effort required for QHP issuers to maintain and submit to the applicable Exchanges, documentation including but not limited to, hospital agreements to partner with a Patient Safety Organization, a Hospital Engagement Network, or a Quality Improvement Organization that demonstrate that each of its contracted hospitals with greater than 50 beds meets the patient safety standards required in § 156.1110(a)(2) for plan years beginning on or after January 1, 2017. QHP issuers may not already be collecting such network provider information; therefore, we estimate the cost and burden to collect this administrative information as follows: For a total of 600 QHP issuers, offering 15 plans as potential QHPs, we estimate each issuer would require one senior manager an average of 3 hours to collect and maintain the hospital agreements or other information necessary to demonstrate compliance as required in § 156.1110(a)(2) for their QHPs offered on Exchanges for plan years beginning on or after January 1, 2017. For a senior manager (at an hourly wage rate of $91.31), we estimate the total annual cost for a QHP issuer to be $273.93. Therefore, we estimate a total annual burden of 1,800 hours, resulting in an annual cost of $164,358. H. ICR Regarding Third Party Payment of Qualified Health Plan Premiums (§ 156.1250) We are proposing to require entities that make third party payments of premiums under this section to notify HHS, in a format and timeline specified in guidance. We expect that the notification would reflect the entity’s intent to make payments of premiums under this section and the number of consumers for whom it intends to make payments. We estimate it would take approximately four hours to analyze the number of consumers the entity intends to make payments of premiums on behalf of, draft a notification and send 75561 the proposed information by a mid-level health policy analyst (at an hourly wage rate of $54.87). Assuming 500 entities exist that make third party payments and each would send one notice, we estimate a total burden of 2,000 hours resulting in an annual cost of $109,740. I. ICRs Regarding Other Notices (§ 156.1256) We are proposing to add a new section at § 156.1256 to require that, in the event of a plan or benefit display error, QHP issuers notify their enrollees within 30 calendar days after the error is identified, both of the plan or benefit display error and of the opportunity to enroll in a new QHP under a special enrollment period at § 155.420(d)(4), if directed to do so by the FFE. This provision would apply to all QHPs in the FFEs, which includes 475 issuers. We estimate it would take approximately 30 minutes to amend a form notice, add SEP language provided by the FFE, and send the proposed information by an issuer’s mid-level health policy analyst (at an hourly wage rate of $54.87). We estimate that approximately 4 percent of enrollees would receive such a notice. Assuming approximately 7 million FFE enrollees, we estimate QHPs in the FFEs would send approximately 280,000 total notices, for a total hours of 140,000, with a total cost of $7,681,800. However, although this proposal would require issuers to send notices for the specified situation, sending these notices is already part of normal issuer business practices and issuers are already working with the FFE to include language in their notices about special enrollment periods, as applicable and appropriate. Therefore, there will be no additional information required by issuers and no new administrative burden as a result of this proposal. In accordance with the implementing regulations of the PRA at 5 CFR 1320.3(b)(2), we believe the burden associated with this requirement would be exempt as it associated with a usual and customary business practice. TABLE 11—ANNUAL REPORTING, RECORDKEEPING AND DISCLOSURE BURDEN OMB Control number jstallworth on DSK7TPTVN1PROD with PROPOSALS Regulation section § 155.225(b)(1)(iii)—certified application counselor organizations. § 155.225(b)(1)(iii)—State Exchange ............... § 156.230(e) ..................................................... § 156.230(f) ...................................................... § 156.1110 ........................................................ § 156.1250 ........................................................ § 156.1256 ........................................................ VerDate Sep<11>2014 13:28 Dec 01, 2015 Number of respondents Responses Burden per response (hours) Total annual burden (hours) Hourly labor cost of reporting ($) Total labor cost of reporting ($) Total cost ($) 0938–1172 .................. 5,000 60,000 2.375 142,500 48.64 6,931,200 6,931,200 0938–1172 .................. 0938–NEW ................. 0938–NEW ................. 0938–1249 .................. 0938–NEW ................. 0938–NEW ................. 1,500 475 575 600 500 475 1,500 178,125 180,000 9,000 500 280,000 0.167 1 0.1 0.2 4 0.5 3,000 375 18,000 1,800 2,000 140,000 43.13 42.65 54.87 91.31 54.87 54.87 129,390 7,597,031 987,660 164,358 109,740 7,681,800 129,390 7,597,031 987,660 164,358 109,740 7,681,800 Jkt 238001 PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2 75562 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules TABLE 11—ANNUAL REPORTING, RECORDKEEPING AND DISCLOSURE BURDEN—Continued OMB Control number Regulation section Total .......................................................... Number of respondents ..................................... 6,100 Responses Burden per response (hours) ........................ ........................ Total annual burden (hours) Hourly labor cost of reporting ($) 334,675 ........................ Total labor cost of reporting ($) 23,601,179 Total cost ($) 23,601,179 Note: There are no capital/maintenance costs associated with the information collection requirements contained in this rule; therefore, we have removed the associated column from Table 11. Submission of PRA-Related Comments We have submitted a copy of this proposed rule to OMB for its review of the rule’s information collection requirements. These requirements are not effective until they have been approved by OMB. To obtain copies of the supporting statement and any related forms for the proposed paperwork collections referenced above, access CMS’ Web site at https://www.cms.hhs.gov/ PaperworkReductionActof1995; email your request, including your address, phone number, OMB control number, and CMS document identifier, to Paperwork@cms.hhs.gov; or call the Reports Clearance Office at 410–786– 1326. We invite public comments on these potential information collection requirements. If you comment on these information collection and recordkeeping requirements, please submit your comments electronically as specified in the ADDRESSES section of this proposed rule. Please include ‘‘CMS–9937–P,’’ the ICR’s OMB control number, and the CMS document ID number in your comment. PRA-specific comments must be received by February 1, 2016. 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 proposed rule, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document. jstallworth on DSK7TPTVN1PROD with PROPOSALS VI. Regulatory Impact Analysis A. Statement of Need This rule proposes standards related to the premium stabilization programs (risk adjustment, reinsurance, and risk corridors) for the 2017 benefit year, as well as certain modifications to these programs 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 VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 previous Payment Notices provided detail on the implementation of these programs, including the specific parameters for the 2014, 2015, and 2016 benefit years applicable to these programs. This rule proposes additional standards related to essential health benefits, meaningful access in the Exchange, consumer assistance tools and programs of an Exchange, Navigators, non-Navigator assistance personnel, agents and brokers registered with the Federally-facilitated Exchange, certified application counselors, costsharing parameters and cost-sharing reduction notices, essential community providers, qualified health plans, network adequacy, stand-alone dental plans, acceptance of third-party payments by QHP issuers, patient safety standards for issuers of qualified health plans participating in Exchanges, guaranteed availability and guaranteed renewability, minimum essential coverage, the rate review program, the medical loss ratio program, the Small Business Health Options Program, 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 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 PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 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 an 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, market standards, 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 help prevent risk selection and decrease the risk of financial loss that health insurance issuers might otherwise expect in 2017 and Exchange financial assistance assists low- and moderateincome consumers and American Indians/Alaska Natives 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 the next phase 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 affordable health coverage. HHS anticipates that the provisions of this proposed rule will help further the Department’s goal of ensuring that all consumers have access to quality and affordable health care and are able to make informed choices, that Exchanges operate smoothly, that premium stabilization programs work as intended, that SHOPs are provided flexibility, and that employers and consumers are protected from fraudulent and criminal activities. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules Affected entities such as QHP issuers would incur costs to comply with the proposed provisions, including administrative costs related to notices, new patient safety requirements, training and recertification requirements, and establishing a larger provider network. In accordance with Executive Order 12866, HHS believes that the benefits of this regulatory action justify the costs. C. Impact Estimates of the Payment Notice Provisions and Accounting Table In accordance with OMB Circular A– 4, Table 12 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 improved health outcomes and longevity due to continuous quality improvement, improved patient safety and increased insurance enrollment— and certain costs—such as the cost of providing additional medical services to newly-enrolled individuals. The effects in Table 12 reflect qualitative impacts and estimated direct monetary costs and transfers resulting from the provisions of this proposed rule for health insurance issuers. The annualized monetized costs described in Table 12 reflect direct administrative costs to health insurance issuers as a result of the proposed provisions, and include administrative costs related to notices, new patient safety requirements, and training and recertification requirements that are estimated in the Collection of Information section of this proposed rule. The annual monetized transfers described in Table 12 include costs associated with FFE user fees, the risk adjustment user fee paid to HHS by issuers, changes in the overall transfer amount for the risk corridors program 75563 for fiscal years 2017 through 2018, and an increase in MLR rebates to consumers. We are proposing to collect a total of $52 million in risk adjustment user fees or $1.80 per enrollee per year from risk adjustment issuers, which is slightly more than the $50 million generated in benefit year 2016 when we established a $1.75 per-enrollee-per-year risk adjustment user fee amount. As in 2016, the risk adjustment user fee contract costs for 2017 include additional costs for risk adjustment data validation; however, we expect increased enrollment in 2017 HHS risk adjustment covered plans, which decreases the per enrollee amount. Also, the increase in FFE user fee collections is the result of expected growth in enrollment in the FFEs rather than an increase in the user fee rate, which at 3.5 percent remains the same from 2016 to 2017. Beginning in 2017, we are also proposing to charge a user fee for SBEs that utilize the Federal platform for eligibility and enrollment services. This user fee rate would be set at 3.0 percent for benefit year 2017. TABLE 12—ACCOUNTING TABLE Benefits: Qualitative: • Increased enrollment in the individual market leading to improved access to health care for the previously uninsured, especially individuals with medical conditions, which will result in improved health and protection from the risk of catastrophic medical expenditures. • Continuous quality improvement among QHP issuers to reduce patient harm and improve health outcomes at lower costs. • More informed Exchanges QHP certification decisions. • Increased coverage options for small businesses and employees with minimal adverse selection. Costs: Estimate Annualized Monetized ($/year) ...................................................................... Year dollar $23.91 23.91 Discount rate (percent) 2015 2015 Period covered 7 3 2016–2020 2016–2020 Quantitative: • Costs incurred by issuers to comply with provisions in the proposed rule. Transfers: Estimate Annualized Monetized ($/year) ...................................................................... Year dollar $21.73 21.84 2015 2015 Discount rate (percent) Period covered 7 3 2016–2020 2016–2020 jstallworth on DSK7TPTVN1PROD with PROPOSALS • Transfers reflect an additional $2 million annual cost of risk adjustment user fees (the total risk adjustment user fee amount for 2015 was $50 million), which are transfers from health insurance issuers to the Federal government. Transfers also reflect an additional $31 million in rebates from entities subject to medical loss ratio (MLR) requirements to consumers, an increase of $105 million in the amount of user fees collected from State-based Exchanges that use the Federal platform for eligibility and enrollment, which are transfers from issuers to the Federal government, and a total decrease of $112 million in the amount of risk corridors transfers between issuers of qualified health plans (QHPs). • 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 Affordable Care Act ends the VerDate Sep<11>2014 18:07 Dec 01, 2015 Jkt 238001 temporary risk corridors program and, in this rulemaking, we propose to end the transitional reinsurance program after the benefit year 2016. Therefore, the costs associated with those programs are not included in Tables 12 or 13 for fiscal years 2019–2020. Table 13 PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 summarizes the effects of the risk adjustment program on the Federal budget from fiscal years 2016 through 2020, with the additional, societal effects of this proposed rule discussed in this RIA. We do not expect the provisions of this proposed rule to E:\FR\FM\02DEP2.SGM 02DEP2 75564 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules significantly alter CBO’s estimates of the budget impact of the premium stabilization programs that are described in Table 13. We estimate that the proposal to true up claims liabilities and reserves used to determine allowable costs for the risk corridors program will reduce the overall risk corridors transfer amount by $112 million in each of fiscal years 2017 and 2018. 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 12). 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 2016 Payment Notice for the impacts associated with the advance payments of cost-sharing reductions and premium tax credits, the premium stabilization programs, and FFE user fee requirements. TABLE 13—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT, REINSURANCE, AND RISK CORRIDORS PROGRAMS FROM FISCAL YEAR 2016–2020 [In billions of dollars] Year 2016 Risk Adjustment, Reinsurance, and Risk Corridors Program Payments ............................................................ Risk Adjustment, Reinsurance, and Risk Corridors Program Collections* ......................................................... 2017 2018 2019 2020 2016–2020 16.5 19.5 13 15 16 80 15.5 18.5 13 15 16 78 Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time. Note 2: The CBO score reflects an additional $2 million in collections in FY 2015 that are outlayed in the FY 2016–FY 2020 timeframe. CBO does not expect a shortfall in these programs. Source: Congressional Budget Office. Insurance Coverage Provisions of the Affordable Care Act—CBO’s March 2015 Baseline Table https:// www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf. 1. Fair Health Insurance Premiums The proposed regulations would permit an additional principal business address to be identified for a small employer that is within the service area of an issuer’s network plan, in instances where the issuer is rating based on geography and the employer’s principal business address is not within that service area. This would ensure that the network plan can be appropriately rated for sale to the group policyholder, benefitting both issuers and employers. 2. Guaranteed Availability This proposed rule would codify certain exceptions to guaranteed availability. Because we believe this codification is consistent with current industry practice under current standards, we do not believe this change will have a material impact on issuers or enrollees. jstallworth on DSK7TPTVN1PROD with PROPOSALS 2. Student Health Insurance Coverage This proposed rule would subject student health insurance coverage to the index rating methodology under the single risk pool regulation, but specify that issuers may establish one or more separate risk pools for each institution of higher education, provided they are based on a bona fide school-related classification and not related to health status. The proposed rule would also eliminate the requirement that issuers of student health insurance coverage provide coverage comprised of the specific metal levels, and instead require such issuers to provide VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 insurance policies that provide at least 60 percent AV. This would provide flexibility for colleges and universities to offer student health insurance plans that are more generous than the standard metal levels. This would affect an estimated 41 issuers that offer student health insurance coverage nationwide and approximately 1.3 million students and dependents enrolled in such plans.48 3. 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. We established standards for the administration of the risk adjustment program, in subparts D and G of part 45 of the CFR. 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, 2015, and 2016 Payment Notices, 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 2017 benefit year, we estimate that the total cost for HHS to operate the risk adjustment program on behalf of States 48 Source: Data from Medical Loss Ratio submissions for 2013 reporting year. PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 for 2017 will be approximately $52 million, slightly more than in 2016, and that the risk adjustment user fee would be approximately $1.80 per enrollee per year. This user fee reflects both increased contract costs to support the risk adjustment data validation process in 2017 and an expected increase in enrollment in risk adjustment covered QHPs. 4. Risk Corridors The Federally operated temporary risk corridors program ends in benefit year 2016 as required by statute. Because risk corridors charges are collected in the year following the applicable benefit year, and risk corridors payments lag receipt of collections by one quarter, we estimate that risk corridors transfers will continue through fiscal year 2018. We are proposing that for the 2015 and later benefit years, the issuer must true up claims liabilities and reserves used to determine the allowable costs reported for the preceding benefit year to reflect the actual claims payments made through June 30 of the year following the benefit year. This proposed amendment would provide for a more accurate risk corridors calculation by substituting actual experience in place of estimates. Some issuers overestimate their claims and liabilities, while others underestimate them. Based on the 2014 MLR and risk corridors data, we estimate that this proposed amendment will result in a combined total reduction of approximately $315 million in risk corridors payments or increase in risk E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules corridors charges for some issuers; and a combined total increase of approximately $203 million in risk corridors payments or decrease in risk corridors charges for other issuers. The estimated net impact of the proposed amendment would thus be a reduction of approximately $112 million in total transfers between issuers. 5. Rate Review In § 154.215, we propose to amend the criteria for submission of the Unified Rate Review Template for single risk pool coverage to HHS. We estimated the burden associated with the rate filing process in the Supporting Statement approved under OMB Control Number 0938–1141. We intend to revise the information collection currently approved under OMB Control Number 0938–1141 to clarify instructions related to completing the template for single risk pool coverage that has a rate decrease, no rate change and for new plans. jstallworth on DSK7TPTVN1PROD with PROPOSALS 6. Additional Required Benefits In § 155.170, we propose to amend the requirement for coverage of benefits in addition to the essential health benefits. Specifically, we propose to reword § 155.170(a)(2) to make clear that a benefit required by the State through action taking place on or before December 31, 2011 is considered an EHB and one required by the State through action taking place after December 31, 2011 is considered in addition to EHB. As we see this as a clarification, we do not anticipate an additional burden on States or issuers. At § 155.170(a)(3), we currently require the Exchange to identify which additional State-required benefits, if any, are in excess of EHB. We propose to amend paragraph (a)(3) to designate the State, rather than the Exchange, as the entity that identifies which Staterequired benefits are not EHB. Because Exchanges have generally been relying upon State Departments of Insurance in determining what constitutes an essential health benefit, we do not anticipate any additional burden to States because of this modification. 7. Standards for Navigators and Certain Non-Navigator Assistance Personnel This proposed rule would amend some of the standards for consumer assistance functions under § 155.205(d) and (e), as well as for the activities of Navigators and non-Navigator assistance personnel subject to § 155.215. The proposed changes include ensuring consumers have access to skilled assistance with Exchange-related issues beyond applying for and enrolling in VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 coverage. Such post enrollment and other assistance would include assisting consumers with applying for exemptions from the individual shared responsibility payment that are granted through the Exchange, with the process of filing Exchange appeals, and with understanding basic concepts related to health coverage and how to use it. The proposed rule would also require Navigators to provide targeted assistance to serve underserved and/or vulnerable populations, as identified by each Exchange. Our proposals would also specify that any individual or entity carrying out consumer assistance functions under § 155.205(d) and (e) or § 155.210 must complete training prior to performing any assister duties, including conducting outreach and education activities. Our proposal to amend §§ 155.205(d) and 155.215(b)(1)(i) related to completing training for Navigators and certain non-Navigator assistance personnel only applies to the timing of the training and does not have any impact on the training itself. Therefore, it would not affect the burden or cost for entities already subject to training requirements. Because under existing § 155.215(b)(2), Navigators in FFEs must already be trained on the tax implications of enrollment decisions, the individual responsibility to have health coverage, eligibility appeals, and rights and processes for QHP appeals and grievances, we expect our amendments to § 155.210(b)(2)(v) through (viii) to have minimal impact on FFE training. If any SBEs do not already provide training on these topics, we expect they would incur minimal costs in developing and implementing this training. Our proposal requiring Navigators to serve underserved and vulnerable populations will have an increased benefit for consumers, especially hard to reach populations. All costs associated with reaching these consumers in FFEs would be considered allowable costs that would be covered by the Navigator grants for the FFEs and that may be drawn down as the grantee incurs such costs. Additionally, § 155.210(b)(2)(i) already requires Navigators in all States to receive training on serving underserved and vulnerable populations. 8. Certified Application Counselors This proposed rule would require certified application counselor organizations to submit data and information to the Exchanges regarding the performance of their certified application counselors and the consumer assistance they provide, upon request, in a form and manner specified PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 75565 by the Exchange. Under proposed § 155.225(b)(1)(iii), if an Exchange requests these certified application counselor reports, the Exchange would also need to review them. We assume that all Exchanges will require monthly reports and will utilize in-house staff to review them. We assume that an employee earning a wage that is equivalent to a mid-level GS–11 employee would review monthly report submissions from certified application counselor designated organizations.49 We estimate that a mid-level employee (at an hourly wage rate of $43.13) will spend 10 minutes reviewing each monthly report for a cost burden of approximately $7.19 per monthly report per certified application counselor designated organization. We estimate the costs of this proposal for State Exchanges in the Collection of Information Requirements section of this proposed rule. For the FFEs, we estimate there are 3,500 certified application counselor designated organizations, resulting in a total annual burden for FFEs of 7,000 hours, at a cost of $301,910. 9. SHOP The SHOP facilitates 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.50 The proposed § 155.735(d)(2)(iii) would require the FF–SHOPs to send qualified employees a notice notifying them that their child dependent(s) are no longer eligible for dependent child coverage under their plan because of age. The notice would be sent 90 days in advance of the date when the dependent enrollee loses eligibility for dependent coverage. We estimate the Federally-facilitated SHOPs will spend roughly 35 hours annually, per State, to prepare the notice, for a total cost of $1,775, per State, to design and implement the notices proposed under § 155.735(d)(2)(iii). We estimate that there will be approximately 32 States operating under the Federally-facilitated SHOPs and all will be subject to this requirement. Therefore, we estimate a total annual cost of $58,575 for the FF– SHOPs as a result of this requirement. 49 Federal wage rates are available at https:// www.opm.gov/policy-data-oversight/pay-leave/ salries-wages/salary-tables/pdf/2015/GS_h.pdf. 50 Available at: https://cciio.cms.gov/resources/ files/Files2/03162012/hie3r-ria-032012.pdf. E:\FR\FM\02DEP2.SGM 02DEP2 75566 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS 10. Standardized Options In assessing the burden associated with implementing standardized options, as described in § 156.20, we assessed the potential impact on premiums established by QHP issuers in the FFEs. Due to the many complex factors that issuers consider when setting premiums, it is impossible to fully predict how each QHP issuer would price a standardized option prior to HHS sharing the standardized option with stakeholders and soliciting feedback. We anticipate that an issuer will price a standardized option based on how similar or different the standardized option is to the issuer’s current shelf (plan offerings). Because of the large variation across the country, we expect that how standardized options will be priced will vary by issuer and by State. We do not anticipate that it will significantly affect 2017 plan premiums. We expect that issuers will offer standardized options at a given metal level if the standardized options are similar to their existing plans and can be priced competitively. The premium impact on issuers’ nonstandard plan offerings is difficult to estimate. Among the six State Exchanges that standardized plans and required standardized options to be offered by QHP issuers in 2014, two (California and New York) that attempted to conduct premium impact analysis found that introduction of the requirement on issuers to offer standardized options was associated with a negligible or downward impact on premiums. However, these SBEs found it was difficult to isolate the effects of plan standardization on premiums given the many changes that occurred in the insurance market in 2014 (including the uptake in individual market enrollment, the movement to narrow networks, and active purchasing and rate negotiation in California). Again, we note that there is a great deal of uncertainty in how this policy will affect Exchanges due to several considerations: • While we propose to standardize cost-sharing on key essential health benefits, there are a wide range of other benefit design parameters that we will not standardize. It is not clear how this differentiation will manifest among plans or affect consumer choice. • There is also wide geographic variation in health care markets, including with respect to prices, plan designs, and provider networks. As such, we anticipate that the take-up of standardized options and their impacts VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 on consumers will vary in different locations across the country. effect with precision. We seek comment on the impact of this policy. 11. 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. In this proposed rule, for the 2017 benefit year, we propose a monthly FFE user fee rate equal to 3.5 percent and, for a State-based Exchange that relies on the Federal platform, 3.0 percent of the monthly premium. For the user fee charges assessed on issuers in the FFE and State-based Exchanges using the Federal platform, we intend to seek an exception to OMB Circular No. A–25R, which requires that the user fee charge be sufficient to recover the full cost to the Federal government of providing the special benefit. We seek this exception to ensure that the FFE can support many of the goals of the Affordable Care Act, including improving the health of the population, reducing health care costs, and providing access to health coverage as advanced by § 156.50(d). 14. Provisions Related to Cost Sharing 12. Actuarial Value The proposed § 156.135(g) changes current § 156.135(g) to allow for additional flexibility in our approach and options for updating of the AV Calculator in the future. 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. 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. 13. Network Adequacy In § 156.230(f), we propose to require QHPs in the FFEs to count certain outof-network cost sharing towards the innetwork annual limitation on cost sharing for enrollees who receive EHB from an out-of-network provider at an in-network setting. The premium impact will vary based on existing State laws. It is difficult to estimate a nationwide PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 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.51 We set forth in this proposed rule the reductions in the maximum annual limitation on cost sharing for silver plan variations. Consistent with our analysis in previous Payment Notices, 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 2017 maximum annual limitation on cost sharing for self only coverage ($7,150). We do not believe these changes will result in a significant economic impact. Therefore, we do not believe the provisions related to costsharing reductions in this proposed rule will have an impact on the program established by and described in the 2015 and 2016 Payment Notices. We also proposed the premium adjustment percentage for the 2017 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. The annual premium adjustment percentage sets the rate of increase for three parameters detailed in the Affordable Care Act: The annual limitation on cost sharing (defined at § 156.130(a)), the required contribution percentage by individuals for minimum essential coverage the Secretary may use to determine eligibility for hardship exemptions under section 5000A of the Code, and the assessable payments under sections 4980H(a) and 4980H(b). We believe that the proposed 2017 premium adjustment percentage of 13.25256291 percent is well within the parameters used in the modeling of the Affordable Care Act, and we do not expect that these 51 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. E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 18. Acceptance of Certain Third Party Payments proposed provisions will alter CBO’s March 2015 baseline estimates of the budget impact. 15. Stand-Alone Dental Plans In § 156.150, we propose increasing the annual limitation on cost sharing for stand-alone dental plans being certified by the Exchanges. We believe that the benefit of increasing the annual limit on cost sharing is that issuers would be able to offer consumers SADPs that provide preventive care without any cost sharing, similar to what is generally offered by SADPs in the large group market. This proposal may also decrease the likelihood of premium increases. 16. Meaningful Difference In § 156.298, we propose to remove health savings account eligibility and the individual coverage or enrollment group coverage criteria as options for meeting the meaningful difference standard. As we believe the health savings account eligibility criterion to overlap with cost-sharing criterion (that is, we believe that a plan that meets the meaningful difference standard for health savings account eligibility would also meet the standard under the costsharing criterion), we do not believe that removing this criterion will have any impact on issuers. Additionally, our records indicate that no self-only coverage plans were reviewed for meaningful difference in 2015 and none are offered for 2016 Open Enrollment. As such, we estimate that the impact of this proposed change is negligible. jstallworth on DSK7TPTVN1PROD with PROPOSALS 17. Patient Safety Standards The proposed next phase of patient safety standards requires QHP issuers participating in Exchanges to track hospital participation agreements with PSOs or other evidence-based patient safety initiatives. We believe this proposed requirement to verify that hospitals with greater than 50 beds use a patient safety evaluation tool and implement a comprehensive personcentered hospital discharge program would encourage continuous quality improvement among QHP issuers by strengthening system-wide efforts to reduce patient harm in a measurable way, improve health outcomes at lower costs, allow for flexibility and innovation in patient safety interventions and practices, and encourage meaningful health care quality improvements. We discuss the administrative costs associated with submitting this information in the Collection of Information section of this proposed rule. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 On March 19, 2014, we published in the Federal Register an interim final rule (IFR) with comment period titled, Patient Protection and Affordable Care Act; Third Party Payment of Qualified Health Plan Premiums (79 FR 15240). In § 156.1250, we propose to refine this rule to require individual market QHPs and SADPs to accept premium payments made by certain third parties. This rule proposes to clarify the circumstances in which individual market QHPs and SADPs must accept payments made by Ryan White HIV/ AIDS program; Federal and State government programs that provide premium and cost sharing support for specific individuals; and Indian tribes, tribal organizations, and urban Indian organizations. We do not believe these actions would impose any significant new costs on issuers because we assume that most issuers already accept such payments under our interim final rule. 19. Medical Loss Ratio In this proposed rule, we propose to amend the definition of unpaid claims reserves in § 158.103 and the requirements for reporting incurred claims in § 158.140(a) to utilize a 6month, rather than a 3-month, run-out period beginning with the 2015 reporting year. This proposed amendment would require incurred claims to be calculated as of June 30, rather than March 31, of the year following the reporting year. This proposed amendment would provide for a more accurate MLR and risk corridors calculation by reducing reliance on estimates. Some issuers overestimate their claims and liabilities, while others underestimate them. We estimate that this proposed provision would increase rebate payments from issuers to consumers by a net total of approximately $12 million. In addition, we are proposing to amend the risk corridors program requirements at § 153.530 to require issuers to true-up claims liabilities and reserves used to determine the allowable costs reported for the preceding benefit year to reflect the actual claims payments made through June 30 of the year following the benefit year. We estimate the impact of this proposal on the risk corridors program elsewhere in this RIA. Because risk corridors payments and charges are a component of the MLR and rebate calculation, the impact of this proposed provision on risk corridors payments and charges will affect MLR rebates to consumers. We estimate that this PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 75567 proposed provision would increase rebate payments from issuers to consumers by an estimated net total of $19 million for the 2015 MLR reporting year. D. Regulatory Alternatives Considered In developing the policies contained in this proposed rule, we considered numerous alternatives to the presented proposals. Below we discuss the key regulatory alternatives that we considered. Regarding the 2017 required contribution percentage, which establishes the threshold for spending on minimum essential health care required for an affordability exemption from the individual responsibility requirement, we considered continuing to use the per capita gross domestic product as the measure of income growth. However, a new measure of income growth, per capita personal income, became available for the first time last year as part of the National Health Expenditure’s projections, and includes not only participation in production but also transfer payments. We believe that this broader measure of personal income more accurately reflects individual income than GDP per capita. For proposed § 155.200(f), we considered a number of alternatives. We considered not codifying the SBE–FP model, and winding down use of the Federal platform by SBEs. This would have forced SBEs to find a way to perform all required Exchange eligibility and enrollment functions themselves, including the implementation of an Exchange technology platform, or else convert to FFEs. We made the proposal we did because we believe that it is technically feasible and will permit a number of SBEs to access the Federal government’s greater economies of scale. We also considered a more customized option, under which an SBE would be permitted to select from a menu of Federal services. While we are considering providing more flexibility to SBE–FPs in the future, at this point we do not have the operational ability to permit that level of customization. Finally, we considered alternatives under which issuers and other delegated and downstream entities in States with SBE–FPs would not be required to meet FFE standards, or HHS would not participate in enforcement against issuers violating those FFE rules. As discussed in this proposed rule, we believe that applying Federal standards to issuers and their downstream entities for SBE–FPs helps promote consistent minimum standards associated with HealthCare.gov. E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75568 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules Regarding the exemptions program, we considered maintaining the option under which individuals can receive certification of certain exemptions from the Exchange, rather than transitioning the process for obtaining those exemption types fully to the IRS. However, we believe that this approach contributes to confusion and unnecessarily creates additional hurdles for individuals claiming these exemptions. We also considered whether to cede other exemption types to the IRS, in addition to the exemptions for Indian status, members of health care sharing ministries, and incarceration. However, to minimize potential consumer confusion, we opted only to streamline the exemptions process and not to expand the scope of exemptions that the IRS may grant. We propose issuing hardship exemptions when a consumer shows their hardship is ongoing at the time of application. Hardship exemptions are issued for months within the current calendar year plus the next, plus the months before and after the hardship ends. When consumers approach the Exchange near the end of the calendar year, we typically can only grant them a hardship exemption for a few months. We believe the current approach may not give consumers sufficient time to seek coverage before their hardship exemption expires, and therefore proposed extending the length of the hardship exemption. Many enrollees eligible for a hardship exemption are currently facing significant life disruptions, and may need more time to find coverage. For employer choice in the FF– SHOPs, we considered offering an additional employer choice option that would permit an employer to select an actuarial value level of coverage, after which employees could choose from plans available at that level and at the level above it. Recognizing that small group market dynamics differ by State, we decided to seek comment on, but not propose this option at this time. We also considered requiring all SHOPs to offer these additional employer choice options, but instead opted to maintain State-based SHOPs’ flexibility under the current regulations, so that States can decide whether implementing additional employer choice options would be in the best interest of small group market consumers in their State. We considered requiring QHP issuers to offer standardized options as a condition of participation in the FFEs. However, we believe that markets and Exchanges may be at different stages of readiness for standardized options, and that the cost-sharing structure that HHS VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 specifies may not be well tailored for all States. Similarly, we believe that some issuers may have difficulty offering standardized options in the short run because of operational constraints. In developing proposed § 156.230, we considered waiting for the NAIC’s workgroup to complete its work on drafting a revised model act on network adequacy and not proposing changes to the network adequacy standard for 2017. As discussed in the preamble of the final rule for the HHS Notice of Benefit and Payment Parameters for 2016 (80 FR 10750), HHS had planned to await the results of the NAIC’s workgroup to develop a revised model act before proposing significant changes to network adequacy policy. However, since the NAIC workgroup has not completed its work, we have decided to proceed with proposing some concepts from the draft versions of the NAIC model act to strengthen network adequacy requirements, particularly for QHPs being offered in the FFEs. We propose these requirements to ensure certain consumer protections and standards are being provided to enrollees in 2017. As an alternative, we also considered proposing more concepts from the NAIC’s drafts of the model act in the area of network adequacy, such as requiring issuers to submit for review and approval an access plan and establishing requirements for what the access plan must include. However, we are cognizant of the burden on issuers to implement many policy changes in one year, especially when these changes affect issuers’ QHP certification applications. Therefore, we will continue to monitor the NAIC’s workgroup efforts to develop a model act on network adequacy, and will consider whether additional standards will be needed in future years. In § 156.230(f), regarding QHP enrollees in the FFE who receive an EHB from an out-of-network provider in an in-network setting, we considered an alternative under which all cost sharing, regardless of notification, would count towards the in-network annual limitation on cost sharing, or to accrue at in-network rates. However, we recognize that the issuer often has a limited ability to control the use of outof-network providers, and are wary of the impact of such a policy on premiums. In § 156.1110, we considered maintaining the current approach of aligning with Medicare hospital Conditions of Participation standards and not establishing further regulations at this time for QHP issuers to collect information, such as hospital PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 participation agreements with PSOs, to comply with new patient safety standards for plan years beginning on or after January 1, 2017. However, we decided to propose the policy in this proposed rule because we believe that strengthening patient safety standards and aligning with current, effective patient safety interventions will achieve greater impact for consumers, in terms of health care quality improvement and harm reduction, resulting in higher quality QHPs being offered in the Exchanges. Additionally, we considered proposing an approach that did not include establishing reasonable exceptions to the requirements for a QHP issuer that contracts with a hospital with greater than 50 beds to utilize a patient safety evaluation system and implement a mechanism for comprehensive person-centered hospital discharges, as described in section 1311(h)(1) of the Affordable Care Act. However, we determined that it is important to support national patient safety efforts, promote evidence-based patient safety interventions and allow for flexibility, innovation, and minimal burden for issuers and hospitals. E. Regulatory Flexibility Act The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), 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 standards 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 E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules 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. • Group health plans. We believe that health insurance issuers and group health plans would be classified under the North American Industry Classification System code 524114 (Direct Health and Medical Insurance Carriers). According to SBA size standards, entities with average annual receipts of $38.5 million or less would be considered small entities for these North American Industry Classification System codes. Issuers could possibly be classified in 621491 (HMO Medical Centers) and, if this is the case, the SBA size standard would be $32.5 million or less. In this proposed rule, we proposed standards for 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 50 employees, unless a State opts to provide that employers with from 1 to 100 employees are ‘‘small employers.’’ 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 a SHOP that are more restrictive than the current requirements on small businesses offering employer sponsored insurance. 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. Some of the entities that voluntarily act as Navigators and non-Navigator assistance personnel subject to § 155.215, or as designated certified application counselor organizations, might be small entities and could incur costs to comply with the provisions of this proposed rule. It should be noted that HHS, in its role as the operator of the FFEs, does not impose any fees on these entities for participating in their respective programs, nor are there fees VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 for taking the Federally required training or completing continuing education or recertification in FFEs. The cost burden related to our proposals about reaching vulnerable and underserved populations and providing post-enrollment and other assistance would apply to Navigators in all Exchanges. The costs associated with these proposals would generally be considered an allowable cost that would be covered by the Navigator grants for the FFEs, and these grant funds may be drawn down as the grantee incurs such costs. Depending upon applicable State law and how States with State Exchanges implement their Navigator grant programs, the same might be true in those States. Though it is very likely that many costs associated with these proposals would be covered by affected entities’ and individuals’ funding sources, HHS cannot guarantee that all such costs would be covered because of the possibility of budget limitations applicable to the FFEs in any given period, and because there may be variations in how State Exchanges implement their Navigator grant programs. The costs related to the proposed reporting requirement for designated certified application counselor organizations would be borne by those organizations, which do not receive funding from Exchanges for these services. The costs incurred by designated certified application counselor organizations for the reporting of performance metrics are expected to be low. Based on data from MLR annual report submissions for the 2014 MLR reporting year, approximately 118 out of 525 issuers of health insurance coverage nationwide had total premium revenue of $38.5 million or less. This estimate may overstate the actual number of small health insurance companies that may be affected, since almost 80 percent of these small companies belong to larger holding groups, and many if not all of these small companies are likely to have non-health lines of business that would result in their revenues exceeding $38.5 million. Only seven of these 118 potentially small entities, all of them part of larger holding groups, are estimated to experience an increase or decrease in the rebate amount under the proposed amendments to the MLR provisions of this proposed rule in part 158, including one entity that did not owe a rebate for the 2014 reporting year. Two additional entities may experience a small (less than 2.5 percent) change in their risk corridors payments and charges under the MLR provisions of this proposed rule. Based on data from PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 75569 the 2014 MLR and risk corridors annual report submissions, 20 of these 118 potentially small entities had risk corridors payments or charges for the 2014 benefit year. Only one of these entities is estimated to experience a decrease in its risk corridors payment under the proposed provisions in § 153.530(b)(2)(iv), with no impact on its rebate liability. Therefore, we do not expect the proposed provisions of this rule to affect a substantial number of small entities. 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 2015, that threshold is approximately $144 million. Although we have not been able to quantify all costs, 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 would 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 E:\FR\FM\02DEP2.SGM 02DEP2 75570 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules determining standards relating to health insurance that is offered in the individual and small group markets. For example, our proposal permitting a State to elect to utilize the Federal platform for enrollment and eligibility services may make certain SBEs more economically feasible, providing more options for States seeking to exercise the right to establish and operate n Exchange. 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. While 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. States will continue to license, monitor, and regulate agents and brokers, both inside and outside of Exchanges. All State laws related to agents and brokers, including State laws related to appointments, contractual relationships with issuers, licensing, marketing, conduct, and fraud will continue to apply. jstallworth on DSK7TPTVN1PROD with PROPOSALS 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 VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 been transmitted to Congress and the Comptroller for review. List of Subjects 45 CFR Parts 144, 146, and 147 Health care, Health insurance, Reporting and recordkeeping requirements. 45 CFR Part 153 Administrative practice and procedure, Health care, Health insurance, Health records, Organization and functions (Government agencies), Reporting and recordkeeping requirements. 45 CFR Part 154 Administrative practice and procedure, Claims, Health care, Health insurance, Penalties, Reporting and recordkeeping requirements. 45 CFR Part 155 Administrative practice and procedure, Health care, Health insurance, Reporting and recordkeeping requirements, State and local governments. 45 CFR Part 156 Administrative practice and procedure, Advertising, American Indian/Alaska Natives, Conflict of interest, Consumer protection, Costsharing reductions, Grant programshealth, Grants administration, Health care, Health insurance, Health maintenance organization (HMO), Health records, Hospitals, Individuals with disabilities, Loan programs-health, Medicaid, Organization and functions (Government agencies), Public assistance programs, Reporting and recordkeeping requirements, State and local governments, Sunshine Act, Technical assistance, Women, Youth. 45 CFR Part 158 Administrative practice and procedure, Claims, Health care, Health insurance, Penalties, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Department of Health and Human Services proposes to amend 45 CFR parts 144, 146, 147, 150, 153, 154, 155, 156, and 158 as set forth below. PART 144—REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE 2. Section 144.103 is amended by revising paragraph (1) of the definition of ‘‘Excepted benefits’’ and revising the definitions of ‘‘Large employer’’ and ‘‘Small employer’’ to read as follows: ■ § 144.103 Definitions. * * * * * Excepted benefits * * * (1) Group market provisions in 45 CFR part 146, subpart D, is defined in 45 CFR 146.145(b); and * * * * * Large employer means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year. A State may elect to define large employer by substituting ‘‘101 employees’’ for ‘‘51 employees.’’ In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a large employer is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year. * * * * * Small employer means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 50 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year. A State may elect to define small employer by substituting ‘‘100 employees’’ for ‘‘50 employees.’’ In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a small employer is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year. * * * * * PART 146—REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET 3. The authority citation for part 146 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. Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg–1 through 300gg–5, 300gg– 11 through 300gg–23, 300gg–91, and 300gg– 92). ■ ■ 1. The authority citation for part 144 continues to read as follows: PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 4. Section 146.150 is amended by— a. In paragraph (a) introductory text, removing the reference ‘‘paragraphs (c) E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules through (f)’’ and adding in its place the reference ‘‘paragraphs (c) through (g)’’. ■ b. Adding paragraph (g). The addition reads as follows: § 146.150 Guaranteed availability of coverage for employers in the small group market. * * * * * (g) Exception for discontinuing a particular product or all coverage. (1) If an issuer decides to discontinue offering a particular product or all coverage in the small group market in accordance with § 146.152, the issuer may between the time of providing the relevant notice and discontinuing the coverage — (i) Deny health insurance coverage in that product when the exception to guaranteed renewability of coverage related to discontinuing the particular product under § 146.152(c) applies. (ii) Deny health insurance coverage in the small group market when the exception to guaranteed renewability of coverage related to discontinuing all coverage under § 146.152(d) applies. (2) An issuer that denies coverage under this paragraph (g) must apply paragraph (g)(1) of this section uniformly to all small employers in the State consistent with applicable State law and without regard to the claims experience or any health-status related factor relating to those employers and their employees (or their respective dependents). (3) Nothing in this paragraph (g) relieves an issuer of its obligations with respect to existing policyholders, such as enrolling dependents under an applicable special enrollment period. * * * * * PART 147—HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND INDIVIDUAL HEALTH INSURANCE MARKETS § 147.104 Guaranteed availability of coverage. * 5. 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. 6. Section 147.102 is amended by revising paragraph (a)(1)(ii) to read as follows: ■ jstallworth on DSK7TPTVN1PROD with PROPOSALS § 147.102 Fair health insurance premiums. (a) * * * (1) * * * (ii) Rating area, as established in accordance with paragraph (b) of this section. For purposes of this paragraph (a), rating area is determined— (A) In the individual market, using the primary policyholder’s address. (B) In the small group market, using the group policyholder’s principal VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 business address. For purposes of this paragraph, principal business address means the principal business address registered with the State or, if a principal business address is not registered with the State, or is registered solely for purposes of service of process and is not a substantial worksite for the employer’s business, the business address within the State where the greatest number of employees of such employer works. If, for a network plan, the group policyholder’s principal business address is not within the service area of such plan, and the policyholder has employees who live, reside, or work within the service area, the principal business address for purposes of the network plan is deemed to be the business address within the plan’s service area where the greatest number of employees work as of the beginning of the plan year. If there is no such business address, the principal business address for purposes of the network plan is deemed to be an address within the rating area selected by the employer that reasonably reflects where the greatest number of employees within the plan’s service area live or reside as of the beginning of the plan year. * * * * * ■ 7. Section 147.104 is amended by— ■ a. In paragraph (a), removing the reference ‘‘paragraphs (b) through (d)’’ and adding in its place the reference ‘‘paragraphs (b) thorugh (e)’’. ■ b. Redesignating paragraphs (e) through (i) as paragraphs (f) through (j), respectively. ■ c. Adding paragraph (e). The addition reads as follows: * * * * (e) Exception for discontinuing a particular product or all coverage. (1) If an issuer decides to discontinue offering a particular product or all coverage in the large group, small group, or individual market in accordance with § 147.106, the issuer may between the time of providing the relevant notice and discontinuing the coverage— (i) Deny health insurance coverage in that product when the exception to guaranteed renewability of coverage related to discontinuing the particular product under § 147.106(c) applies. (ii) Deny health insurance coverage in that market when the exception to guaranteed renewability of coverage related to discontinuing all coverage under § 147.106(d) applies. (2) An issuer that denies coverage under this paragraph (e) must apply paragraph (e)(1) of this section PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 75571 uniformly to all employers or individuals in the large group, small group, or individual market, as applicable, in the State consistent with applicable State law and without regard to the claims experience or any healthstatus related factor relating to those individuals or employers and their employees (or their respective dependents). (3) Nothing in this paragraph (e) relieves an issuer from any of its obligations with respect to existing policyholders, such as enrolling dependents under an applicable special enrollment period. * * * * * ■ 8. Section 147.145 is amended by revising paragraph (b)(3) and adding paragraph (b)(4) to read as follows: § 147.145 Student health insurance coverage. * * * * * (b) * * * (3) Single risk pool. For plan years beginning on or after January 1, 2017, student health insurance coverage is subject to the index rating provisions of § 156.80(d) of this subchapter. For purposes of the preceding sentence, a health insurance issuer that offers student health insurance coverage may establish one or more separate risk pools for each institution of higher education, if the distinction between or among groups of students (or dependents of students) who form the risk pool is based on a bona fide school-related classification and not based on a health factor as described in § 146.121 of this subchapter. (4) Levels of coverage. The requirement to provide a specific level of coverage described in section 1302(d) of the Affordable Care Act does not apply to student health insurance coverage for plan years beginning on or after January 1, 2017. However, the benefits provided by such coverage must provide at least 60 percent actuarial value, as certified by a member of the American Academy of Actuaries using generally accepted actuarial principles. * * * * * PART 153—STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT 9. The authority citation for part 153 continues to read as follows: ■ Authority: Secs. 1311, 1321, 1341–1343, Pub. L. 111–148, 24 Stat. 119. 10. Section 153.405 is amended by revising paragraph (i) to read as follows: ■ E:\FR\FM\02DEP2.SGM 02DEP2 75572 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules § 153.405 Calculation of reinsurance contributions. § 153.510 Risk corridors establishment and payment methodology. (A) The sum of unpaid claims reserves and claims incurred but not reported, as set forth in §§ 158.103 and 158.140(a)(2) and (3) of this subchapter, that were reported on the MLR and Risk Corridors Annual Reporting Form for the year preceding the benefit year; and (B) The actual claims incurred during the year preceding the benefit year and paid between the valuation date of the unpaid claims reserves and liabilities described above and June 30 of the year following the benefit year. * * * * * ■ 13. Section 153.710 is amended by— ■ a. Removing paragraph (d). ■ b. Redesignating paragraphs (e) and (f) as paragraphs (d) and (e), respectively. ■ c. Revising newly redesignated paragraph (e). ■ d. Adding paragraph (f). ■ e. Revising paragraphs (g) introductory text, (g)(1) introductory text, (g)(1)(iii) and (iv), and (g)(2). ■ f. Adding paragraph (g)(3). The revisions and additions read as follows: * § 153.710 * * * * * (i) Audits. HHS or its designee may audit a contributing entity to assess its compliance with the requirements of this subpart. HHS or its designee may audit a third party administrator, administrative services-only contractor, or other third party who assists a contributing entity with its obligations under this subpart to assess compliance with the requirements of this subpart. A contributing entity that chooses to use a third party administrator, administrative services-only contractor, or other third party to assist with its obligations under this subpart must ensure that the third party administrator, administrative services-only contractor, or other third party cooperate with any audit under this section. ■ 11. Section 153.510 is amended by adding paragraph (g) to read as follows: * * * * (g) Adjustment to risk corridors payments and charges. If an issuer reported a certified estimate of 2014 cost-sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting Form that is lower than the actual value of cost-sharing reductions calculated under § 156.430(c) of this subchapter for the 2014 benefit year, HHS will make an adjustment to the amount of the issuer’s 2015 benefit year risk corridors payment or charge measured by the full difference between the certified estimate of 2014 cost-sharing reductions reported and the actual value of cost-sharing reductions provided as calculated under § 156.430(c) for the 2014 benefit year. ■ 12. Section 153.530 is amended by revising paragraphs (b)(2)(ii) and (iii) and adding paragraph (b)(2)(iv) to read as follows: § 153.530 Risk corridors data requirements. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (b) * * * (2) * * * (ii) Any reinsurance payments received by the issuer for the nongrandfathered health plans under the transitional reinsurance program established under subpart C of this part; (iii) A cost-sharing reduction amount equal to the amount of cost-sharing reductions for the benefit year as calculated under § 156.430(c) of this subchapter, to the extent not reimbursed to the provider furnishing the item or service. (iv) For the 2015 and later benefit years, any difference between— VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 Data requirements. * * * * * (e) Unresolved discrepancies. If a discrepancy first identified in a final dedicated distributed data environment report in accordance with paragraph (d)(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) of this subchapter. (f) Data sufficiency. If an issuer of a risk adjustment covered plan fails to provide sufficient required data, such that HHS cannot apply the applicable methodology to calculate the risk adjustment payment transfer amount for the risk adjustment covered plan in a timely or appropriate fashion, then HHS will assess a default risk adjustment charge under § 153.740(b). A default charge will be assessed under this paragraph no later than the date of the notification provided by HHS under § 153.310(e). If an issuer of a reinsurance eligible plan fails to provide data sufficient for HHS to calculate reinsurance payments, the issuer will forfeit reinsurance payments for claims it fails to submit. (1) Data quantity. An issuer of a risk adjustment covered plan or a reinsurance-eligible plan must provide, in a format and on a timeline specified by HHS, data on its total enrollment and PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 claims counts by market, which HHS may use in evaluating whether the issuer provided access in the dedicated distributed data environment to a sufficient quantity of data to meet reinsurance and risk adjustment data requirements. (2) Data quality. If, following the deadline for submission of data specified in § 153.730, HHS identifies an anomaly that would cause the data that a risk adjustment covered plan or a reinsurance-eligible plan made available through a dedicated data environment to fail HHS’s data quality thresholds, the issuer may, within 10 calendar days of receiving notification of the anomaly, submit an explanation of the anomaly for HHS to consider in determining whether the issuer met the reinsurance and risk adjustment data requirements. (g) Risk corridors and MLR reporting. Except as provided in paragraph (g)(3) of this section: (1) Notwithstanding any discrepancy report made under paragraph (d)(2) of this section, or any request for reconsideration under § 156.1220(a) of this subchapter with respect to any risk adjustment payment or charge, including an assessment of risk adjustment user fees; reinsurance payment; cost-sharing reduction 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 MLR programs: * * * * * (iii) A cost-sharing reduction amount equal to the actual amount of costsharing reductions for the benefit year as calculated under § 156.430(c) of this subchapter, to the extent not reimbursed to the provider furnishing the item or service; and (iv) For medical loss ratio reporting only, the risk corridors payment to be made or charge assessed by HHS under § 153.510. (2) An issuer must report any adjustment made or approved by HHS for any risk adjustment payment or charge, including an assessment of risk adjustment user fees; any reinsurance payment; any cost-sharing reduction payment or charge; or any risk corridors payment or charge; where such adjustment has not be accounted for in a prior MLR and Risk Corridor Annual Reporting Form, in the MLR and Risk Corridors Annual Reporting Form for the following reporting year. (3) In cases where HHS reasonably determines that the reporting instructions in paragraph (g)(1) or (2) of this section would lead to unfair or E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules misleading financial reporting, issuers must mitigate or correct their data submissions in a form and manner to be specified by HHS. ■ PART 154—HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND REVIEW REQUIREMENTS § 154.220 Timing of providing the rate filing justification. 14. The authority citation for part 154 continues to read as follows: ■ Authority: Section 2794 of the Public Health Service Act (42 U.S.C. 300gg–94). 15. Section 154.200 is amended by revising paragraph (c)(2) to read as follows: ■ § 154.200 review. Rate increases subject to * * * * * (c) * * * (2) For rates filed for single risk pool coverage beginning on or after January 1, 2017, the average increase, including premium rating factors described in § 147.102 of this subchapter, for all enrollees weighted by premium volume for any plan within the product meets or exceeds the applicable threshold. * * * * * ■ 16. Section 154.215 is amended by revising paragraphs (a) and (b) introductory text and removing and reserving paragraph (c) to read as follows: jstallworth on DSK7TPTVN1PROD with PROPOSALS § 154.215 Submission of rate filing justification. (a) A health insurance issuer must submit to CMS and to the applicable State (if the State accepts such submissions) the information specified below on a form and in a manner prescribed by the Secretary. (1) For all single risk pool coverage products, including new and discontinuing products, the Unified Rate Review Template, as described in paragraph (d) of this section; (2) For each single risk pool coverage product that includes a plan that is subject to a rate increase, regardless of the size of the increase, the Unified Rate Review Template and Actuarial Memorandum, as described in paragraph (f) of this section; (3) For each single risk pool coverage product that includes a plan with a rate increase that is subject to review under § 154.210, all parts of the Rate Filing Justification, as described in paragraph (b) of this section (b) A Rate Filing Justification includes one or more of the following: * * * * * (c) [Reserved] * * * VerDate Sep<11>2014 * * 13:28 Dec 01, 2015 Jkt 238001 17. Section 154.220 is amended by revising the introductory text and paragraphs (b) introductory text and (b)(1) to read as follows: A health insurance issuer must submit applicable sections of the Rate Filing Justification for all single risk pool coverage in the individual or small group market, as follows: * * * * * (b) For coverage effective on or after January 1, 2017, by the earlier of the following: (1) The date by which the State requires submission of a rate filing; or * * * * * ■ 18. Section 154.230 is amended by revising paragraph (c)(2)(i) to read as follows: § 154.230 Submission and posting of Final Justifications for unreasonable rate increases. * * * * * (c) * * * (2) * * * (i) The information made available to the public by CMS and described in § 154.215(h). * * * * * PART 155—EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED STANDARDS UNDER THE AFFORDABLE CARE ACT 19. The authority citation for part 155 continues 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 155.20 is amended by— a. In the definition of ‘‘Applicant’’, revising paragraph (2). ■ b. Adding the definition of ‘‘Federal platform agreement’’ in alphabetical order. ■ c. Revising the definitions of ‘‘Large employer’’ and ‘‘Small employer’’. The addition and revisions read as follows: ■ ■ § 155.20 Definitions. * * * * * Applicant * * * (2) For SHOP: (i) An employer seeking eligibility to purchase coverage through the SHOP; or (ii) An employer, employee, or a former employee seeking eligibility for enrollment in a QHP through the SHOP for himself or herself and, if the PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 75573 qualified employer offers dependent coverage through the SHOP, seeking eligibility to enroll his or her dependents in a QHP through the SHOP. * * * * * Federal platform agreement means an agreement between a State Exchange and HHS under which a State Exchange elects to rely on the Federal platform to carry out select Exchange functions. * * * * * Large employer means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year. In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a large employer is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year. A State may elect to define large employer by substituting ‘‘101 employees’’ for ‘‘51 employees.’’ The number of employees must be determined using the method set forth in section 4980H(c)(2) of the Code. * * * * * Small employer means, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least one but not more than 50 employees on business days during the preceding calendar year and who employs at least one employee on the first day of the plan year. In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a small employer is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year. A State may elect to define small employer by substituting ‘‘100 employees’’ for ‘‘50 employees.’’ The number of employees must be determined using the method set forth in section 4980H(c)(2) of the Code. * * * * * ■ 21. Section 155.106 is amended by— ■ a. Revising paragraphs (a) introductory text, (a)(2) and (3), and (b) introductory text. ■ b. Adding paragraphs (a)(4), (a)(5), and (c). The revisions and additions read as follows: E:\FR\FM\02DEP2.SGM 02DEP2 75574 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules jstallworth on DSK7TPTVN1PROD with PROPOSALS § 155.106 Election to operate an Exchange after 2014. (a) Election to operate an Exchange. Except as provided in paragraph (c) of this section, a State electing to seek approval of its Exchange must: * * * * * (2) Submit an Exchange Blueprint application for HHS approval at least 15 months prior to the date on which the Exchange proposes to begin open enrollment as a State Exchange; (3) Have in effect an approved, or conditionally approved, Exchange Blueprint and operational readiness assessment at least 14 months prior to the date on which the Exchange proposes to begin open enrollment as a State Exchange; (4) Develop a plan jointly with HHS to facilitate the transition to a State Exchange; and (5) If the open enrollment period for the year the State intends to begin operating an SBE has not been established, this deadline must be calculated based on the date open enrollment began or will begin in the year in which the State is submitting the Blueprint application. (b) Transition process for State Exchanges that cease operations. If a State intends to cease operation of its Exchange, HHS will operate the Exchange on behalf of the State. Therefore, a State that intends to cease operations of its Exchange must: * * * * * (c) Process for State Exchanges that seek to utilize the Federal platform for select functions. A State seeking approval as a State Exchange utilizing the Federal platform to support select functions through a Federal platform agreement under § 155.200(f) must: (1) If the State Exchange does not have a conditionally approved Exchange Blueprint application, submit one for HHS approval at least 3 months prior to the date on which the Exchange proposes to begin open enrollment as an SBE–FP; (2) If the State Exchange has a conditionally approved Exchange Blueprint application, submit any significant changes to that application for HHS approval, in accordance with § 155.105(e), at least 3 months prior to the date on which the Exchange proposes to begin open enrollment as an SBE–FP; (3) Have in effect an approved, or conditionally approved, Exchange Blueprint and operational readiness assessment at least 2 months prior to the date on which the Exchange proposes to begin open enrollment as an SBE–FP, in accordance with HHS rules, as a State Exchange utilizing the Federal platform; VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (4) Upon approval, or conditional approval, of the Exchange Blueprint, execute a Federal platform agreement prior to the start of the open enrollment period for which the State Exchange desires to begin utilizing the Federal platform; and (5) Coordinate with HHS on a transition plan to be developed jointly between HHS and the State. ■ 22. Section 155.170 is amended by revising paragraphs (a)(2), (a)(3), and (c)(2)(iii) to read as follows: § 155.170 Additional required benefits. (a) * * * (2) A benefit required by State action taking place on or before December 31, 2011 is considered an EHB. A benefit required by State action taking place on or after January 1, 2012, other than for purposes of compliance with Federal requirements, is considered in addition to the essential health benefits. (3) The State will identify which State-required benefits are in addition to the EHB. * * * * * (c) * * * (2) * * * (iii) Reported to the State. ■ 23. Section 155.200 is amended by revising paragraph (a) and adding paragraph (f) to read as follows: § 155.200 Functions of an Exchange. (a) General requirements. An Exchange must perform the functions described in this subpart and in subparts D, E, F, G, H, K, M, and O of this part unless the State is approved to operate only a SHOP by HHS under § 155.100(a)(2), in which case the Exchange operated by the State must perform the functions described in subpart H of this part and all applicable provisions of other subparts referenced in that subpart. In a State that is approved to operate only a SHOP, the individual market Exchange operated by HHS in that State will perform the functions described in this subpart and in subparts D, E, F, G, K, M, and O of this part. * * * * * (f) Requirements for State Exchanges on the Federal platform. (1) A State that receives approval or conditional approval to operate a State Exchange on the Federal platform under § 155.106(c) may meet its obligations under paragraph (a) of this section by relying on Federal services that the Federal government agrees to provide under a Federal platform agreement. (2) A State Exchange on the Federal platform must establish and oversee requirements for its issuers that are no less strict than the following PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 requirements that are applied to Federally-facilitated Exchange issuers: (i) Data submission requirements under § 156.122(d)(2) of this subchapter; (ii) Network adequacy standards under § 156.230 of this subchapter; (iii) Essential community providers standards under § 156.235 of this subchapter; (iv) Meaningful difference standards under § 156.298 of this subchapter; (v) Changes of ownership of issuers requirements under § 156.330 of this subchapter; (vi) QHP issuer compliance and compliance of delegated or downstream entities requirements under § 156.340(a)(4) of this subchapter; and (vii) Casework requirements under § 156.1010 of this subchapter. (3) If a State is not substantially enforcing any requirement listed under § 155.200(f)(2) of this subchapter with respect to a QHP issuer or plan in a State-based Exchange on the Federal platform, HHS may enforce that requirement directly against the issuer or plan by means of plan suppression under § 156.815 of this subchapter. ■ 24. Section 155.205 is amended by— ■ a. Revising paragraphs (a) and (d)(1). ■ b. Adding paragraph (b)(7). The addition and revisions read as follows: § 155.205 Consumer assistance tools and programs of an Exchange. (a) Call center. The Exchange must provide for operation of a toll-free call center that addresses the needs of consumers requesting assistance and meets the requirements outlined in paragraphs (c)(1), (c)(2)(i), and (c)(3) of this section, unless it enters into a Federal platform agreement through which it relies on HHS to carry out call center functions, in which case the Exchange must provide at a minimum a toll-free telephone hotline to respond to requests for assistance. (b) * * * (7) A State-based Exchange on the Federal platform must at a minimum maintain an informational Internet Web site. * * * * * (d) * * * (1) The Exchange must have a consumer assistance function that meets the standards in paragraph (c) of this section, including the Navigator program described in § 155.210. Any individual providing such consumer assistance must be trained regarding QHP options, insurance affordability programs, eligibility, and benefits rules and regulations governing all insurance affordability programs operated in the State, as implemented in the State, prior E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules to providing such assistance or the outreach and education activities specified in paragraph (e) of this section. * * * * * ■ 25. Section 155.210 is amended by— ■ a. Revising paragraphs (b)(2)(iii) and (iv). ■ b. Adding paragraphs (b)(2)(v), (vi), (vii), and (viii). ■ c. Revising paragraph (d)(6). ■ d. In paragraph (e)(7), removing the period at the end of the paragraph and adding a semicolon in its place. ■ e. Adding paragraphs (e)(8) and (9). The revisions and additions read as follows: § 155.210 Navigator program standards. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (b) * * * (2) * * * (iii) The range of QHP options and insurance affordability programs; (iv) The privacy and security standards applicable under § 155.260; (v) The process of filing Exchange eligibility appeals; (vi) General concepts regarding exemptions from the requirement to maintain minimum essential coverage and from the individual shared responsibility payment, including the application process for exemptions granted through the Exchange, and IRS resources on exemptions; (vii) The Exchange-related components of the premium tax credit reconciliation process and IRS resources on this process; and (viii) Basic concepts related to health coverage and how to use it. * * * * * (d) * * * (6) Provide to an applicant or potential enrollee gifts of any value as an inducement for enrollment. The value of gifts provided to applicants and potential enrollees for purposes other than as an inducement for enrollment must not exceed nominal value, either individually or in the aggregate, when provided to that individual during a single encounter. For purposes of this paragraph (d)(6), the term gifts includes gift items, gift cards, cash cards, cash, and promotional items that market or promote the products or services of a third party, but does not include the reimbursement of legitimate expenses incurred by a consumer in an effort to receive Exchange application assistance, such as travel or postage expenses. * * * * * (e) * * * (8) Provide targeted assistance to serve underserved or vulnerable populations, as identified by the VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 Exchange, within the Exchange service area. (i) In a Federally-facilitated Exchange, this paragraph (e)(8) will apply beginning with the Navigator grant application process for Navigator grants awarded in 2018. The Federallyfacilitated Exchange will identify populations as vulnerable or underserved that are disproportionately without access to coverage or care, or that are at a greater risk for poor health outcomes, in the funding opportunity announcement for its Navigator grants, and applicants for those grants will have an opportunity to propose additional vulnerable or underserved populations in their applications for the Federallyfacilitated Exchange’s approval. (ii) [Reserved] (9) Provide information and assistance with— (i) The process of filing Exchange eligibility appeals; (ii) Understanding and applying for exemptions from the individual shared responsibility requirement that are granted through the Exchange, understanding the availability of exemptions from the requirement to maintain minimum essential coverage and from the individual shared responsibility payment that are claimed through the tax filing process and how to apply for them, and understanding the availability of IRS resources on this topic; (iii) Understanding the Exchangerelated components of the premium tax credit reconciliation process, and the availability of IRS resources on this process; (iv) Understanding basic concepts related to health coverage and how to use it; and (v) Referrals to licensed tax advisers, tax preparers, or other resources for assistance with tax preparation and tax advice related to consumer questions about the Exchange application and enrollment process, exemptions from the requirement to maintain minimum essential coverage and from the individual shared responsibility requirement, and premium tax credit reconciliations. * * * * * ■ 26. Section 155.215 is amended by revising paragraph (b)(1)(i) to read as follows: PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 75575 § 155.215 Standards applicable to Navigators and Non-Navigator Assistance Personnel carrying out consumer assistance functions under §§ 155.205(d) and (e) and 155.210 in a Federally-facilitated Exchange and to Non-Navigator Assistance Personnel funded through an Exchange Establishment Grant. * * * * * (b) * * * (1) * * * (i) Obtain certification by the Exchange prior to carrying out any consumer assistance functions or outreach and education activities under § 155.205(d) and (e) or § 155.210; * * * * * ■ 27. Section 155.220 is amended by— ■ a. Revising paragraph (c)(1), (f)(4), (g)(2)(ii), (g)(3), and (g)(4); ■ b. Adding paragraphs (g)(5), (j), (k), and (l). The revisions and additions read as follows: § 155.220 Ability of States to permit agents and brokers to assist qualified individuals, qualified employers, or qualified employees enrolling in QHPs. * * * * * (c) * * * (1) The agent or broker ensures the applicant’s completion of an eligibility verification and enrollment application through the Exchange Internet Web site or an Exchange approved web service using the FFE single streamline application; * * * * * (f) * * * (4) When termination of the agreement between the agent or broker and the Exchange under paragraph (d) of this section becomes effective under paragraph (f) of this section, the agent or broker will no longer be registered with the Federally-facilitated Exchanges, or be permitted to assist with or facilitate enrollment of qualified individuals, qualified employers or qualified employees in coverage in a manner that constitutes enrollment through a Federally-facilitated Exchange, or be permitted to assist individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs. The agent’s or broker’s agreement with the Exchange under § 155.260(b) will also be terminated through the termination for cause process set forth in that agreement. The agent or broker must continue to protect any personally identifiable information accessed during the term of either of these agreements with the Federally-facilitated Exchange. (g) * * * (2) * * * (ii) Any term or condition of the agreement with the Federally-facilitated E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75576 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules Exchange required under paragraph (d) of this section, or any term or condition of the agreement with the Federallyfacilitated Exchange required under § 155.260(b); * * * * * (3) HHS will notify the agent or broker of the specific finding of noncompliance or pattern of noncompliance made under paragraph (g)(1) of this section, and after 30 days from the date of the notice, may terminate the agreement for cause if the matter is not resolved to the satisfaction of HHS. (4) After the period in paragraph (g)(3) of this section has elapsed and the agreement under paragraph (d) of this section is terminated, the agent or broker will no longer be registered with the Federally-facilitated Exchanges, or be permitted to assist with or facilitate enrollment of a qualified individual, qualified employer, or qualified employee in coverage in a manner that constitutes enrollment through a Federally-facilitated Exchange, or be permitted to assist individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs. The agent’s or broker’s agreement with the Exchange under § 155.260(b) will also be terminated through the process set forth in that agreement. The agent or broker must continue to protect any personally identifiable information accessed during the term of either of these agreements with a Federally-facilitated Exchange. (5) In cases involving potential fraud or abusive conduct— (i)(A) If HHS reasonably suspects that an agent or broker may have engaged in fraud or abusive conduct using personally identifiable information of an Exchange enrollee or applicant, or in connection with an Exchange enrollment or application, HHS may temporarily suspend the agent’s or broker’s agreements required under paragraph (d) of this section and under § 155.260(b) for up to 90 calendar days. The suspension will be effective starting on the date of the notice that HHS sends to the agent or broker advising of the suspension under this paragraph (g)(5)(i). (B) The agent or broker may submit evidence in a form and manner to be specified by HHS, to rebut the allegation during this 90-day period. If the agent or broker fails to submit such evidence during the suspension period, HHS may terminate the agent’s or broker’s agreements required under paragraph (d) of this section and under § 155.260(b) for cause under paragraph (g)(5)(ii) of this section. (ii) If HHS reasonably confirms the credibility of an allegation that an agent VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 or broker engaged in fraud or abusive conduct (or is notified by a State or law enforcement authority of the State or law enforcement authority’s finding or determination of fraud or behavior that would constitute abusive conduct) using personally identifiable information of Exchange enrollees or applicants, or in connection with an Exchange enrollment or application, HHS will terminate the agent’s or broker’s agreements required under paragraph (d) of this section and under § 155.260(b) for cause. The termination will be effective starting on the date of the notice that HHS sends to the agent or broker advising of the termination of the agreements under this paragraph (g)(5)(ii). (iii) During the suspension period under paragraph (g)(5)(i) of this section and following termination of the agreements under paragraph (g)(5)(ii) of this section, the agent or broker will not be registered with the Federallyfacilitated Exchanges, or be permitted to assist with or facilitate enrollment of qualified individuals, qualified employers, or qualified employees in coverage in a manner that constitutes enrollment through a Federallyfacilitated Exchange, or be permitted to assist individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs. In the case of termination under paragraph (g)(5)(ii) of this section, the agent’s or broker’s agreement with the Exchange under § 155.260(b) will also be terminated as of the date of the notice. The agent or broker must continue to protect any personally identifiable information accessed during the term of either of these agreements with a Federally-facilitated Exchange. * * * * * (j) Federally-facilitated Exchange standards of conduct. (1) An agent or broker that assists with or facilitates enrollment of qualified individuals, qualified employers, or qualified employees, in coverage in a manner that constitutes enrollment through a Federally-facilitated Exchange, or assists individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs sold through a Federally-facilitated Exchange, must— (i) Have executed the required agreement under paragraph § 155.260(b); (ii) Be registered with the Federallyfacilitated Exchanges under paragraph (d)(1) of this section; and (iii) Comply with the standards of conduct in paragraph (j)(2) of this section. PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 (2) Standards of conduct. An individual or entity described in paragraph (j)(1) of this section must— (i) Provide consumers with correct information, without omission of material fact, regarding the Federallyfacilitated Exchanges, QHPs offered through the Federally-facilitated Exchanges, and insurance affordability programs, and refrain from marketing or conduct that is misleading or coercive, or discriminates based on race, color, national origin, disability, age, sex, gender identity, or sexual orientation; (ii) Provide the Federally-facilitated Exchanges with correct information under section 1411(b) of the Affordable Care Act; (iii) Obtain the consent of the individual, employer, or employee prior to assisting with or facilitating enrollment through a Federallyfacilitated Exchange, or assisting the individual in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs; (iv) Protect consumer personally identifiable information according to § 155.260(b)(3) and the agreement described in § 155.260(b)(2); and (v) Comply with all applicable Federal and State laws and regulations. (3) An agent or broker will be considered to be in compliance with paragraphs (j)(2)(i) and (ii) of this section if HHS determines that there was a reasonable cause for the failure to provide correct information and that the agent or broker acted in good faith. (k) Penalties other than termination of the agreement with the Federallyfacilitated Exchanges. (1) If HHS determines that an agent or broker has failed to comply with the requirements of this section, in addition to any other available remedies, that agent or broker— (i) May be denied the right to enter into agreements with the Federallyfacilitated Exchanges in future years; and (ii) May be subject to civil money penalties as described in § 155.285. (2) HHS will notify the agent or broker of the proposed imposition of penalties under paragraph (k)(1)(i) of this section and, after 30 calendar days from the date of the notice, may impose the penalty if the agent or broker has not requested a reconsideration under paragraph (h) of this section. The proposed imposition of penalties under paragraph (k)(1)(ii) of this section will follow the process outlined under § 155.285. (l) Application to State-Based Exchanges using a Federal platform. An agent or broker who enrolls qualified individuals, qualified employers, or E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules qualified employees in coverage in a manner that constitutes enrollment through an State-Based Exchange using a Federal platform, or assists individual market consumers with submission of applications for advance payments of the premium tax credit and cost-sharing reductions through an State-Based Exchange using a Federal platform must comply with all applicable Federallyfacilitated Exchange standards in this section. ■ 28. Section 155.222 is amended by— ■ a. Revising the section heading. ■ b. Revising paragraphs (a)(1), (a)(2), (b)(1) through (5), and (d). ■ c. Adding paragraph (b)(6). The revisions and addition read as follows: jstallworth on DSK7TPTVN1PROD with PROPOSALS § 155.222 Standards for HHS-approved vendors of Federally-facilitated Exchange training for agents and brokers. (a) * * * (1) A vendor must be approved by HHS, in a form and manner to be determined by HHS, to have its training program recognized for agents and brokers assisting with or facilitating enrollment in individual market or SHOP coverage through the Federallyfacilitated Exchanges consistent with § 155.220. (2) As part of the training program, the vendor must require agents and brokers to provide identifying information and successfully complete the required curriculum. * * * * * (b) * * * (1) Submit a complete and accurate application by the deadline established by HHS, which includes demonstration of prior experience with successfully conducting online training, as well as providing technical support to a large customer base. (2) Adhere to HHS specifications for content, format, and delivery of training, which includes offering continuing education units (CEUs) for at least five States in which a Federally-facilitated Exchange or State-Based Exchange using a Federal platform is operating. (3) Collect, store, and share with HHS training completion data from agent and broker users of the vendor’s training in a manner, format, and frequency specified by HHS, and protect all data from agent and broker users of the vendor’s training in accordance with applicable privacy and security requirements. (4) Execute an agreement with HHS, in a form and manner to be determined by HHS, which requires the vendor to comply with applicable HHS guidelines for implementing the training and interfacing with HHS data systems, and the use of all data collected. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (5) Permit any individual who holds a valid State license or equivalent State authority to sell health insurance products to access the vendor’s training. (6) Provide technical support to agent and broker users of the vendor’s training as specified by HHS. * * * * * (d) Monitoring. HHS may periodically monitor and audit vendors approved under this subpart, and their records related to the training functions described in this section, to ensure ongoing compliance with the standards in paragraph (b) of this section. If HHS determines that an HHS-approved vendor is not in compliance with the standards required in paragraph (b) of this section, the vendor may be removed from the approved list described in paragraph (c) of this section and may be required by HHS to cease performing the training functions described under this subpart. * * * * * ■ 29. Section 155.225 is amended by adding paragraph (b)(1)(iii) and revising paragraph (g)(4) to read as follows: § 155.225 Certified application counselors. * * * * * (b) * * * (1) * * * (iii) Provides data and information to the Exchange regarding the number and performance of its certified application counselors and regarding the consumer assistance provided by its certified application counselors, upon request, in the form and manner specified by the Exchange. Beginning in January 2017, in a Federally-facilitated Exchange, organizations designated by the Exchange must submit monthly reports that include, at a minimum, data regarding the number of individuals who have been certified by the organization; the total number of consumers who received application and enrollment assistance from the organization; and of that number, the number of consumers who received assistance in applying for and selecting a QHP, enrolling in a QHP, or applying for Medicaid or CHIP. * * * * * (g) * * * (4) Provide to an applicant or potential enrollee gifts of any value as an inducement for enrollment. The value of gifts provided to applicants and potential enrollees for purposes other than as an inducement for enrollment must not exceed nominal value, either individually or in the aggregate, when provided to that individual during a single encounter. For purposes of this paragraph (g)(4), the term gifts includes PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 75577 gift items, gift cards, cash cards, cash, and promotional items that market or promote the products or services of a third party, but does not include the reimbursement of legitimate expenses incurred by a consumer in an effort to receive Exchange application assistance, such as travel or postage expenses. * * * * * ■ 30. Section 155.260 is amended by revising paragraph (a)(1) introductory text to read as follows: § 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 § 155.300; 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: * * * * * ■ 31. Section 155.280 is amended by revising paragraph (a) to read as follows: § 155.280 Oversight and monitoring of privacy and security requirements. (a) General. HHS will oversee and monitor the Federally-facilitated Exchanges, State-based Exchanges on the Federal platform, and non-Exchange entities required to comply with the privacy and security standards established and implemented by a Federally-facilitated Exchange pursuant to § 155.260 for compliance with those standards. HHS will oversee and monitor State Exchanges for compliance with the standards State Exchanges establish and implement pursuant to § 155.260. State Exchanges will oversee and monitor non-Exchange entities required to comply with the privacy and security standards established and implemented by a State Exchange in accordance to § 155.260. * * * * * ■ 32. Section 155.302 is amended by revising paragraph (a)(1) to read as follows: § 155.302 Options for conducting eligibility determinations. (a) * * * (1) Directly, through contracting arrangements in accordance with § 155.110(a), or as a State-based Exchange on the Federal platform through a Federal platform agreement under which HHS carries out eligibility E:\FR\FM\02DEP2.SGM 02DEP2 75578 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules determinations and other requirements contained within this subpart; or * * * * * ■ 33. Section 155.310 is amended by revising paragraphs (h) introductory text and (h)(2) to read as follows: § 155.310 Eligibility process. * * * * * (h) Notice of an employee’s receipt of advance payments of the premium tax credit and cost-sharing reductions to an employer. The Exchange must notify an employer that an employee has been determined eligible for advance payments of the premium tax credit and cost-sharing reductions and has enrolled in a qualified health plan through the Exchange within a reasonable timeframe following a determination that the employee is eligible for advance payments of the premium tax credit and cost-sharing reductions in accordance with § 155.305(g) or § 155.350(a) and enrollment by the employee in a qualified health plan through the Exchange. Such notice must: * * * * * (2) Indicate that the employee has been determined eligible advance payments of the premium tax credit and cost-sharing reductions and has enrolled in a qualified health plan through the Exchange; * * * * * ■ 34. Section 155.320 is amended by— ■ a. Revising paragraphs (c)(3)(vi) and (d)(3). ■ b. Adding paragraph (d)(4). The revisions and addition read as follows: § 155.320 Verification process related to eligibility for insurance affordability programs. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (c) * * * (3) * * * (vi) Alternate verification process for decreases in annual household income estimates and for situations in which tax return data is unavailable. If a tax filer qualifies for an alternate verification process based on the requirements specified in paragraph (c)(3)(iv) of this section and the applicant’s attestation to projected annual household income, as described in paragraph (c)(3)(ii)(B) of this section, is more than a reasonable threshold below the annual household income computed in accordance with paragraph (c)(3)(ii)(A) of this section, or if data described in paragraph (c)(1)(i) of this section is unavailable, the Exchange must attempt to verify the applicant’s attestation of the tax filer’s projected annual household income by following the procedures specified in paragraph VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (c)(3)(vi)(A) through (G) of this section. For the purposes of this paragraph (c)(3)(vi), a reasonable threshold is established by the Exchange in guidance and approved by HHS, but must not be less than10 percent, and can also include a threshold dollar amount. The Exchange’s threshold is subject to approval by HHS. * * * * * (d) * * * (3) Verification procedures. (i) If an applicant’s attestation is not reasonably compatible with the information obtained by the Exchange as specified in paragraphs (d)(2)(i) through (iii) of this section, other information provided by the application filer, or other information in the records of the Exchange, the Exchange must follow the procedures specified in § 155.315(f). (ii) Except as specified in paragraph (d)(3)(i) or (d)(4)(i) of this section, the Exchange must accept an applicant’s attestation regarding the verification specified in paragraph (d) of this section without further verification. (4) Alternate procedures. For any benefit year for which it does not reasonably expect to obtain sufficient verification data as described in paragraphs (d)(2)(i) through (iii) of this section, the Exchange must follow the procedures specified in paragraph (d)(4)(i) of this section or, for benefit years 2016 and 2017, the Exchange may follow the procedures specified in paragraph (d)(4)(ii) of this section. For purposes of this paragraph (d)(4), the Exchange reasonably expects to obtain sufficient verification data for any benefit year when, for the benefit year, the Exchange is able to obtain data about enrollment in and eligibility for qualifying coverage in an eligible employer-sponsored plan from at least one electronic data source that is available to the Exchange and that has been approved by HHS, based on evidence showing that the data source is sufficiently current, accurate, and minimizes administrative burden, as described under paragraph (d)(2)(i) of this section. (i) Select a statistically significant random sample of applicants for whom the Exchange does not have any of the information specified in paragraphs (d)(2)(i) through (iii) of this section and— (A) Provide notice to the applicant indicating that the Exchange will be contacting any employer identified on the application for the applicant and the members of his or her household, as defined in 26 CFR 1.36B–1(d), to verify whether the applicant is enrolled in an eligible employer-sponsored plan or is PO 00000 Frm 00092 Fmt 4701 Sfmt 4702 eligible for qualifying coverage in an eligible employer-sponsored plan for the benefit year for which coverage is requested; (B) Proceed with all other elements of the eligibility determination using the applicant’s attestation, and provide eligibility for enrollment in a QHP to the extent that an applicant is otherwise qualified; (C) Ensure that advance payments of the premium tax credit and cost-sharing reductions are provided on behalf of an applicant who is otherwise qualified for such payments and reductions, as described in § 155.305, if the tax filer attests to the Exchange that he or she understands that any advance payments of the premium tax credit paid on his or her behalf are subject to reconciliation; (D) Make reasonable attempts to contact any employer identified on the application for the applicant and the members of his or her household, as defined in 26 CFR 1.36B–1(d), to verify whether the applicant is enrolled in an eligible employer-sponsored plan or is eligible for qualifying coverage in an eligible employer-sponsored plan for the benefit year for which coverage is requested; (E) If the Exchange receives any information from an employer relevant to the applicant’s enrollment in an eligible employer-sponsored plan or eligibility for qualifying coverage in an eligible employer-sponsored plan, the Exchange must determine the applicant’s eligibility based on such information and in accordance with the effective dates specified in § 155.330(f), and if such information changes his or her eligibility determination, notify the applicant and his or her employer or employers of such determination in accordance with the notice requirements specified in § 155.310(g) and (h); (F) If, after a period of 90 days from the date on which the notice described in paragraph (d)(4)(i)(A) of this section is sent to the applicant, the Exchange is unable to obtain the necessary information from an employer, the Exchange must determine the applicant’s eligibility based on his or her attestation regarding coverage provided by that employer. (G) To carry out the process described in paragraph (d)(4)(i) of this section, the Exchange must only disclose an individual’s information to an employer to the extent necessary for the employer to identify the employee. (ii) Establish an alternative process approved by HHS. * * * * * ■ 35. Section 155.335 is amended by revising paragraph (j) to read as follows: E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules § 155.335 Annual eligibility redetermination. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (j) Re-enrollment. If an enrollee remains eligible for enrollment in a QHP through the Exchange upon annual redetermination and— (1) QHPs under the product under which the QHP in which he or she is enrolled remain available through the Exchange for renewal, consistent with § 147.106 of this subchapter, such enrollee will have his or her enrollment through the Exchange in a QHP under that product renewed, unless he or she terminates coverage, including termination of coverage in connection with voluntarily selecting a different QHP, in accordance with § 155.430. The Exchange will ensure that re-enrollment in coverage under this paragraph (j)(1) occurs under the same product (except as provided in paragraph (j)(1)(iii)(A) of this section) in which the enrollee was enrolled, as follows: (i) The enrollee’s coverage will be renewed in the same plan as the enrollee’s current QHP, unless the current QHP is not available through the Exchange. (ii) If the enrollee’s current QHP is not available through the Exchange, the enrollee’s coverage will be renewed in a QHP at the same metal level as the enrollee’s current QHP within the same product. (iii) If the enrollee’s current QHP is not available through the Exchange and the enrollee’s product no longer includes a QHP at the same metal level as the enrollee’s current QHP and— (A) The enrollee’s current QHP is a silver level plan, the enrollee will be reenrolled in a silver level QHP under a different product offered by the same QHP issuer that is most similar to the enrollee’s current product. If no such silver level QHP is available for enrollment through the Exchange, the enrollee’s coverage will be renewed in a QHP that is one metal level higher or lower than the enrollee’s current QHP under the same product; (B) The enrollee’s current QHP is not a silver level plan, the enrollee’s coverage will be renewed in a QHP that is one metal level higher or lower than the enrollee’s current QHP under the same product; or (iv) If the enrollee’s current QHP is not available through the Exchange and the enrollee’s product no longer includes a QHP that is at the same metal level as, or one metal level higher or lower than the enrollee’s current QHP, the enrollee’s coverage will be renewed in any other QHP offered under the product in which the enrollee’s current VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 QHP is offered in which the enrollee is eligible to enroll. (2) No plans under the product under which the QHP in which he or she is enrolled are available through the Exchange for renewal, consistent with § 147.106 of this subchapter, such enrollee may be enrolled in a QHP under a different product offered by the same QHP issuer, to the extent permitted by applicable State law, unless he or she terminates coverage, including termination of coverage in connection with voluntarily selecting a different QHP, in accordance with § 155.430. The Exchange will ensure that re-enrollment in coverage under this paragraph (j)(2) occurs as follows: (i) The enrollee will be re-enrolled in a QHP at the same metal level as the enrollee’s current QHP in the product offered by the same issuer that is the most similar to the enrollee’s current product; (ii) If the issuer does not offer another QHP at the same metal level as the enrollee’s current QHP, the enrollee will be re-enrolled in a QHP that is one metal level higher or lower than the enrollee’s current QHP in the product offered by the same issuer through the Exchange that is the most similar to the enrollee’s current product; or (iii) If the issuer does not offer another QHP through the Exchange at the same metal level as, or one metal level higher or lower than the enrollee’s current QHP, the enrollee will be re-enrolled in any other QHP offered by the same issuer in which the enrollee is eligible to enroll. * * * * * ■ 36. Section 155.400 is amended by revising paragraph (e) and adding paragraphs (g) and (h) to read as follows: § 155.400 Enrollment of qualified individuals into QHPs. * * * * * (e) Premium payment. Exchanges may, and the Federally-facilitated Exchange will, require payment of a binder payment to effectuate an enrollment or to add coverage retroactively to an already effectuated enrollment. Exchanges may, and the Federally-facilitated Exchange will, establish a standard policy for setting premium payment deadlines: (1) In a Federally-facilitated Exchange: (i) For prospective coverage to be effectuated under regular coverage effective dates, as provided for in §§ 155.410(f) and 155.420(b)(1), the binder payment must consist of the first month’s premium, and the deadline for making the binder payment must be no earlier than the coverage effective date, PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 75579 and no later than 30 calendar days from the coverage effective date; (ii) For prospective coverage to be effectuated under special effective dates, as provided for in § 155.420(b)(2), the binder payment must consist of the first month’s premium, and the deadline for making the binder payment must be no earlier than the coverage effective date and no later than 30 calendar days from the date the issuer receives the enrollment transaction or the coverage effective date, whichever is later. (iii) For coverage to be effectuated under retroactive effective dates, as provided for in § 155.420(b)(2), the binder payment must consist of the premium due for all months of retroactive coverage through the first prospective month of coverage, and, the deadline for making the binder payment must be no earlier than 30 calendar days from the date the issuer receives the enrollment transaction. If only the premium for one month of coverage is paid, only prospective coverage should be effectuated, in accordance with regular effective dates. (2) [Reserved] * * * * * (g) Premium payment threshold. Exchanges may, and the Federallyfacilitated Exchange will, allow issuers to implement, a premium payment threshold policy under which issuers can consider enrollees to have paid all amounts due if the enrollees pay an amount sufficient to maintain a percentage of total premium paid out of the total premium owed equal to or greater than a level prescribed by the issuer, provided that the level is reasonable and that the level and the policy are applied in a uniform manner to all enrollees. If an applicant or enrollee satisfies the premium payment threshold policy, the issuer may: (1) Effectuate an enrollment based on payment of the binder payment under paragraph (e) of this section. (2) Avoid triggering a grace period for non-payment of premium, as described by § 156.270(d) of this subchapter or a grace period governed by State rules. (3) Avoid terminating the enrollment for non-payment of premium as, described by §§ 156.270(g) of this subchapter and 155.430(b)(2)(ii)(A) and(B). (h) Requirements. A State Exchange may rely on HHS to carry out the requirements of this section and other requirements contained within this subpart E through a Federal platform agreement. ■ 37. Section 155.410 is amended by revising paragraphs (e)(2) and (f)(2) to read as follows: E:\FR\FM\02DEP2.SGM 02DEP2 75580 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules § 155.410 Initial and annual open enrollment periods. * * * * * (e) * * * (2) For the benefit years beginning on January 1, 2016 and on January 1, 2017, the annual open enrollment period begins on November 1 of the calendar year preceding the benefit year, and extends through January 31 of the benefit year. (f) * * * (2) For the benefit years beginning on January 1, 2016 and on January 1, 2017, the Exchange must ensure that coverage is effective— (i) January 1 for QHP selections received by the Exchange on or before December 15 of the calendar year preceding the benefit year. (ii) February 1 for QHP selections received by the Exchange from December 16 of the calendar year preceding the benefit year through January 15 of the benefit year. (iii) March 1 for QHP selections received by the Exchange from January 16 through January 31 of the benefit year. * * * * * ■ 38. Section 155.430 is amended by— ■ a. Adding paragraph (b)(1)(iv). ■ b. Revising paragraphs (b)(2)(ii)(A). ■ c. Redesignating paragraph (b)(2)(vi) as paragraph (b)(2)(vii). ■ d. Adding paragraphs (b)(2)(vi) and (d)(9), (10), and (11) The additions and revision read as follows: § 155.430 Termination of Exchange enrollment or coverage. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (b) * * * (1) * * * (iv) The Exchange must permit an enrollee to retroactively terminate or cancel his or her coverage or enrollment in a QHP in the following circumstances: (A) The enrollee demonstrates to the Exchange that he or she attempted to terminate his or her coverage or enrollment in a QHP and experienced a technical error that did not allow the enrollee to terminate his or her coverage or enrollment through the Exchange, and requests retroactive termination within 60 days after he or she discovered the technical error. (B) The enrollee demonstrates to the Exchange that his or her enrollment in a QHP through the Exchange was unintentional, inadvertent, or erroneous and was the result of the error or misconduct of an officer, employee, or agent of the Exchange or HHS, its instrumentalities, or a non-Exchange entity providing enrollment assistance VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 or conducting enrollment activities. Such enrollee must request cancellation within 60 days of discovering the unintentional, inadvertent, or erroneous enrollment. For purposes of this paragraph (b)(1)(iv)(B), misconduct includes the failure to comply with applicable standards under this part, part 156 of this subchapter, or other applicable Federal or State requirements as determined by the Exchange. (C) The enrollee was enrolled in a QHP without his or her knowledge or consent due to the fraudulent activity of any third party, including third parties who have no connection with the Exchange, and requests cancellation within 60 days of discovering of the fraudulent enrollment. (2) * * * (ii) * * * (A) The exhaustion of the 3-month grace period, as described in § 156.270(d) and (g) of this subchapter, required for enrollees, who when first failing to timely pay premiums, are receiving advance payments of the premium tax credit; * * * * * (vi) The enrollee was enrolled in a QHP due to fraudulent activity, including fraudulent activity by a third party with no connection with the Exchange. * * * * * (d) * * * (9) In case of a retroactive termination in accordance with paragraph (b)(1)(iv)(A) of this section, the termination date will be no sooner than 14 days after the date that the enrollee can demonstrate he or she contacted the Exchange to terminate his or her coverage or enrollment through the Exchange, unless the issuer agrees to an earlier effective date as set forth in paragraph (d)(2)(iii) of this section. (10) In case of a retroactive cancellation or termination in accordance with paragraph (b)(1)(iv)(B) or (C) of this section, the cancellation date or termination date will be the original coverage effective date or a later date, as determined appropriate by the Exchange, based on the circumstances of the cancellation or termination. (11) In the case of cancellation in accordance with paragraph (b)(2)(vi) of this section, the Exchange may cancel the enrollee’s enrollment upon its determination that the enrollment was performed fraudulently and following reasonable notice to the enrollee (where possible). The termination date will be the original coverage effective date. * * * * * ■ 39. Section 155.505 is amended by adding paragraphs (b)(1)(iii) and (b)(5) PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 and revising paragraph (b)(4) to read as follows: § 155.505 General eligibility appeals requirements. * * * * * (b) * * * (1) * * * (iii) A determination of eligibility for an enrollment period, made in accordance with § 155.305(b); * * * * * (4) A denial of a request to vacate dismissal made by a State Exchange appeals entity in accordance with § 155.530(d)(2), made under paragraph (c)(2)(i) of this section; and (5) An appeal decision issued by a State Exchange appeals entity in accordance with § 155.545(b), consistent with § 155.520(c). * * * * * ■ 40. Section 155.510 is amended by revising paragraph (a)(1) to read as follows: § 155.510 Appeals coordination. (a) * * * (1) Minimize burden on appellants, including not asking the appellant to provide duplicative information or documentation that he or she already provided to an agency administering an insurance affordability program or eligibility appeals process, unless the appeals entity, Exchange, or agency does not have access to the information or documentation and cannot reasonably obtain it; * * * * * ■ 41. Section 155.520 is amended by adding paragraph (d)(2)(i)(D) to read as follows: § 155.520 Appeal requests. * * * * * (d) * * * (2) * * * (i) * * * (D) That, in the event the appeal request is not valid due to failure to submit by the date determined under paragraph (b) or (c) of this section, as applicable, the appeal request may be considered valid if the applicant or enrollee sufficiently demonstrates within a reasonable timeframe determined by the appeals entity that failure to timely submit was due to exceptional circumstances and should not preclude the appeal. * * * * * ■ 42. Section 155.530 is amended by revising paragraph (a)(4) to read as follows: § 155.530 Dismissals. (a) * * * (4) Dies while the appeal is pending, except if the executor, administrator, or E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules other duly authorized representative of the estate requests to continue the appeal. * * * * * ■ 43. Section 155.535 is amended by revising paragraphs (a) introductory text and (b) to read as follows: § 155.535 Informal resolution and hearing requirements. (a) Informal resolution. The HHS appeals process will provide an opportunity for informal resolution and a hearing in accordance with the requirements of this section. A State Exchange appeals entity may also provide an informal resolution process prior to a hearing. Any information resolution process must meet the following requirements: * * * * * (b) Notice of hearing. When a hearing is scheduled, the appeals entity must send written notice to the appellant of the date, time, and location or format of the hearing no later than 15 days prior to the hearing date unless— (1) The appellant requests an earlier hearing date; or (2) A hearing date sooner than 15 days is necessary to process an expedited appeal, as described in § 155.540(a), and the appeals entity has contacted the appellant to schedule a hearing on a mutually agreed upon date, time, and location or format. * * * * * ■ 44. Section 155.545 is amended by revising paragraphs (b)(1) and (c)(1)(i) and (ii) to read as follows: § 155.545 Appeal decisions. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (b) * * * (1) Must issue written notice of the appeal decision to the appellant within 90 days of the date an appeal request under § 155.520(b) or (c) is received, as administratively feasible. * * * * * (c) * * * (1) * * * (i) Prospectively, on the first day of the month following the date of the notice of appeal decision, or consistent with § 155.330(f)(2), (3), (4), or (5), if applicable; or (ii) Retroactively, to the coverage effective date the appellant did receive or would have received if the appellant had enrolled in coverage under the incorrect eligibility determination that is the subject of the appeal, at the option of the appellant. * * * * * ■ 45. Section 155.555 is amended by revising paragraphs (e)(1) introductory text and (l) to read as follows: VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 § 155.555 Employer appeals process. * * * * * (e) * * * (1) Upon receipt of a valid appeal request under this section, or upon receipt of the notice under paragraph (d)(1)(iii) of this section, the Exchange must promptly transmit via secure electronic interface to the appeals entity— * * * * * (l) Implementation of the appeal decision. After receipt of the notice under paragraph (k)(3) of this section, if the appeal decision affects the employee’s eligibility, the Exchange must promptly: (1) Redetermine the employee’s eligibility and the eligibility of the employee’s household members, if applicable, in accordance with the standards specified in § 155.305; or (2) Notify the employee of the requirement to report changes in eligibility as described in § 155.330(b)(1). * * * * * ■ 46. Section 155.605 is amended by: ■ a. In paragraph (b), removing the reference ‘‘paragraphs (c)(2), (f)(2), and (g) of this section’’ and adding in its place the reference ‘‘paragraphs (c)(2) and (d) of this section’’; ■ b. Removing paragraphs (d), (e) and (f); ■ c. Redesignating paragraph (g) as paragraph (d); ■ d. Revising newly redesignated paragraph (d); and ■ c. Adding paragraph (e). The revision and addition read as follows: § 155.605 Eligibility standards for exemptions. * * * * * (d) Hardship—(1) General. The Exchange must grant a hardship exemption to an applicant eligible for an exemption for at least the month before, the month or months during which, and the month after a specific event or circumstance, if the Exchange determines that the applicant has suffered a hardship in relation to his or her ability to obtain coverage because they experienced one or more of the events or circumstances listed in paragraph (d)(1)(i) through (iii) or (d)(2) of this section. Notwithstanding the length of the hardship, any hardship exemption granted pursuant to this paragraph (d) may be granted for a maximum period that is not to exceed the month before the event or circumstance and the remainder of the calendar year during which the hardship commenced, plus the next calendar year. PO 00000 Frm 00095 Fmt 4701 Sfmt 4702 75581 (i) He or she experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan; (ii) The expense of purchasing a qualified health plan would have caused him or her to experience serious deprivation of food, shelter, clothing or other necessities; or (iii) He or she has experienced other circumstances that prevented him or her from obtaining coverage under a qualified health plan. (2) Examples of events and circumstances for which the Exchange must grant a hardship exemption to an applicant based on paragraph (d)(1) of this section include: (i) Individuals that the Exchange determines are homeless. (ii) Individuals who have been evicted or facing eviction or foreclosure. (iii) Individuals who have received a shut-off notice from a utility company. (iv) Individuals who have experienced domestic violence. (v) Individuals who have experienced the death of a family member. (vi) Individuals who have experienced a fire, flood or other nature or human-caused disaster that caused substantial damage to your property. (vii) Individuals who have filed for bankruptcy. (viii) Individuals who had medical bills which resulted in substantial debt (ix) Individuals who experienced unexpected increases in necessary expenses due to caring for an ill, disabled or aging family member. (x) Individuals who are seeking categorical Medicaid eligibility under section 1902(f) of the Act for ‘‘209(b)’’ States (codified at 42 CFR 435.121). (xi) Individuals who are seeking Medicaid coverage provided to medically needy individuals under section 1902(a)(10)(C) of the Social Security Act 42 U.S.C. 1396(a)(10)(C) that is not recognized as governmentsponsored minimum essential coverage (MEC) under IRS regulations or HHS regulations or guidance. (xii) Individuals who are enrolled in Medicaid coverage provided to a pregnant women that is not recognized as government-sponsored MEC under IRS regulations or HHS regulations or guidance. (xiii) Individuals who are enrolled in CHIP coverage provided to an unborn child that includes comprehensive prenatal care for the pregnant mother. (xiv) Individuals who are eligible for enrollment in a qualified health plan E:\FR\FM\02DEP2.SGM 02DEP2 jstallworth on DSK7TPTVN1PROD with PROPOSALS 75582 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules (QHP) through the Exchange, lower costs on the individual’s monthly premiums or cost-sharing reductions for a time period when the individual was not enrolled in a QHP through the Exchange as a result of an eligibility appeals decision. (3) The hardship event or circumstance described under paragraph (d)(1) or (2) of this section must have occurred within 3 years of the date the applicant submits an application to the Exchange under § 155.610, except in the case of applicants who are or who were homeless or experienced domestic violence. (i) The date of submission of an application means the date of receipt of the application by the Exchange via the channels available for the submission of an application, as described in § 155.610(d) or the date the application was signed by the submitter. (ii) [Reserved] (4) Lack of affordable coverage based on projected income. The Exchange must determine an applicant eligible for an exemption for a month or months during which he or she, or another individual the applicant attests will be included in the applicant’s family, as defined in 26 CFR 1.36B–1(d), is unable to afford coverage in accordance with the standards specified in section 5000A(e)(1) of the Code, provided that— (i) Eligibility for this exemption is based on projected annual household income; (ii) An eligible employer-sponsored plan is only considered under paragraphs (d)(4)(iii) and (iv) of this section if it meets the minimum value standard described in § 156.145 of this subchapter. (iii) For an individual who is eligible to purchase coverage under an eligible employer-sponsored plan, the Exchange determines the required contribution for coverage such that— (A) An individual who uses tobacco is treated as not earning any premium incentive related to participation in a wellness program designed to prevent or reduce tobacco use that is offered by an eligible employer-sponsored plan; (B) Wellness incentives offered by an eligible employer-sponsored plan that do not relate to tobacco use are treated as not earned; (C) In the case of an employee who is eligible to purchase coverage under an eligible employer-sponsored plan sponsored by the employee’s employer, the required contribution is the portion of the annual premium that the employee would pay (whether through salary reduction or otherwise) for the lowest cost self-only coverage. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (D) In the case of an individual who is eligible to purchase coverage under an eligible employer-sponsored plan as a member of the employee’s family, as defined in 26 CFR 1.36B–1(d), the required contribution is the portion of the annual premium that the employee would pay (whether through salary reduction or otherwise) for the lowest cost family coverage that would cover the employee and all other individuals who are included in the employee’s family who have not otherwise been granted an exemption through the Exchange. (iv) For an individual who is ineligible to purchase coverage under an eligible employer-sponsored plan, the Exchange determines the required contribution for coverage in accordance with section 5000A(e)(1)(B)(ii) of the Code, inclusive of all members of the family, as defined in 26 CFR 1.36B–1(d), who have not otherwise been granted an exemption through the Exchange and who are not treated as eligible to purchase coverage under an eligible employer-sponsored plan, in accordance with paragraph (d)(4)(ii) of this section; and (v) The applicant applies for this exemption prior to the last date on which he or she could enroll in a QHP through the Exchange for the month or months of a calendar year for which the exemption is requested. (vi) The Exchange must make an exemption in this category available prospectively, and provide it for all remaining months in a coverage year, notwithstanding any change in an individual’s circumstances. (5) Ineligible for Medicaid based on a State’s decision not to expand. The Exchange must determine an applicant eligible for an exemption for a calendar year if he or she would be determined ineligible for Medicaid for one or more months during the benefit year solely as a result of a State not implementing section 2001(a) of the Affordable Care Act. (e) Eligibility for an exemption through the IRS. Hardship exemptions in this paragraph can be claimed on a Federal income tax return without obtaining an exemption certificate number. The IRS may allow an individual to claim the hardship exemptions described in this paragraph (e) without requiring an exemption certificate number from the Exchange. (1) Filing threshold. The IRS may allow an applicant to claim an exemption specified in HHS Guidance published September 18, 2014, entitled, Shared Responsibility Guidance—Filing Threshold Hardship Exemption,’’ and in IRS Notice 2014–76, section B. PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 (2) Self-only coverage in an eligible employer-sponsored plan. The IRS may allow an applicant to claim an exemption specified in HHS Guidance published November 21, 2014, entitled, ‘‘Guidance on Hardship Exemptions for Persons Meeting Certain Criteria,’’ and in IRS Notice 2014–76, section A. (3) Eligible for services through an Indian health care provider. The IRS may allow an applicant to claim the exemption specified in HHS Guidance published September 18, 2014, entitled, ‘‘Shared Responsibility Guidance— Exemption for Individuals Eligible for Services through an Indian Health Care Provider,’’ and in IRS Notice 2014–76, section E. (4) Ineligible for Medicaid based on a State’s decision not to expand. The IRS may allow an applicant to claim the exemption specified in HHS Guidance published November 21, 2014, entitled, ‘‘Guidance on Hardship Exemptions for Persons Meeting Certain Criteria,’’ and in IRS Notice 2014–76, section F. ■ 47. Section 155.610 is amended by revising paragraph (h)(1) and adding paragraph (k) to read as follows: § 155.610 Eligibility process for exemptions. * * * * * (h) * * * (1) Except for the exemptions described in § 155.605(c) and (d), after December 31 of a given calendar year, the Exchange may decline to accept an application for an exemption that is available retrospectively for months for such calendar year, and must provide information to individuals regarding how to claim an exemption through the tax filing process. * * * * * (k) Incomplete application. (1) If an applicant submits an application that does not include sufficient information for the Exchange to conduct a determination for eligibility of an exemption the Exchange must— (i) Provide notice to the applicant indicating that information necessary to complete an eligibility determination is missing, specifying the missing information, and providing instructions on how to provide the missing information; and (ii) Provide the applicant with a period of no less than 10 and no more than 90 days, in the reasonable discretion of the Exchange, from the date on which the notice described in paragraph (k)(1) of this section is sent to the applicant to provide the information needed to complete the application to the Exchange; and (iii) Not proceed with the applicant’s eligibility determination during the E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules period described in paragraph (k)(2) of this section. (2) If the Exchange does not receive the requested information within the time allotted in paragraph (k)(1)(ii) of this section, the Exchange must notify the applicant in writing that the Exchange cannot process the application and provide appeal rights to the applicant. ■ 48. Section 155.615 is amended by■ a. Removing paragraphs (c), (d), and (e). ■ b. Redesignating paragraphs (f), (g), (h), (i), (j), and (k) as paragraphs (c), (d), (e), (f), (g), and (h), respectively. ■ c. Revising newly redesignated paragraph (c)(1). ■ d. Removing newly redesignated paragraph (c)(3). ■ e. Further redesignating newly redesignated paragraph (c)(2) as paragraph (c)(3). ■ f. Adding paragraph (c)(2). The revision and addition read as follows: § 155.615 Verification process related to eligibility for exemptions. * * * * * (c) Verification related to exemption for hardship—(1) In general. For any applicant who requests an exemption based on hardship, except for the hardship exemptions described in § 155.605(d)(3), the Exchange must verify whether he or she has experienced the hardship to which he or she is attesting. (2) Hardship. If the hardshipqualifying event or circumstance in § 155.605(d)(1) began more than 3 years prior to the date the exemption application was submitted, as specified in § 155.605(d)(3)(i), and the event or circumstance continued beyond the initial 3-year period, the Exchange must verify the applicant continued to experience the hardship to which he or she is attesting during a period that is within 3 years from the date of the exemption application submitted under § 155.605(d)(1). * * * * * ■ 49. Section 155.625 is amended by revising paragraphs (a)(2) and (b) to read as follows: jstallworth on DSK7TPTVN1PROD with PROPOSALS § 155.625 Options for conducting eligibility determinations for exemptions. (a) * * * (2) By use of the HHS service under paragraph (b) of this section. (b) Use of HHS service. Notwithstanding the requirements of this subpart, the Exchange may adopt an exemption eligibility determination made by HHS. ■ 50. Section 155.705 is amended by: VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 a. Adding paragraphs (b)(3)(viii), (ix), and (x). ■ b. In paragraph (b)(4)(ii)(B), removing the semicolon and adding a colon in its place. ■ c. Adding paragraph (b)(4)(ii)(B)(1) and adding and reserving paragraph (b)(4)(ii)(B)(2). ■ d. Revising paragraphs (b)(4)(ii)(C)(2) and (b)(11)(ii)(A), (B), and (C). ■ e. Removing paragraphs (b)(11)(ii)(D) and (E). The revisions and additions read as follows: ■ § 155.705 Functions of a SHOP. * * * * * (b) * * * (3) * * * (viii) For plan years beginning on or after January 1, 2017, a Federallyfacilitated SHOP will provide a qualified employer a choice of three methods to make QHPs available to qualified employees and their dependents: (A) The employer may choose a level of coverage as described in paragraph (b)(2) of this section; (B) The employer may choose a single QHP; or (C) The employer may offer its qualified employees a choice of all QHPs offered through a Federallyfacilitated SHOP by a single issuer across all available levels of coverage, as described in section 1302(d)(1) of the Affordable Care Act and implemented in § 156.140(b) of this subchapter. (ix) For plan years beginning on or after January 1, 2017, a Federallyfacilitated SHOP will provide a qualified employer a choice of three 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 a Federally-facilitated SHOP at a level of coverage as described in § 156.150(b)(2) of this subchapter; or (C) The employer may offer its qualified employees a choice of all plans offered through a Federallyfacilitated SHOP by a single issuer across all available levels of coverage, as described in § 156.150(b)(2) of this subchapter. (x) States operating as a State-based Exchange utilizing the Federal platform for SHOP enrollment functions will have the same employer choice models available as States with a Federallyfacilitated SHOP. (4) * * * (ii) * * * PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 75583 (B) * * * (1) In a Federally-facilitated SHOP, payment for the group’s first month of coverage must be received by the premium aggregation services vendor on or before the 20th day of the month prior to the month that coverage begins. (2) [Reserved] (C) * * * (2) The number of days for which coverage is being provided in the month described in paragraph (b)(4)(ii)(C)(1) of this section. * * * * * (11) * * * (ii) * * * (A) When the employer offers a single plan to qualified employees, the employer must use a fixed contribution methodology under which the employer contributes a fixed percentage of the plan’s premium for each qualified employee and, if applicable, for each dependent of a qualified employee. A tobacco surcharge, if applicable, will be applied after the employer’s contribution is applied to the premium. (B) When the employer offers a choice of plans to qualified employees, the employer may use a fixed contribution methodology or a reference plan contribution methodology. Under the fixed contribution methodology, the employer contributes a fixed percentage of the premiums for each qualified employee and, if applicable, for each dependent of a qualified employee, across all plans in which any qualified employee, and, if applicable, any dependent of a qualified employee, is enrolled. Under the reference plan contribution methodology, the employer will select a plan from within the level of coverage offered as described in paragraphs (b)(2) and (3) of this section to serve as a reference plan on which contributions will be based, and then will define a percentage contribution toward premiums under the reference plan; the resulting contribution amounts under the reference plan will be applied toward any plan in which a qualified employee or, if applicable, any dependent of a qualified employee, is enrolled, up to the lesser of the contribution amount or the total amount of any premium for the selected plan before application of a tobacco surcharge, if applicable. A tobacco surcharge, if applicable, will be applied after the employer’s contribution is applied to the premium. (C) The employer will define a percentage contribution toward premiums for employee-only coverage and, if dependent coverage is offered, a percentage contribution toward premiums for dependent coverage. To E:\FR\FM\02DEP2.SGM 02DEP2 75584 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules the extent permitted by other applicable law, for plan years beginning on or after January 1, 2015, a 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. * * * * * ■ 51. Section 155.715 is amended by revising paragraph (g)(1) to read as follows: § 155.715 Eligibility determination process for SHOP. * * * * * (g) * * * (1) Each QHP terminates the enrollment through the SHOP of the employer’s enrollees enrolled in a QHP through the SHOP; and * * * * * ■ 52. Section 155.725 is amended by revising paragraphs (c), (e), (h)(2), (i)(1) introductory text, and (j)(2)(i) to read as follows: § 155.725 Enrollment periods under SHOP. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (c) Annual employer election period. The SHOP must provide qualified employers with a standard election period prior to the completion of the employer’s plan year and before the annual employee open enrollment period, in which the qualified employer may change its participation in the SHOP for the next plan year, including— (1) The method by which the qualified employer makes QHPs available to qualified employees pursuant to § 155.705(b)(2) and (3); (2) The employer contribution towards the premium cost of coverage; (3) The level of coverage offered to qualified employees as described in § 155.705(b)(2) and (3); and (4) The QHP or QHPs offered to qualified employees in accordance with § 155.705. * * * * * (e) Annual employee open enrollment period. (1) The SHOP must establish a standardized annual open enrollment period for qualified employees prior to the completion of the applicable qualified employer’s plan year and after that employer’s annual election period. (2) Qualified employers in a Federally-facilitated SHOP must provide qualified employees with an VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 annual open enrollment period of at least one week. * * * * * (h) * * * (2) For a group enrollment received by the Federally-facilitated SHOP from a qualified employer at the time of an initial group enrollment or renewal: (i) Between the first and fifteenth day of any month, the Federally-facilitated SHOP must ensure a coverage effective date of the first day of the following month unless the employer opts for a later effective date within a quarter for which small group market rates are available. (ii) Between the 16th and last day of any month, the Federally-facilitated SHOP must ensure a coverage effective date of the first day of the second following month unless the employer opts for a later effective date within a quarter for which small group market rates are available. * * * * * (i) * * * (1) If a qualified employee enrolled in a QHP through the SHOP remains eligible for enrollment through the SHOP in coverage offered by the same qualified employer, the SHOP may provide for a process under which the employee will remain in the QHP selected the previous year, unless— * * * * * (j) * * * (2) * * * (i) Experiences an event described in § 155.420(d)(1) (other than paragraph (d)(1)(ii)), or experiences an event described in § 155.420(d)(2), (4), (5), (7), (8), or (9); * * * * * ■ 53. Section 155.735 is amended by revising paragraphs (c)(2) introductory text and (d)(2) to read as follows: § 155.735 Termination of SHOP enrollment or coverage. * * * * * (c) * * * (2) In an FF–SHOP, for premium payments other than payments for the first month of coverage— * * * * * (d) * * * (2) In the FF–SHOP, termination is effective: (i) In the case of a termination in accordance with paragraphs (d)(1)(i), (ii), (iii), and (v) of this section, termination is effective on the last day of the month in which the Federallyfacilitated SHOP receives notice of the event described in paragraph (d)(1)(i), (ii), (iii), or (v) of this section. (ii) In the case of a termination in accordance with paragraph (d)(1)(iv) of PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 this section, the last day of coverage in an enrollee’s prior QHP is the day before the effective date of coverage in his or her new QHP, including for any retroactive enrollments effectuated under § 155.420(b)(2). (iii) The FF–SHOP will send qualified employees a notice notifying them in advance of a child dependent’s loss of eligibility for dependent child coverage under their plan because of age. The notice will be sent 90 days in advance of the date when the dependent enrollee would lose eligibility for dependent child coverage. The enrollee will also receive a separate termination notice when coverage is terminated, under § 155.735(g). * * * * * ■ 54. Section 155.740 is amended by revising paragraphs (c)(2), (d)(2), and (l)(3) to read as follows: § 155.740 SHOP employer and employee eligibility appeals requirements. * * * * * (c) * * * (2) A failure by the SHOP to provide a timely eligibility determination or a timely notice of an eligibility determination in accordance with § 155.715(e). (d) * * * (2) A failure by the SHOP to provide a timely eligibility determination or a timely notice of an eligibility determination in accordance with § 155.715(f). * * * * * (l) * * * (3) Be effective as follows: (i) If an employer is found eligible under the decision, then at the employer’s option, the effective date of coverage or enrollment through the SHOP under the decision can either be made retroactive to the effective date of coverage or enrollment through the SHOP that the employer would have had if the employer had been correctly determined eligible, or prospective to the first day of the month following the date of the notice of the appeal decision. (ii) If an employee is found eligible under the decision, then at the employee’s option, the effective date of coverage or enrollment through the SHOP under the decision can either be made effective retroactive to the effective date of coverage or enrollment through the SHOP that the employee would have had if the employee had been correctly determined eligible, or prospective to the first day of the month following the date of the notice of the appeal decision. (iii) If the employer or employee is found ineligible under the decision, then the decision is effective on the first E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules day of the month following the date of the notice of the appeal decision. * * * * * PART 156—HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES 55. The authority citation for part 156 continues to read as follows: ■ Authority: Title I of the Affordable Care Act, sections 1301–1304, 1311–1313, 1321– 1322, 1324, 1334, 1342–1343, 1401–1402, 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). 56. Section 156.20 is amended by adding a definition of ‘‘Standardized option’’ in alphabetical order to read as follows: ■ § 156.20 Definitions. * * * * * Standardized option means a QHP with a standardized cost-sharing structure specified by HHS and that is offered for sale through an individual market Federally-facilitated Exchange. ■ 57. Section 156.50 amended by revising paragraph (c) to read as follows: § 156.50 Financial support. jstallworth on DSK7TPTVN1PROD with PROPOSALS * * * * * (c) Requirement for Federallyfacilitated Exchange user fee. (1) To support the functions of Federallyfacilitated Exchanges, a participating issuer offering a plan through a Federally-facilitated Exchange must remit a user fee to HHS each month, in the time frame and manner established by HHS, equal to the product of the monthly user fee rate specified in the annual HHS notice of benefit and payment parameters for Federallyfacilitated Exchanges for the applicable benefit year and the monthly premium charged by the issuer for each policy under the plan where enrollment is through a Federally-facilitated Exchange. (2) To support the functions of Statebased Exchanges on the Federal platform, a participating issuer offering a plan through a State-based Exchange that elects to utilize the Federal Exchange platform for certain Exchange functions described in § 155.200 of this subchapter, as specified in a Federal platform agreement, must remit a user fee to HHS, in the timeframe and manner established by HHS, equal to the product of the sum of the monthly user fee rate specified in the annual HHS notice of benefit and payment parameters for State-based Exchanges VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 that use the Federal platform for the applicable benefit year plus any additional user fee rate that HHS will collect on behalf of the Sate-based Exchange, multiplied by the monthly premium charged by the issuer for each policy under the plan where enrollment is through the State-based Exchange on the Federal platform. * * * * * ■ 58. Section 156.80 is amended by revising paragraph (d)(3)(ii) to read as follows: § 156.80 Single risk pool. * * * * * (d) * * * (3) * * * (ii) A health insurance issuer in the small group market (not including a merged market) may establish index rates and make the marketwide adjustments under paragraph (d)(1) of this section, and make the plan-level adjustments under paragraph (d)(2) of this section, no more frequently than quarterly. Any changes to rates must have effective dates of January 1, April 1, July 1, or October 1. Such rates may only apply to coverage issued or renewed on or after the rate effective date and will apply for the entire plan year of the group health plan. * * * * * ■ 59. Section 156.135 is amended by revising paragraph (g) to read as follows: § 156.135 AV calculation for determining level of coverage. * * * * * (g) Updates to the AV Calculator. HHS will update the AV Calculator annually for material changes that may include costs, plan designs, the standard population, developments in the function and operation of the AV Calculator and other actuarially relevant factors. ■ 60. Section 156.150 is amended by adding paragraphs (a)(1) and (2), (c), and (d) to read as follows: § 156.150 Application to stand-alone dental plans inside the Exchange. (a) * * * (1) For plan years beginning after 2016, for one covered child—the dollar limit applicable to a stand-alone dental plan for one covered child specified in this paragraph (a) increased by an amount equal to the product of that amount and the quotient of consumer price index for dental services for the year 2 years prior to the benefit year, divided by the consumer price index for dental services for 2016. (2) For plan years after 2016, for two or more covered children—twice the PO 00000 Frm 00099 Fmt 4701 Sfmt 4702 75585 dollar limit for one child described in paragraph (a)(1) of this section. * * * * * (c) Consumer price index for dental services defined. The consumer price index for dental services is a subcomponent of the US Department of Labor’s Bureau of Labor Statistics Consumer Price Index specific to dental services. (d) Increments of cost sharing increases. Any increase in the annual dollar limits described in paragraph (a)(1) of this section that does not result in a multiple of 25 dollars will be rounded down, to the next lowest multiple of 25 dollars. ■ 61. Section 156.230 is amended by adding (d), (e), and (f) to read as follows. § 156.230 Network adequacy standards. * * * * * (d) Minimum threshold. A QHP in a Federally-facilitated Exchange meets the standard under paragraph (a)(2) of this section if its network is determined adequate under the following standards: (1) In a State that implements an acceptable quantifiable network adequacy metric commonly used in the health insurance industry to measure network adequacy, under that metric; or (2) In any other State, under the Federal time and distance standard, based on minimum number of providers and average time and distance to those providers. QHPs that cannot meet the time and distance standard established by HHS may satisfy this requirement by reasonably justifying variances from this standard based on such factors as the availability of providers and variables reflected in local patterns of care. (e) Provider transitions. A QHP issuer in a Federally-facilitated Exchange must— (1) Make a good faith effort to provide written notice of discontinuation of a provider 30 days prior to the effective date of the change or otherwise as soon as practicable, to enrollees who are patients seen on a regular basis by the provider or who receive primary care from the provider whose contract is being discontinued, irrespective of whether the contract is being discontinued due to a termination for cause or without cause, or due to a nonrenewal; (2) In cases where a provider is terminated without cause, allow an enrollee in active treatment to continue treatment until the treatment is complete or for 90 days, whichever is shorter, at in-network cost-sharing rates. (i) For the purposes of paragraph (e)(2) of this section, active treatment means: E:\FR\FM\02DEP2.SGM 02DEP2 75586 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules (A) An ongoing course of treatment for a life-threatening condition; (B) An ongoing course of treatment for a serious acute condition; (C) The second or third trimester of pregnancy; or (D) An ongoing course of treatment for a health condition for which a treating physician or health care provider attests that discontinuing care by that physician or health care provider would worsen the condition or interfere with anticipated outcomes. (ii) Any decisions made for a request for continuity of care under paragraph (e)(2) of this section must be subject to the health benefit plan’s internal and external grievance and appeal processes in accordance with applicable State or Federal law or regulations. (f) Out-of-network cost sharing. Notwithstanding § 156.130(c), for a network to be deemed adequate, each QHP that uses a provider network must: (1) Count the cost sharing paid by an enrollee for an essential health benefit provided by an out-of-network provider in an in-network setting towards the enrollee’s annual limitation on cost sharing; or (2) Provide a written notice to the enrollee at least ten business days before the provision of the benefit that additional costs may be incurred for an essential health benefit provided by an out-of-network provider in an innetwork setting, including balance billing charges, unless such costs are prohibited under State law, and that any additional charges may not count toward the in-network annual limitation on cost sharing. ■ 62. Section 156.235, as amended on February 27, 2015 (80 FR 10873), is further amended by revising paragraphs (a)(2)(i) and (b)(2)(i) to read as follows: jstallworth on DSK7TPTVN1PROD with PROPOSALS § 156.235 Essential community providers. (a) * * * (2) * * * (i) The network includes as participating practitioners at least a minimum percentage, as specified by HHS, of available essential community providers in each plan’s service area. For plan years beginning prior to January 1, 2018, multiple providers at a single location will count as a single essential community provider toward both the available essential community provider s in the plan’s service area and the issuer’s satisfaction of the essential community provider participation standard. For plan years beginning on or after January 1, 2018, multiple contracted or employed full-time equivalent practitioners at a single location will count toward both the available essential community providers VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 in the plan’s service area and the issuer’s satisfaction of the essential community provider participation standard; and * * * * * (b) * * * (2) * * * (i) The number of its providers that are located in Health Professional Shortage Areas or five-digit zip codes in which 30 percent or more of the population falls below 200 percent of the Federal Poverty Line satisfies a minimum percentage, specified by HHS, of available essential community provider in the plan’s service area. For plan years beginning prior to January 1, 2018, multiple providers at a single location will count as a single essential community provider toward both the available essential community providers in the plan’s service area and the issuer’s satisfaction of the essential community provider participation standard. For plan years beginning on or after January 1, 2018, multiple contracted or employed full-time equivalent practitioners at a single location will count toward both the available essential community providers in the plan’s service area and the satisfaction of the essential community provider participation standard; and * * * * * ■ 63. Section 156.265 is amended by revising paragraph (b)(2)(ii) to read as follows: § 156.265 Enrollment process for qualified individuals. * * * * * (b) * * * (2) * * * (ii) Ensure the applicant received an eligibility determination for coverage through the Exchange through the Exchange Internet Web site or an Exchange approved web service using the FFE single streamline application. * * * * * ■ 64. Section 156.270 is amended by revising paragraphs (d) introductory text and (g) to read as follows: § 156.270 Termination of coverage or enrollment for qualified individuals. * * * * * (d) Grace period for recipients of advance payments of the premium tax credit. A QHP issuer must provide a grace period of 3 months for an enrollee, who when failing to timely pay premiums, is receiving advance payments of the premium tax credit. During the grace period, the QHP issuer must: * * * * * (g) Exhaustion of grace period. If an enrollee receiving advance payments of PO 00000 Frm 00100 Fmt 4701 Sfmt 4702 the premium tax credit exhausts the 3month grace period in paragraph (d) of this section without paying all outstanding premiums, subject to a premium payment threshold implemented under § 155.400(g) of this subchapter, if applicable, the QHP issuer must terminate the enrollee’s enrollment through the Exchange on the effective date described in § 155.430(d)(4) of this subchapter, provided that the QHP issuer meets the notice requirement specified in paragraph (b) of this section. * * * * * ■ 65. Section 156.285 is amended by revising paragraph (c)(5) and removing and reserving paragraph (d)(2) to read as follows: § 156.285 SHOP Additional standards specific to * * * * * (c) * * * (5) In a Federally-facilitated SHOP, must send enrollment reconciliation files on at least a monthly basis according to a process, timeline, and file format established by the Federallyfacilitated SHOP; * * * * * (d) * * * (2) [Reserved] * * * * * 66. Section 156.298 is amended by— a. Revising paragraph (b)(4). b. Removing paragraph (b)(5). c. Redesignating paragraph (b)(6) as paragraph (b)(5). ■ d. Revising newly redesignated paragraph (b)(5). The revision reads as follows: ■ ■ ■ ■ § 156.298 Meaningful difference standard for Qualified Health Plans in the Federallyfacilitated Exchanges. * * * * * (b) * * * (4) Plan type; or (5) Child-only versus non Child-only plan offerings. * * * * * ■ 67. The heading of subpart D is revised to read as follows: Subpart D—Standards for Qualified Health Plan Issuers on FederallyFacilitated Exchanges and State-Based Exchanges on the Federal Platform 68. Section 156.350 is added to subpart D to read as follows: ■ § 156.350 Eligibility and enrollment standards for Qualified Health Plan issuers on State-based Exchanges on the Federal platform. (a) In order to participate in a Statebased Exchange on the Federal platform, E:\FR\FM\02DEP2.SGM 02DEP2 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules a QHP issuer must comply with HHS regulations, and guidance pertaining to issuer eligibility and enrollment functions as if the issuer were an issuer of a QHP on a Federally-facilitated Exchange. These requirements include— (1) Section 156.285(a)(4)(ii) regarding the premiums for plans offered on the SHOP; (2) Section 156.285(c)(8)(iii) regarding enrollment process for SHOP; and (3) Section 156.715 regarding compliance reviews of QHP issuers, to the extent relating directly to applicable eligibility and enrollment functions. (b) HHS will permit issuers of QHPs in each State-based Exchange on the Federal platform to directly enroll applicants in a manner that is considered to be through the Exchange, as if the issuers were issuers of QHPs on Federally-facilitated Exchanges under § 156.1230(a), to the extent permitted by applicable State law. (c) If the State-based Exchange on the Federal platform does not substantially enforce a requirement in paragraph (a) of this section against the issuer or plan, then HHS may do so, in accordance with the enforcement remedies in subpart I of this part, subject to the administrative review process in subpart J of this part. ■ 69. Section 156.805 is amended by revising paragraph (d) to read as follows: § 156.805 Bases and process for imposing civil money penalties in Federally-facilitated Exchanges. * * * * (d) Request for hearing. (1) An issuer may appeal the assessment of a civil money penalty under this section by filing a request for hearing under an applicable administrative hearing process. (2) If an issuer files a request for hearing under this paragraph (d), the assessment of a civil money penalty will not occur prior to the issuance of the final administrative decision in the appeal. * * * * * ■ 70. Section 156.810 is amended by revising paragraphs (a)(12) and (13) and (e) and adding paragraphs (a)(14) and (15) to read as follows: jstallworth on DSK7TPTVN1PROD with PROPOSALS * § 156.810 Bases and process for decertification of a QHP offered by an issuer through a Federally-facilitated Exchange. (a) * * * (12) The QHP issuer substantially fails to meet the requirements related to the cases forwarded to QHP issuers under subpart K of this part; VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (13) The QHP issuer substantially fails to meet the requirements related to the offering of a QHP under subpart M of this part; (14) The QHP issuer offering the QHP is the subject of a pending, ongoing, or final State regulatory or enforcement action or determination that relates to the issuer offering QHPs in the Federally-facilitated Exchanges; or (15) HHS reasonably believes that the QHP issuer lacks the financial viability to provide coverage under its QHPs until the end of the plan year. * * * * * (e) Request for hearing. An issuer may appeal the decertification of a QHP offered by that issuer under paragraph (c) or (d) of this section by filing a request for hearing under an applicable administrative hearing process. (1) If an issuer files a request for hearing under this paragraph (e): (i) If the decertification is under paragraph (b)(1) of this section, the decertification will not take effect prior to the issuance of the final administrative decision in the appeal, notwithstanding the effective date specified in paragraph (b)(1) of this section. (ii) If the decertification is under paragraph (b)(2) of this section, the decertification will be effective on the date specified in the notice of decertification, but the certification of the QHP may be reinstated immediately upon issuance of a final administrative decision that the QHP should not be decertified. (2) [Reserved] ■ 71. Section § 156.1110 is amended by revising paragraphs (a) and (b) and removing paragraph (d) 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 Act: (1) For plan years beginning before January 1, 2017, is Medicare-certified or has been issued a Medicaid-only CMS Certification Number (CCN) and is subject to the Medicare Hospital Conditions of Participation requirements for— (i) A quality assessment and performance improvement program as specified in 42 CFR 482.21; and (ii) Discharge planning as specified in 42 CFR 482.43. (2) For plan years beginning on or after January 1, 2017— PO 00000 Frm 00101 Fmt 4701 Sfmt 4702 75587 (i)(A) Utilizes a patient safety evaluation system as defined in 42 CFR 3.20; and (B) Implements a mechanism for comprehensive person-centered hospital discharge to improve care coordination and health care quality for each patient; or (ii) Implements evidence-based initiatives to reduce all cause preventable harm, prevent hospital readmission, improve care coordination and improve health care quality through the collection, management and analysis of patient safety events. (3) A QHP issuer must ensure that each of its QHPs meets the patient safety standards in accordance with this section. (b) Documentation. A QHP issuer must collect: (1) For plan years beginning before January 1, 2017, the CCN from each of its contracted hospitals with greater than 50 beds, to demonstrate that those hospitals meet patient safety standards required in paragraph (a)(1) of this section; and (2) For plan years beginning on or after January 1, 2017, information, from each of its contracted hospitals with greater than 50 beds, to demonstrate that those hospitals meet patient safety standards required in paragraph (a)(2) of this section. * * * * * ■ 72. Section 156.1220 is amended by revising paragraphs (a)(3) and (a)(4)(ii) to read as follows: § 156.1220 Administrative appeals. (a) * * * (3) 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 date of the final reconsideration notification specifying the aggregate amount of advance payments of the premium tax credit, advance payments of costsharing reductions, and Federallyfacilitated 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 the date of the notification under § 153.310(e) of this subchapter; (iii) For a reinsurance payment, within 30 calendar days of the date of the notification under § 153.240(b)(1)(ii) of this subchapter; E:\FR\FM\02DEP2.SGM 02DEP2 75588 Federal Register / Vol. 80, No. 231 / Wednesday, December 2, 2015 / Proposed Rules (iv) For a default risk adjustment charge, within 30 calendar days of the date of the notification of the default risk adjustment charge; (v) For reconciliation of cost-sharing reductions, within 30 calendar days of the date of the notification of the costsharing reduction reconciliation payment or charge; and (vi) For a risk corridors payment or charge, within 30 calendar days of the date of the notification under § 153.510(d) of this subchapter. (4) * * * (ii) Notwithstanding paragraph (a)(1) 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) of this subchapter, it was so identified and remains unresolved. * * * * * ■ 73. Section 156.1250 is revised to read as follows: § 156.1250 Acceptance of certain third party payments. jstallworth on DSK7TPTVN1PROD with PROPOSALS (a) Issuers offering individual market QHPs, including stand-alone dental plans, and their downstream entities, must accept premium and cost-sharing payments from the following third-party entities on behalf of plan enrollees: (1) A Ryan White HIV/AIDS Program under title XXVI of the Public Health Service Act; (2) An Indian tribe, tribal organization, or urban Indian organization; and (3) A local, State, or Federal government program, including a grantee directed by a government program to make payments on its behalf consistent with the program’s statutory authority. VerDate Sep<11>2014 13:28 Dec 01, 2015 Jkt 238001 (b) An entity making third party payments of premiums under paragraph (a) of this section must notify HHS of its intent to do so, and the expected number of consumers for which it will do so, in a format and timeline established by HHS. ■ 74. Section 156.1256 is added to subpart M to read as follows: claims that were incurred during the MLR reporting year but had not been paid within 6 months of the end of the MLR reporting year. ■ 77. Section 158.140 is amended by revising paragraph (a) introductory text to read as follows: § 156.1256 (a) General requirements. The report required in § 158.110 must include direct claims paid to or received by providers, including under capitation contracts with physicians, whose services are covered by the policy for clinical services or supplies covered by the policy. In addition, the report must include claim reserves associated with claims incurred during the MLR reporting year, the change in contract reserves, reserves for contingent benefits and the medical claim portion of lawsuits, and any incurred experience rating refunds. Reimbursement for clinical services, as defined in this section, is referred to as ‘‘incurred claims.’’ All components of and adjustments to incurred claims, with the exception of contract reserves, must be calculated based on claims incurred only during the MLR reporting year and paid through June 30th of the following year. Contract reserves must be calculated as of December 31st of the applicable year. * * * * * Other notices. As directed by the FFE, health insurance issuer that is offering QHP coverage through an FFE must notify its enrollees of material plan or benefit display errors and the enrollees’ eligibility for a special enrollment period, included in § 155.420(d)(4) of this subchapter, within 30 calendar days after the error is identified. PART 158—ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE REQUIREMENTS 75. The authority citation for part 158 continues to read as follows: ■ Authority: Section 2718 of the Public Health Service Act (42 U.S.C. 300gg-18), as amended. 76. Section 158.103 is amended by revising the definitions of ‘‘Large Employer’’, ‘‘Small Employer’’, and ‘‘Unpaid claim reserves’’ to read as follows: ■ § 158.103 Definitions. * * * * * Large Employer has the meaning given the term in § 144.103 of this subchapter. * * * * * Small Employer has the meaning given the term in § 144.103 of this subchapter. * * * * * Unpaid claim reserves means reserves and liabilities established to account for PO 00000 Frm 00102 Fmt 4701 Sfmt 9990 § 158.140 Reimbursement for clinical services provided to enrollees. Dated: October 23, 2015. Andrew M. Slavitt, Acting Administrator, Centers for Medicare & Medicaid Services. Dated: November 17, 2015. Sylvia M. Burwell, Secretary, Department of Health and Human Services. [FR Doc. 2015–29884 Filed 11–20–15; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\02DEP2.SGM 02DEP2

Agencies

DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 80, Number 231 (Wednesday, December 2, 2015)]
[Proposed Rules]
[Pages 75487-75588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29884]

[[Page 75487]]

Vol. 80

Wednesday,

No. 231

December 2, 2015

Part II

Department of Health and Human Services

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45 CFR Parts 144, 146, 147, et al.

Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2017; Proposed Rule

Federal Register / Vol. 80 , No. 231 / Wednesday, December 2, 2015 /
Proposed Rules

[[Page 75488]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 146, 147, 153, 154, 155, 156, and 158

[CMS-9937-P]
RIN 0938-AS57

Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2017

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule sets forth payment parameters and
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
provides additional standards for the annual open enrollment period for
the individual market for the 2017 benefit year; essential health
benefits; cost-sharing requirements; qualified health plans; updated
standards for Exchange consumer assistance programs; network adequacy;
patient safety standards; the Small Business Health Options Program;
stand-alone dental plans; acceptance of third-party payments by
qualified health plans; the definitions of large employer and small
employer; fair health insurance premiums; guaranteed availability;
student health insurance coverage; the rate review program; the medical
loss ratio program; eligibility and enrollment; exemptions and appeals;
and other related topics.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on December 21,
2015.

ADDRESSES: In commenting, please refer to file code CMS-9937-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-9937-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-9937-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:
Jeff Wu, (301) 492-4305, Krutika Amin, (301) 492-5153, or Lindsey
Murtagh (301) 492-4106, for general information.
David Mlawsky, (410) 786-6851, for matters related to fair health
insurance premiums, the single risk pool, guaranteed availability,
guaranteed renewability, and student health insurance coverage.
Kelly Drury, (410) 786-0558, for matters related to risk
adjustment.
Adrianne Glasgow, (410) 786-0686, for matters related to
reinsurance, distributed data collection, and administrative appeals of
financial transfers.
Melissa Jaffe, (301) 492-4129, for matters related to risk
corridors.
Lisa Cuozzo, (410) 786-1746, for matters related to rate review.
Jennifer Stolbach, (301) 492-4350, for matters related to
establishing a State Exchange, and State-based Exchanges on the Federal
Platform.
Emily Ames, (301) 492-4246, and Michelle Koltov, (301) 492-4225,
for matters related to Navigators and non-Navigator assistance
personnel under part 155.
Joan Matlack, (301) 492-4223, for matters related to certified
application counselors under part 155.
Briana Levine, (301) 492-4247, for matters related to agents and
brokers.
Dana Krohn, (301) 492-4412, for matters related to employer
notification and verification.
Rachel Arguello, (301) 492-4263, for matters related to open
enrollment periods and special enrollment periods under part 155.
Anne Pesto, (410) 786-3492, for matters related to eligibility
determinations and appeals of eligibility determinations for Exchange
participation and insurance affordability programs, and eligibility
determinations for exemptions.
Kate Ficke, (301) 492-4256, for matters related to exemptions from
the shared responsibility payment.
Christelle Jang, (410) 786-8438, for matters related to the SHOP.
Krutika Amin, (301) 492-5153, for matters related to the Federally-
facilitated Exchange user fee.
Leigha Basini, (301) 492-4380, for matters related to essential
health benefits, network adequacy, essential community providers, and
other standards for QHP issuers.
Ielnaz Kashefipour, (301) 492-4376, for matters related to
standardized options and third party payment of premiums and cost
sharing.
Rebecca Zimmermann, (301) 492-4396, for matters related to stand-
alone dental plans.
Cindy Chiou, (301) 492-5142, for matters related to QHP issuer
oversight.
Pat Meisol, (410) 786-1917, for matters related to cost-sharing
reductions and the premium adjustment percentage.
Nidhi Singh Shah, (301) 492-5110, for matters related to patient
safety standards.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio program.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of

[[Page 75489]]

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 and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2017
A. Part 144--Requirements Relating to Health Insurance Coverage
B. Part 146--Requirements for the Group Health Insurance Market
C. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
D. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment Under the Affordable Care Act
E. Part 154--Health Insurance Issuer Rate Increases: Disclosure
and Review Requirements
F. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
G. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
H. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
IV. Collection of Information Requirements
A. ICRs Regarding Submission of Risk Corridors Data
B. ICRs Regarding Submission of Rate Filing Justification
C. ICRs Regarding Election to Operate an Exchange After 2014
D. ICRs Regarding Standards for Certified Application Counselors
E. ICRs Regarding Network Adequacy Standards
F. ICR Regarding Monthly SHOP Enrollment Reconciliation Files
Submitted by Issuers
G. ICR Regarding Patient Safety Standards
V. Response to Comments
VI. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and
Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism
H. Congressional Review Act

Acronyms and Abbreviations

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), as amended
APTC--Advance payments of the premium tax credit
AV--Actuarial value
CBO--Congressional Budget Office
CFR--Code of Federal Regulations
CHIP--Children's Health Insurance Program
CMP--Civil money penalties
CMS--Centers for Medicare & Medicaid Services
CSR--Cost-sharing reduction
ECN--Exemption certificate number
ECP--Essential community provider
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
FR--Federal Register
FTE--Full-time equivalent
GDP--Gross Domestic Product
HCC--Hierarchical condition category
HHS--United States Department of Health and Human Services
HIOS--Health Insurance Oversight System
HIPAA--Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
IRS--Internal Revenue Service
MEC--Minimum essential coverage
MLR--Medical loss ratio
NAIC--National Association of Insurance Commissioners
NHEA--National Health Expenditure Accounts
OMB--Office of Management and Budget
OPM--United States Office of Personnel Management
PHS Act--Public Health Service Act
PII--Personally Identifiable Information
PMPM--Per member per month
PRA--Paperwork Reduction Act of 1995
PSO--Patient safety organization
QHP--Qualified health plan
SADPs--Stand-alone dental Plans
SBE--State-based Exchange
SBE-FP--State-based Exchange on the Federal platform
SHOP--Small Business Health Options Program
The Code--Internal Revenue Code of 1986 (26 U.S.C. 1, et seq.)

I. Executive Summary

The Affordable Care Act enacted a set of reforms that are making
high quality health insurance coverage and care more affordable and
accessible to millions of Americans. These reforms include the creation
of competitive marketplaces called Affordable Insurance Exchanges, or
``Exchanges'' (in this proposed rule, we also call an Exchange a Health
Insurance Marketplace\SM\,\1\ or Marketplace\SM\) through which
qualified individuals and qualified employers can purchase health
insurance coverage. In addition, many individuals who enroll in
qualified health plans (QHPs) through individual market Exchanges are
eligible to receive a premium tax credit to make health insurance more
affordable, and reductions in cost-sharing payments to reduce out-of-
pocket expenses for health care services. These Affordable Care Act
reforms also include the premium stabilization programs (that is, risk
adjustment, reinsurance and risk corridors) and rules that are intended
to mitigate the potential impact of adverse selection and stabilize the
price of health insurance in the individual and small group markets. In
previous rulemaking, we have outlined the major provisions and
parameters related to many Affordable Care Act programs.
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\1\ Health Insurance Marketplace\SM\ and Marketplace\SM\ are
service marks of the U.S. Department of Health & Human Services.
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In this proposed rule, we seek to improve States' ability to
operate efficient Exchanges through a proposal that leverages the
economies of scale available through the Federal eligibility and
enrollment platform and information technology infrastructure. We
propose to codify a new Exchange model--the State-based Exchange on the
Federal platform (SBE-FP). This model would enable State-based
Exchanges (SBEs) to execute certain processes using the Federal
eligibility and enrollment infrastructure. Under the proposal, the SBE-
FP would be required to enter into a Federal platform agreement with
HHS that would define a set of mutual obligations, including the set of
Federal services upon which the SBE-FP relies. Under this Exchange
model, certain requirements that were previously only applicable to
QHPs offered on a Federally-facilitated Exchange (FFE) and their
downstream and delegated entities would apply to QHPs offered on an
SBE-FP and their downstream and delegated entities. In addition, we
propose that agents and brokers facilitating enrollments through SBE-
FPs would need to comply with the FFE registration and training
requirements. For 2017, we propose a user fee for QHPs offered through
SBE-FPs to offset Federal costs of providing this infrastructure.

[[Page 75490]]

We also propose a number of incremental amendments that we believe
will improve the stability of the Exchanges while improving the choices
available to consumers and supporting consumers' ability to make
informed choices when purchasing health insurance. These include the
introduction of ``standardized options'' in the individual market,
which will improve competition and consumer transparency. These
amendments are complemented by a series of additional amendments
designed to enhance consumers' ability to make informed choices about
their health coverage, increase the accessibility of high quality
health insurance, and improve competition, transparency, and
affordability.
Our proposal for standardized options is intended to simplify the
consumer shopping experience by allowing consumers to more easily
compare plans across issuers in the individual market FFEs. We propose
a standardized option with a specified cost-sharing structure at each
of the bronze, silver (with cost-sharing reduction (CSR) plan
variations), and gold metal levels. We do not propose to restrict
issuers' non-standardized option offerings. We anticipate
differentially displaying these standardized options to allow consumers
to compare plans based on differences in price and quality rather than
cost-sharing structure.
We are also proposing to standardize a number of policies relating
to network adequacy for QHPs on the FFEs. We propose a quantitative
network adequacy threshold to be selected by the State and a Federal
default network adequacy standard that would apply otherwise, that is
based on the standard currently used for review and several provisions
relating to provider transition for QHPs. We also discuss in this
proposed rule a standardized categorization of network depth for QHPs
in these Exchanges and their display on HealthCare.gov. Finally, we
propose a standard for when an enrollee receives an essential health
benefit at an in-network setting provided by an out-of-network
provider.
As part of our efforts to provide consumers simplicity and
transparency in their choices, we are considering giving the FFEs the
authority to selectively contract with issuers. We would use this
authority primarily to strengthen oversight in the short term.
We also seek to improve consumers' ability to make choices
regarding health insurance coverage by ensuring they receive high-
quality assistance in their interactions with the Exchange. The
proposed rule would amend program requirements for Navigators, certain
non-Navigator assistance personnel, and certified application
counselors. These amendments would require Navigators to assist
consumers with certain post-enrollment issues, serve underserved and
vulnerable populations, and require Navigators and non-Navigator
assistance personnel to complete training prior to conducting outreach
and education activities. We would also amend our rules regarding the
use of gifts by Navigators, certain non-Navigator assistance personnel
and certified application counselors. In addition, we propose that
certified application counselor designated organizations would be
required to submit data and information related to the organization's
certified application counselors, upon the request of the Exchanges in
which they operate.
We believe transparency is critical to informed decision-making,
and this proposed rule includes several proposals to increase
transparency. This proposed rule proposes provisions to enhance the
transparency of rates in all States and the effectiveness of the rate
review program.
In this proposed rule, we propose several provisions regarding when
consumers may choose and enroll in plans. This rule proposes dates for
the individual market annual open enrollment period for the 2017
benefit year. For 2017, we propose to maintain the same open enrollment
period we adopted for 2016--that is, November 1, 2016, through January
31, 2017.
We also propose to codify a number of Exchange policies relating to
exemptions in order to provide certainty and transparency around these
policies for all stakeholders.
The HHS Notice of Benefit and Payment Parameters for 2014 (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. Risk adjustment factors reflect enrollee health risk and the
costs of a given disease relative to average spending. Last year, we
recalibrated the HHS risk adjustment models for 2016 by using 2011,
2012, and 2013 claims data from the Truven Health Analytics 2010
MarketScan[supreg] Commercial Claims and Encounters database
(MarketScan) to develop updated risk factors. Similarly, this year we
propose to do so using the 2012, 2013, and 2014 claims data, when the
2014 MarketScan data become available.
If any reinsurance contribution amounts remain after calculating
reinsurance payments for the 2016 benefit year (including after HHS
would increase the coinsurance rate to 100 percent for the 2016 benefit
year), we propose to lower the 2016 attachment point of $90,000 to pay
out any remaining contribution amounts for the 2016 benefit year. We
also propose several changes to the risk corridors program for 2015 and
2016. We propose that, for 2015 risk corridors and MLR reporting, if
the issuer reported a certified estimate of 2014 cost-sharing
reductions on its 2014 MLR and Risk Corridors Annual Reporting Form
that is lower than the actual cost-sharing reductions provided, HHS
would make an adjustment to the issuer's 2015 risk corridors payment or
charge amount in order to address the impact of the inaccurate
reporting on the risk corridors and MLR calculations for the 2014
benefit year. We also propose that the issuer must adjust the cost-
sharing reduction amounts it reports for the 2015 MLR and risk
corridors reporting cycle by any difference between 2014 reported and
actual cost-sharing reductions amounts.
We also propose that for the 2015 and later benefit years, the
issuer must true up claims liabilities and reserves used to determine
the allowable costs reported for the risk corridors program for the
preceding benefit year to reflect the actual claims payments made
through June 30 of the year following the benefit year. In addition, we
propose changes to the definition of ``unpaid claim reserves'' and
related requirements for reporting incurred claims for the MLR program
beginning with the 2015 reporting year to require issuers to utilize a
6-month (rather than a 3-month) claims run out period.
In addition to provisions aimed at stabilizing premiums, we propose
several provisions related to cost sharing. First, we propose the
premium adjustment percentage for 2017, 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 for 2017. We
propose the maximum annual limitations on cost sharing for the 2017
benefit year for cost-sharing reduction plan variations. This proposed
rule also proposes standards for stand-alone dental plans (SADPs)
related to the annual limitation on cost sharing, and would amend
standards related to the acceptance of third party payments for
premiums and cost sharing by QHP issuers.
This proposed rule includes several incremental improvements that
seek to ensure Americans have access to not only affordable, but also
robust, high-quality health care coverage. This proposed rule would
amend

[[Page 75491]]

requirements for QHPs, including essential community providers (ECPs)
and meaningful difference requirements. There are also proposed
technical amendments to QHP issuer oversight provisions. This rule
proposes amendments to further strengthen the patient safety
requirements for QHP issuers offering coverage through Exchanges.
For consumers purchasing coverage through the Small Business Health
Options Program (SHOP), we propose a new ``vertical choice'' model for
Federally-facilitated SHOPs for plan years beginning on or after
January 1, 2017, under which employers would be able to offer qualified
employees a choice of all plans across all available levels of coverage
from a single issuer.
Finally, in this proposed rule, as outlined, we propose adjustments
to our programs and rules, as we do each year, so that our rules and
policies reflect the latest market developments. We propose the
following changes and clarifications to the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) and Affordable Care
Act health insurance reform requirements. We propose revisions to the
definitions of small employer and large employer to bring them into
conformance with recently enacted legislation. We also propose
provisions to ensure that a network plan in the small group market with
a limited service area can be appropriately rated based on geography.
We propose that an issuer subject to the guaranteed availability
requirements may--in the limited circumstances of when the exception to
the guaranteed renewability requirement related to discontinuing a
particular product, or the exception related to discontinuing all
coverage in a market, applies--deny coverage to individuals and
employers. Lastly, we propose provisions regarding the application of
the actuarial value (AV) and single risk pool provisions to student
health insurance coverage.

II. Background

A. Legislative and Regulatory Overview

The Patient Protection and Affordable Care Act (Pub. L. 111-148)
was enacted 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.''
Subtitles A and C of title I of the Affordable Care Act
reorganized, amended, and added to the provisions of part A of title
XXVII of the Public Health Service Act (PHS Act) relating to group
health plans and health insurance issuers in the group and individual
markets.
Section 2701 of the PHS Act, as added by the Affordable Care Act,
restricts the variation in premium rates charged by a health insurance
issuer for non-grandfathered health insurance coverage in the
individual or small group market to certain specified factors. The
factors are: Family size, rating area, age and tobacco use.
Section 2701 of the PHS Act operates in coordination with section
1312(c) of the Affordable Care Act. Section 1312(c) of the Affordable
Care Act generally requires a health insurance issuer to consider all
enrollees in all health plans (except for grandfathered health plans)
offered by such issuer to be members of a single risk pool for each of
its individual and small group markets. States have the option to merge
the individual market and small group market risk pools under section
1312(c)(3) of the Affordable Care Act.
Section 2702 of the PHS Act, as added by the Affordable Care Act,
requires health insurance issuers that offer health insurance coverage
in the group or individual market in a State to offer coverage to and
accept every employer and individual in the State that applies for such
coverage unless an exception applies.\2\
---------------------------------------------------------------------------

\2\ Before enactment of the Affordable Care Act, the Health
Insurance Portability and Accountability Act of 1996 amended the PHS
Act (formerly section 2711) to generally require guaranteed
availability of coverage for employers in the small group market.
---------------------------------------------------------------------------

Section 2703 of the PHS Act, as added by the Affordable Care Act,
and sections 2712 and 2741 of the PHS Act, as added by HIPAA and
codified prior to the enactment of the Affordable Care Act, require
health insurance issuers that offer health insurance coverage in the
group or individual market to renew or continue in force such coverage
at the option of the plan sponsor or individual unless an exception
applies.
Section 2718 of the PHS Act, as added by the Affordable Care Act,
generally requires health insurance issuers to submit an annual MLR
report to HHS, and provide rebates to enrollees if the issuers do not
achieve specified MLR thresholds.
Section 2794 of the PHS Act, as added by the Affordable Care Act,
directs the Secretary of HHS (the Secretary), in conjunction with the
States, to establish a process for the annual review of ``unreasonable
increases in premiums for health insurance coverage.'' \3\ The law also
requires health insurance issuers to submit to the Secretary and the
applicable State justifications for unreasonable premium increases
prior to the implementation of the increases. Section 2794(b)(2) of the
PHS Act further specifies that beginning with plan years starting in
2014, the Secretary, in conjunction with the States, will monitor
premium increases of health insurance coverage offered through an
Exchange and outside of an Exchange.
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\3\ The implementing regulations in part 154 limit the scope of
the requirements under section 2794 of the PHS Act to health
insurance issuers offering health insurance coverage in the
individual market or small group market. See Rate Increase
Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23,
2011).
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Section 1252 of the Affordable Care Act provides that any standard
or requirement adopted by a State under title I of the Affordable Care
Act, or any amendment made by title I of the Affordable Care Act, shall
be applied uniformly to all health plans in each insurance market to
which the standard and requirement apply.
Section 1302 of the Affordable Care Act provides for the
establishment of an essential health benefits (EHB) package that
includes coverage of EHB (as defined by the Secretary), cost-sharing
limits, and actuarial value requirements. The law directs that EHBs be
equal in scope to the benefits covered by a typical employer plan and
that they cover at least the following 10 general categories:
ambulatory patient services; emergency services; hospitalization;
maternity and newborn care; mental health and substance use disorder
services, including behavioral health treatment; prescription drugs;
rehabilitative and habilitative services and devices; laboratory
services; preventive and wellness services and chronic disease
management; and pediatric services, including oral and vision care.
Section 1301(a)(1)(B) of the Affordable Care Act directs all
issuers of QHPs to cover the EHB package described in section 1302(a)
of the Affordable Care Act, including coverage of the services
described in section 1302(b) of the Affordable Care Act, to adhere to
the cost-sharing limits described in section 1302(c) of the Affordable
Care Act and to meet the AV levels established in section 1302(d) of
the Affordable Care Act. Section 2707(a) of the PHS Act, which is
effective for plan or policy years beginning on or after January 1,
2014, extends the coverage of the EHB package to non-grandfathered
individual and small group coverage, irrespective of whether such
coverage is offered through an Exchange. In addition, section 2707(b)

[[Page 75492]]

of the PHS Act directs non-grandfathered group health plans to ensure
that cost sharing under the plan does not exceed the limitations
described in sections 1302(c)(1) and (2) of the Affordable Care Act.
Section 1302(d) of the Affordable Care Act describes the various
levels of coverage based on actuarial value. Consistent with section
1302(d)(2)(A) of the Affordable Care Act, actuarial value 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
Small Business Health Options Program assist qualified small employers
in facilitating the enrollment of their employees in qualified health
plans offered in the small group market. Sections 1312(f)(1) and (2) of
the Affordable Care Act define qualified individuals and qualified
employers. 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 an Exchange.\4\
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\4\ If a State elects this option, the rating rules in section
2701 of the PHS Act and its implementing regulations will apply to
all coverage offered in such State's large group market (except for
self-insured group health plans) pursuant to section 2701(a)(5) of
the PHS Act.
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Section 1311(c)(1)(B) of the Affordable Care Act requires the
Secretary to establish minimum criteria for provider network adequacy
that a health plan must meet to be certified as a QHP.
Section 1311(c)(5) of the Affordable Care Act requires the
Secretary to continue to operate, maintain, and update the Internet
portal developed under section 1103 of the Affordable Care Act to
provide information to consumers and small businesses on affordable
health insurance coverage options.
Section 1311(c)(6)(B) of the Affordable Care Act states that the
Secretary is to set annual open enrollment periods for Exchanges for
calendar years after the initial enrollment period.
Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act
direct all Exchanges to establish a Navigator program.
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 1321(a) of the Affordable Care Act provides broad 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. Section 1321(a)(1)
directs the Secretary to issue regulations that set standards for
meeting the requirements of title I of the Affordable Care Act with
respect to, among other things, the establishment and operation of
Exchanges.
Sections 1313 and 1321 of the Affordable Care Act provide 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 of the Affordable Care Act provides for State flexibility
in the operation and enforcement of Exchanges and related requirements.
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 1321(c)(2) of the Affordable Care Act authorizes the
Secretary to enforce the Exchange standards using civil money penalties
(CMPs) on the same basis as detailed in section 2723(b) of the PHS Act.
Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs
as a means of enforcing the individual and group market reforms
contained in Part A of title XXVII of the PHS Act when a State fails to
substantially enforce these provisions
Section 1321(d) of the Affordable Care Act provides that nothing in
title I of the Affordable Care Act should be construed to preempt any
State law that does not prevent the application of title I of the
Affordable Care Act. Section 1311(k) of the Affordable Care Act
specifies that Exchanges may not establish rules that conflict with or
prevent the application of regulations issued by the Secretary.
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 in
benefit years 2014 through 2016. Section 1342 of the Affordable Care
Act directs the Secretary to establish a temporary risk corridors
program that reduces the impact of inaccurate rate setting from 2014
through 2016. Section 1343 of the Affordable Care Act establishes a
permanent risk adjustment program to provide increased payments to
health insurance issuers that attract higher-risk populations, such as
those with chronic conditions, funded by payments from those that
attract lower-risk populations; thereby, reducing incentives for
issuers to avoid higher-risk enrollees.
Sections 1402 and 1412 of the Affordable Care Act provide for,
among other things, reductions in cost sharing for essential health
benefits for qualified low- and moderate-income enrollees in silver
level health plans offered through the individual market Exchanges.
These sections also provide for reductions in cost sharing for Indians
enrolled in QHPs at any metal level.
Section 5000A of the Internal Revenue Code of 1986 (the Code), as
added by section 1501(b) of the Affordable Care Act, requires all non-
exempt individuals to maintain minimum essential coverage (MEC) for
each month or make the individual shared responsibility payment.
Section 5000A(f) of the Code defines minimum essential coverage as any
of the following: (1) Coverage under a specified government sponsored
program; (2) coverage under an eligible employer-sponsored plan; (3)
coverage under a health plan offered in the individual market within a
State; and (4) coverage under a grandfathered health plan. Section
5000A(f)(1)(E) of the Code authorizes the Secretary of HHS, in
coordination with the Secretary of the Treasury, to designate other
health benefits coverage as minimum essential coverage.
The Protecting Affordable Coverage for Employees Act (Pub. L. 114-
60) amended section 1304(b) of the Patient Protection and Affordable
Care Act and section 2791(e) of the PHS Act to amend the definition of
small employer in

[[Page 75493]]

these statutes to mean, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 1 but not more than 50 employees on business days
during the preceding calendar year and who employs at least 1 employee
on the first day of the plan year. It also amended these statutes to
make conforming changes to the definition of large employer, and to
provide that a State may treat as a small employer, with respect to a
calendar year and a plan year, an employer who employed 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.
1. Premium Stabilization Programs
In the July 15, 2011 Federal Register (76 FR 41929), we published a
proposed rule outlining the framework for the premium stabilization
programs. We implemented the premium stabilization programs in a final
rule, published in the March 23, 2012 Federal Register (77 FR 17219)
(Premium Stabilization Rule). In the December 7, 2012 Federal Register
(77 FR 73117), we published a proposed rule outlining the benefit and
payment parameters for the 2014 benefit year 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 final rule in the March 11, 2013
Federal Register (78 FR 15409).
In the December 2, 2013 Federal Register (78 FR 72321), we
published a proposed rule outlining the benefit and payment parameters
for the 2015 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2015 Payment Notice). We published the 2015 Payment Notice
final rule in the March 11, 2014 Federal Register (79 FR 13743).
In the November 26, 2014 Federal Register (79 FR 70673), we
published a proposed rule outlining the benefit and payment parameters
for the 2016 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2016 Payment Notice). We published the 2016 Payment Notice
final rule in the February 27, 2015 Federal Register (80 FR 10749).
2. Program Integrity
In the June 19, 2013 Federal Register (78 FR 37031), 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 Program Integrity Rule'' published in the August
30, 2013 Federal Register (78 FR 54069) and the ``second Program
Integrity Rule'' published in the October 30, 2013 Federal Register (78
FR 65045).
3. Exchanges
We published a request for comment relating to Exchanges in the
August 3, 2010 Federal Register (75 FR 45584). We issued initial
guidance to States on Exchanges on November 18, 2010. We proposed a
rule in the July 15, 2011 Federal Register (76 FR 41865) to implement
components of the Exchanges, and a rule in the August 17, 2011 Federal
Register (76 FR 51201) regarding Exchange functions in the individual
market, eligibility determinations, and Exchange standards for
employers. 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 18309) (Exchange
Establishment Rule).
We established standards for 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 March 11, 2013 Federal
Register (78 FR 15541). The provisions established in the interim final
rule were finalized in the second Program Integrity Rule. We also set
forth standards related to Exchange user fees in the 2014 Payment
Notice. We 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
39869) (Preventive Services Rule).
In a final rule published in the July 17, 2013 Federal Register (78
FR 42823), we established standards for Navigators and non-Navigator
assistance personnel in FFEs and for non-Navigator assistance personnel
funded through an Exchange establishment grant. This final rule also
established a certified application counselor program for Exchanges and
set standards for that program.
4. Essential Health Benefits and Actuarial Value
On December 16, 2011, HHS released a bulletin \5\ (the EHB
Bulletin) that outlined an intended regulatory approach for defining
EHB, including a benchmark-based framework. HHS also published a
bulletin that outlined its intended regulatory approach to calculations
of AV on February 24, 2012.\6\ A proposed rule relating to EHBs and AVs
was published in the November 26, 2012 Federal Register (77 FR 70643).
We established requirements relating to EHBs and AVs in the Standards
Related to Essential Health Benefits, Actuarial Value, and
Accreditation Final Rule, which was published in the February 25, 2013
Federal Register (78 FR 12833) (EHB Rule).
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\5\ ``Essential Health Benefits Bulletin.'' December 16, 2011.
Available at: https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
\6\ ``Actuarial Value and Cost-Sharing Reductions Bulletin.''
February 24, 2012. Available at: https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.
---------------------------------------------------------------------------

5. Market Rules
A proposed rule relating to the 2014 health insurance market rules
was published in the November 26, 2012 Federal Register (77 FR 70584).
A final rule implementing the health insurance market rules was
published in the February 27, 2013 Federal Register (78 FR 13406) (2014
Market Rules).
A proposed rule relating to Exchanges and Insurance Market
Standards for 2015 and Beyond was published in the March 21, 2014
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A
final rule implementing the Exchange and Insurance Market Standards for
2015 and Beyond was published in the May 27, 2014 Federal Register (79
FR 30240) (2015 Market Standards Rule).
6. Rate Review
A proposed rule to establish the rate review program was published
in the December 23, 2010 Federal Register (75 FR 81003). A final rule
with comment period implementing the rate review program was published
in the May 23, 2011 Federal Register (76 FR 29963) (Rate Review Rule).
The provisions of the Rate Review Rule were amended in final rules
published in the September 6, 2011 Federal Register (76 FR 54969), the
February 27, 2013 Federal Register (78 FR 13405), the May 27, 2014
Federal Register (79 FR 30339), and the February 27, 2015 Federal
Register (80 FR 10749).

[[Page 75494]]

7. Medical Loss Ratio
We published a request for comment on section 2718 of the PHS Act
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 MLR
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day
comment period was published in the December 7, 2011 Federal Register
(76 FR 76573). An interim final rule with a 60-day comment period was
published in the December 7, 2011 Federal Register (76 FR 76595). A
final rule was published in the Federal Register on May 16, 2012 (77 FR
28790).

B. Stakeholder Consultation and Input

HHS has consulted with stakeholders on policies related to the
operation of Exchanges, including the SHOP and the premium
stabilization programs. We have held a number of listening sessions
with consumers, providers, employers, health plans, the actuarial
community, and State representatives to gather public input. We
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
public input we received 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, 146, 147, 153, 154, 155, 156 and 158. The proposed
regulations in part 144 would, consistent with recent legislation,
revise the definitions of ``large employer'' and ``small employer.''
The proposed regulations in parts 146 and 147 would codify an
exception to the guaranteed availability requirement when the exception
to the guaranteed renewability requirement related to discontinuing a
particular product or discontinuing all coverage in a market applies.
The proposed regulations in part 147 would clarify the definition
of principal business address for purposes of geographic rating. We
further propose provisions regarding the treatment of student health
insurance coverage with regard to the AV and single risk pool
requirements.
The proposed regulations in part 153 amend the audit provision for
the reinsurance program to clarify that this authority also extends to
third parties who assist contributing entities with their obligations
under this program. The proposed regulations also include the risk
adjustment user fee for 2017 and outline certain modifications to the
HHS risk adjustment methodology. We propose to clarify reporting
requirements for the risk adjustment, reinsurance, and risk corridors.
The proposed regulations in part 154 outline certain modifications
to enhance the transparency and effectiveness of the rate review
program. We propose to collect a Unified Rate Review Template from all
issuers offering single risk pool coverage in the individual and small
group market, including coverage with rate decreases or unchanged
rates, as well as rates for new plans. We also announce our intention
to disclose all proposed rate increases for single risk pool coverage
at a uniform time on the CMS Web site, including rates with increases
of less than 10 percent. We also reiterate the process for establishing
the uniform timeline that proposed rate increases subject to review and
all final rate increases (including those not subject to review) for
single risk pool coverage must be posted at a uniform time by States
with Effective Rate Review Programs. Finally, we specify the rate
filing requirements for student health insurance coverage.
The proposed regulations in part 155 include a clarification
related to the functions of an Exchange, and would establish the
individual market open enrollment period for the 2017 benefit year.
Certain proposals in part 155 are related to the eligibility and
verification processes related to eligibility for insurance
affordability programs. We also propose to amend and clarify rules
related to enrollment of qualified individuals into QHPs. We describe
changes to the process of submitting certain exemption applications and
options for State Exchanges to handle exemptions. The proposed
regulations also include a Federal platform agreement through which a
State Exchange may rely on the FFE for certain functions as an SBE-FP.
We propose that QHP issuers on an SBE-FP be required to comply with
certain provisions relating directly to the eligibility and enrollment
platform, and propose to require that SBE-FPs promulgate regulations at
least as stringent as a number of FFE regulations, to maintain
consistency of the HealthCare.gov experience. We also make various
proposals related to the SHOPs. We propose to amend the standards
applicable to the consumer assistance functions performed by
Navigators, non-Navigator assistance personnel, and certified
application counselors. We also discuss our approach to denial of QHP
certification, and outline proposed modifications to standards for FFE-
registered agents and brokers and requirements for HHS-approved vendors
of FFE training.
The proposed regulations in part 156 set forth proposals related to
cost sharing, including the premium adjustment percentage, the maximum
annual limitation on cost sharing, and the reductions in the maximum
annual limitation for cost-sharing plan variations for 2017. We propose
a clarification to the administrative appeals process applicable to the
premium stabilization, Exchange financial assistance, and FFE user fee
programs. Part 156 also includes proposals related to essential health
benefits, including clarification to the policy regarding additional
State-required benefits. We propose amendments to network adequacy
requirements (including application of out-of-network costs to the
annual limitation on cost sharing for EHBs covered under QHPs in the
small group and individual markets), and essential community provider
requirements. We propose establishing standardized options for cost-
sharing structures, indexing for the stand-alone dental plan annual
limitation on cost sharing, changes to our process for updating the AV
Calculator for QHPs, meaningful difference standards for QHPs, and
minor changes to QHP issuer oversight standards. We also propose
additional modifications to acceptance of third party payments by QHP
issuers and the next phase for patient safety standards for issuers of
QHPs offered on Exchanges.
The proposed amendments to the regulations in part 158 propose
revisions related to the definitions of ``large employer'' and ``small
employer'' consistent with recent legislation, as well as revisions
related to the reporting of incurred claims.

III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2017

A. Part 144--Requirements Relating to Health Insurance Coverage

1. Definitions (Sec. 144.103)
Under Sec. 144.103, the term ``plan year'' means, for a group
health plan, the year that is designated as the plan year in the plan
document of the group health plan. However, if the plan document does
not

[[Page 75495]]

designate a plan year or if there is no plan document, then the plan
year is--
The deductible or limit year used under the plan;
If the plan does not impose deductibles or limits on a
yearly basis, then the plan year is the policy year;
If the plan does not impose deductible or limits on a
yearly basis, and either the plan is not insured or the insurance
policy is not renewed on an annual basis, then the plan year is the
employer's taxable year; or
In any other case, the plan year is the calendar year.\7\
---------------------------------------------------------------------------

\7\ Under Sec. 147.104(b)(1)(i), in the small group market,
including under Sec. 155.725 in the SHOP, issuers generally must
permit small employers to purchase coverage at any point during the
year. In the SHOP, the employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date
of coverage. With respect to an employer that purchases coverage in
the small group market in a State that has elected to merge its
individual and small group risk pools under section 1312(c) of the
Affordable Care Act, the plan year will begin on the qualified
employer's effective date of coverage, which might be any day during
the year, and end on December 31 of the calendar year in which
coverage first became effective.
---------------------------------------------------------------------------

We are not proposing any changes to the definition of ``plan year''
in this proposed rule. However, we note that whichever definition
applies under Sec. 144.103, we interpret the term plan year to mean a
period that is no longer than 12 months with respect to grandfathered
and non-grandfathered group health plans. Plan years that exceed 12
months are inconsistent with the Affordable Care Act, including the
rate review and single risk pool requirements, which both contemplate
12-month or shorter plan years. The Departments of Labor and the
Treasury, which respectively have jurisdiction over parallel
definitions in the Employee Retirement Income Security Act of 1974
(ERISA) and the Code, have advised HHS that they concur with this
interpretation.
Also under Sec. 144.103, because of the original Affordable Care
Act definitions, the term large employer currently is defined to mean,
in connection with a group health plan with respect to a calendar year
and a plan year, an employer who employed an average of at least 101
employees on business days during the preceding calendar year and who
employs at least 1 employee on the first day of the plan year. In the
case of plan years beginning before January 1, 2016, a State may elect
to define large employer by substituting ``51 employees'' for ``101
employees.'' The term small employer currently is defined to mean, in
connection with a group health plan with respect to a calendar year and
a plan year, an employer who employed 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. In the case of plan years beginning before January 1, 2016, a
State may elect to define small employer by substituting ``50
employees'' for ``100 employees.'' These regulatory definitions were
consistent with section 1304(b) of the Affordable Care Act and section
2791(e) of the PHS Act.
However, both of those sections have recently been amended by the
Protecting Affordable Coverage for Employees Act (Pub. L. 114-60).
Therefore, we propose to revise the regulatory definitions of large
employer and small employer in Sec. 144.103 to conform to this
legislation. Specifically, we propose to revise the regulatory
definition of large employer to mean, in connection with a group health
plan with respect to a calendar year and a plan year, an employer who
employed an average of at least 51 employees on business days during
the preceding calendar year and who employs at least 1 employee on the
first day of the plan year, but would provide that a State may elect to
define large employer by substituting ``101 employees'' for ``51
employees.'' Conversely, we propose to revise the regulatory definition
of small employer to mean, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 1 but not more than 50 employees on business days
during the preceding calendar year and who employs at least 1 employee
on the first day of the plan year, but would provide that a State may
elect to define small employer by substituting ``100 employees'' for
``50 employees.'' Consistent with section 1304(b) of the Affordable
Care Act and section 2791(e) of the PHS Act, we also propose to codify
statutory language providing that in the case of an employer that was
not in existence throughout the preceding calendar year, the
determination of whether the employer is a large employer or a small
employer be based on the average number of employees that it is
reasonably expected the employer will employ on business days in the
current calendar year.
Finally, we propose to correct a cross-reference in the definition
of excepted benefits under Sec. 144.103, which should refer to the
group market provisions in Sec. 146.145(b) as opposed to Sec.
146.145(c).

B. Part 146--Requirements for the Group Health Insurance Market

1. Guaranteed Availability of Coverage for Employers in the Small Group
Market (Sec. 146.150)
Part 146 includes pre-Affordable Care Act HIPAA requirements on
group health insurance issuers, including Sec. 146.150, which requires
health insurance issuers in the small group market to guarantee the
availability of coverage, with some specific exceptions. We propose to
add paragraph (g) to Sec. 146.150, providing an exception to the
guaranteed availability requirement when the exceptions to the
guaranteed renewability requirement in Sec. 146.152(c) or (d) related
to discontinuing a particular product or all coverage in a market
apply. For a further discussion of this proposal, see the discussion of
Sec. 147.104, ``Guaranteed Availability of Coverage,'' in this
proposed rule at part 147, ``Health Insurance Reform Requirements for
the Group and Individual Health Insurance Markets.''

C. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets

1. Fair Health Insurance Premiums (Sec. 147.102)
Under section 2701 of the PHS Act and regulations at Sec. 147.102,
the rating area for a small group plan is the group policyholder's
principal business address. We propose to amend Sec. 147.102(a)(1)(ii)
to provide that if the employer has registered an in-State principal
business address with the State, that location is the principal
business address. We note that an in-State address registered solely
for purposes of service of process would not be considered the
employer's principal business address, unless it is a substantial
worksite for the employer's business. If an in-State principal business
address is not registered with the State or is only registered for
purposes of service of process and is not a substantial worksite, the
employer would designate as its principal business address the business
address within the State where the greatest number of employees work in
the applicable State.
When a network plan offered in a State has a limited service area,
the policy described above could result in an issuer having to make a
plan available to an employer (because the employer has an employee who
lives, works, or resides in the service area), but not be able to apply
a geographic rating factor under the current rule, because the issuer
might not have

[[Page 75496]]

established rates applicable to the location of the employer's
principal business address outside the plan's service area.
We propose to amend Sec. 147.102 to provide for an additional
principal business address to be identified within a plan's service
area so that the plan can be appropriately rated for sale to the
employer. In such instances, the additional principal business address
would be the business address within the plan's service area where the
greatest number of employees work as of the beginning of the plan year,
or, if there is no such business address, an address within the rating
area selected by the employer that reasonably reflects where the
greatest number of employees within the plan's service area live or
reside as of the beginning of the plan year.
We note that SHOPs, including the Federally-facilitated Small
Business Health Options Programs (FF-SHOPs), may use the address that
was used to establish a qualified employer's eligibility for
participation in the SHOP to determine the applicable geographic rating
area when calculating premiums for participating employers. The SHOPs,
including the FF-SHOPs, may not be able to accommodate multiple
principal business addresses within a State for premium calculation
purposes. As a result, when a single application is completed in a
State, plan availability and premium calculations will be based on the
principal business address entered on the FF-SHOP employer user
interface.
Under Sec. 147.102(b), States have considerable flexibility in
establishing rating areas. Rating areas must be based on counties,
three-digit zip codes, or metropolitan statistical areas and non-
metropolitan statistical areas, and generally will be presumed adequate
if State-established rating areas are no greater in number than the
number of metropolitan statistical areas in the State plus one. States
may seek approval from CMS for a greater number of rating areas
provided they are actuarially justified, are not unfairly
discriminatory, reflect significant differences in health care unit
costs, lead to stability in rates over time, and apply uniformly to all
issuers in a market.
We have observed wide variations in the size of rating areas in the
various States. We are concerned that, within States, this could lead
to pockets of smaller rating areas with higher-risk groups, which
potentially compromises the risk-spreading objective that the single
risk pool requirement is intended to achieve. At the same time, States
are the primary regulators of health insurance, and we believe it is
important to recognize the unique needs of each State. We also
recognize the consumer disruption that could result from changes to
rating areas. Therefore, we seek comments on whether we should seek
more uniformity in the size of rating areas or establish a minimum size
for rating areas, and if so, how that should be achieved, consistent
with the principle of flexibility for States. For example, to help
ensure uniformity in rating areas, we could require that each rating
area in a State be one geographically contiguous area, and that the
relative population of each rating area not vary by more than a
specified percentage. To help ensure that rating areas are sufficiently
large, we could direct that each State have a maximum number of rating
areas equal to the number of metropolitan statistical areas in the
State, plus one. We also seek comment on how we could improve
uniformity and sufficient size for risk pooling in a manner that would
preserve flexibility to accommodate the unique needs of each State.
We also recognize the inconsistency that can occur between an
issuer's rating area and the service area of some of its network-based
plans. Under current Sec. 155.1055, the service area of a QHP must be
established without regard to racial, ethnic, language, health status-
related factors, or other factors that exclude specific high utilizing,
high cost, or medically underserved populations. We believe it could be
beneficial from an insurance market perspective for the rating area and
the service area to generally be consistent, to provide that health
insurance issuers offer a full array of products in larger geographic
areas. We seek comment on whether and how to achieve this objective,
including whether to achieve it through regulation, and if so, how our
regulations should be revised for this purpose.
Section 147.102(e) provides for a uniform age curve in each State.
When a State does not specify an age curve, a Federal default uniform
age curve will apply. We are investigating the child age rating factor
in the Federal uniform age curve, and seek to determine whether the
default factor is appropriate, or fails to adequately differentiate the
health risk of children of different ages. We seek comment and data on
the most appropriate child age curve, and the policy reasons underlying
any recommendation.
2. Guaranteed Availability of Coverage (Sec. 147.104)
a. Product Discontinuance and Market Withdrawal Exceptions to
Guaranteed Availability
Section 147.104 includes several exceptions to the guaranteed
availability requirement. We have been asked whether there is an
exception to this requirement in the small group, large group, and
individual markets when an issuer avails itself of the exception to the
guaranteed renewability requirement in Sec. 147.106(c) (discontinuing
a particular product), or in Sec. 147.106(d) (discontinuing all
coverage). The exception to the guaranteed renewability requirement in
Sec. 147.106(c) requires an issuer to provide notice in writing, in a
form and manner specified by the Secretary, to each plan sponsor or
individual, as applicable, (and to all participants and beneficiaries
covered under such coverage) of the discontinuation at least 90
calendar days before the date the coverage will be discontinued. The
exception to the guaranteed renewability requirement in Sec.
147.106(d) requires an issuer to provide notice in writing to the
applicable State authority and to each plan sponsor or individual, as
applicable (and to all participants and beneficiaries covered under the
coverage) of the discontinuation at least 180 calendar days prior to
the date the coverage will be discontinued. We have been asked whether
the guaranteed availability requirement requires health insurance
issuers discontinuing a product, or all coverage, to guarantee the
availability of coverage during these 90- and 180-day (or other
applicable) time periods. We do not believe an issuer should be
required to guarantee the availability of a product the issuer is in
the process of discontinuing, while the issuer is attempting to wind
down its operations for that product. Therefore, we propose to
redesignate paragraphs (e) through (i) as (f) through (j), and add a
new paragraph (e) to Sec. 147.104, providing for an exception to the
guaranteed availability requirement when the exceptions to the
guaranteed renewability requirement in Sec. 147.106(c) or (d) related
to discontinuing a particular product, or the exception related to
discontinuing all coverage in a market, apply. The exception would be
effective for the duration of the notice periods discussed above. We
acknowledge that the statute does not expressly contain such an
exception to the guaranteed availability requirement. However, the
statutory requirement under the guaranteed renewability

[[Page 75497]]

provision requires issuers to provide at least 90-day or 180-day
advance notice to enrollees prior to discontinuation of the coverage.
If additional consumers continue to enroll after notice is given, the
issuer would not be able to provide the required advance notice to
these new enrollees before discontinuing coverage. Accordingly, we are
interpreting the interaction between the guaranteed availability and
guaranteed renewability provisions to permit an issuer to deny
enrollments during the applicable product discontinuance or market
withdrawal notice period. However, we propose in paragraph (e)(3) that
this exception does not relieve issuers of their obligations to
existing policyholders, such as enrolling dependents under a special
enrollment right during the 90-day or 180-day period.
We understand that some States may wish issuers to guarantee the
availability of products until the end of the applicable notice period,
and any such requirement would continue to apply.
We also propose a new paragraph (e)(2), under which an issuer that
denies coverage under these provisions must apply the denial uniformly
to all employers or individuals in the large group, small group, or
individual market, as applicable, in the State consistent with
applicable State law, and without regard to the claims experience or
any health-status related factor relating to those individuals or
employers and their employees (or their respective dependents).
We seek comment on these proposals.
b. Minimum Participation and Contribution Rules
Section 2702 of the PHS Act generally requires health insurance
issuers in the group and individual markets to guarantee the
availability of coverage. In the 2014 Market Rules final rule, we
determined that small employers accordingly could not be denied
coverage for failure to satisfy minimum participation or contribution
requirements. In recognition of the potential for adverse selection,
however, under our authority to define open enrollment periods at Sec.
147.104, we permitted health insurance issuers offering non-
grandfathered plans in the small group market to limit the availability
of coverage to small employers that do not meet an issuer's employer
contribution or group participation rules to an annual enrollment
period of November 15 to December 15 of each year. We continue to
recognize that the use of minimum participation or contribution rules
to limit when coverage can be obtained can guard against adverse
selection, in that some employers might wait to purchase insurance only
when medical need arises. We also acknowledge the possibility that
minimum contribution rules might promote employee take-up and help
spread insurance risk across a broad and diverse pool of individuals.
However, several features of the Affordable Care Act make participation
and contribution rules less relevant, including the individual shared
responsibility provisions, under which non-exempt individuals must
maintain minimum essential coverage (such as might be available through
a group health plan) or make an individual shared responsibility
payment, and the employer shared responsibility provisions, under which
applicable large employers (in general, employers with at least 50
full-time employees (including full-time equivalent employees)) must
either offer coverage that is affordable and that provides minimum
value to their full-time employees (and their dependents) or
potentially make an assessable payment to the IRS.
Based on our experience since the finalization of the rule
providing for the November 15 to December 15 enrollment window, we are
concerned that the limitation of the enrollment window could result in
some applicable large employers that intend to avoid an employer shared
responsibility payment by offering coverage being unable to reasonably
offer coverage, if a State were to expand the small group market to
include employers with up to 100 employees.
In recognition of this dynamic, we note that a State electing to
expand its small group market to include employers with up to 100
employees may opt, under its own authority, to prohibit a small group
health insurance issuer from restricting the availability of small
group coverage based on employer contribution or group participation
rules. Alternatively, in cases where a State expands the definition of
a small employer to include up to 100 employees, we could amend the
guaranteed availability regulations, with respect to small employers
with 51-100 employees or with respect to all small employers
altogether, to achieve this objective. We seek comment on such an
approach.
3. Guaranteed Renewability of Coverage (Sec. 147.106)
The guaranteed renewability provisions of title XXVII of the PHS
Act provide that an issuer may discontinue a product offered in the
group or individual market if the issuer offers to each plan sponsor or
individual who is enrolled in that particular product the option to
purchase all (or, in the case of the large group market, any) other
health insurance coverage currently being offered by the issuer in that
market, and complies with other requirements of those sections, as well
as with any applicable State law. Title XXVII of the PHS Act includes
several exceptions to the guaranteed renewability provisions, including
when a group health plan sponsor has violated a material plan provision
relating to employer contribution or group participation rules,
provided applicable State law allows an exception to guaranteed
renewability under such circumstances; and for coverage made available
in the individual market, or small or large group market only through
one or more bona fide associations, if the individual's or employer's
membership in the association ceases. Although the Affordable Care Act
removed from title XXVII these exceptions as they applied to guaranteed
availability, it did not do so with respect to guaranteed renewability.
Therefore, a large employer whose coverage is non-renewed for one of
these reasons, and a small employer whose coverage is non-renewed due
to membership ceasing in an association, could be seen to have a right
to immediately purchase that same coverage (if available in the market)
from that same issuer in accordance with guaranteed availability. This
renders effectively meaningless these two exceptions to guaranteed
renewability in these contexts. To address this potential ambiguity
regarding the interplay between guaranteed renewability and guaranteed
availability, we propose to remove these guaranteed renewability
exceptions from the regulations at Sec. 147.106. We seek comment on
other ways in which this ambiguity could be addressed.
4. Student Health Insurance Coverage (Sec. 147.145)
a. Index Rate Setting Methodology for Student Health Insurance Coverage
Under 45 CFR 147.145, student health insurance coverage is a type
of individual health insurance coverage that, subject to limited
exceptions, must comply with the PHS Act requirements that apply to
individual health insurance coverage. However, section 1560(c) of the
Affordable Care Act provides that nothing in title I of the Affordable
Care Act (or an amendment made by title I) is to be construed to
prohibit an institution of higher

[[Page 75498]]

education from offering a student health insurance plan to the extent
that the requirement is otherwise permitted under applicable Federal,
State, or local law. HHS has exercised its authority under section
1560(c) to modify some of its rules as applied to student health
insurance coverage, including those related to the guaranteed
availability, guaranteed renewability, and single risk pool
requirements.
Our intent in exempting student health insurance coverage from the
single risk pool requirement was to provide that student health
insurance issuers need not include their student health insurance
coverage in their overall individual market (or merged market) risk
pool, and also need not have one single risk pool composed of their
total statewide book of student health insurance business. Rather, we
intended that issuers could establish separate risk pools from their
individual health insurance market single risk pool (or merged market
risk pool, where applicable) for student health insurance coverage,
including by establishing separate risk pools for different
institutions of higher education, or multiple risk pools within a
single institution, provided the risk pools were based on a bona fide
school-related classification (for example, graduate students and
undergraduate students) and not a health status-related factor as
described in Sec. 146.121. However, we have learned that student
health insurance issuers may be using certain rating factors that would
be prohibited under the single risk pool regulation in Sec. 156.80(d)
to establish rates for institutions of higher education, on the basis
that student health insurance coverage has been exempted from those
single risk pool index rating requirements under our regulations.
Examples of such rating factors include the percentage of students
enrolled in the coverage, or the length of time the college or
university has had coverage through the issuer. Section 156.80(d)
requires a health insurance issuer to base its index rate only on the
total combined claims costs for providing EHB (subject to certain
adjustments).
We do not intend to disrupt rate setting for student health
insurance, but we do seek to ensure that rates are based on actuarially
justified factors. To clarify our intent, we propose, for plan years
beginning on or after January 1, 2017, that student health insurance
coverage be subject to the index rate setting methodology of the single
risk pool provision in the regulation at Sec. 156.80(d). However,
student health insurance issuers still would be permitted to establish
separate risk pools from their individual health insurance market
single risk pool (or merged market risk pool, where applicable) for
student health insurance coverage, including by establishing separate
risk pools for different institutions of higher education, or multiple
risk pools within a single institution, provided they are based on a
bona fide school-related classification (for example, graduate students
and undergraduate students) and not a health status-related factor as
described in Sec. 146.121. Consistent with our single risk pool
policy, the index rates for these risk pools would be based upon
actuarially justified estimates of claims. Permissible plan-level
adjustments to these index rates would be limited to those permitted
under our rules. This approach would continue to allow rates for
student health insurance coverage to reflect the unique characteristics
of the student population at the particular institution, while more
clearly delineating our intent with regard to the treatment of student
health insurance coverage. We seek comment on any potential operational
challenges associated with this proposal, including potential
challenges related to filing rates for student health insurance
coverage and how this policy might be adjusted to address those
challenges.
b. Actuarial Value Requirements for Student Health Insurance Plans
Many colleges and universities have reported to us that they offer
student health insurance plans that are rich in benefits (for example,
providing an actuarial value of 96 percent) and that they are reluctant
to reduce the level of benefits to meet an actuarial value metal level.
Because enrollees in student health insurance plans are not typically
selecting among such plans, there is less need for standardization of
actuarial levels in this part of the individual market. Therefore, we
propose to add an exemption to the requirements for student health
insurance coverage in Sec. 147.145, under which, for plan years
beginning on or after January 1, 2017, student health insurance
coverage would be exempt from the actuarial value requirements under
section 1302(d) of the Affordable Care Act, as implemented in
Sec. Sec. 156.135 and 156.140, but would be required to provide an
actuarial value of at least 60 percent. To determine a plan's actuarial
value for purposes of the application of the 60 percent actuarial value
requirement to student health insurance coverage, we propose to require
student health insurance coverage issuers to obtain certification by an
actuary that the plan provides an actuarial value of at least 60
percent. This determination would be required to be made by a member of
the American Academy of Actuaries, based on analysis in accordance with
generally accepted actuarial principles and methodologies.
We considered making modifications to the AV Calculator for the
purposes of determining the actuarial value for student health
insurance plans. However, the standard population in the AV Calculator
is more diverse than the expected population in student health
insurance plans, such that the AV Calculator's calculations might be
less accurate. That said, we solicit comments on whether the AV
Calculator should be used for this purpose.
We also solicit comments on whether to require student health
insurance issuers to specify, in their SBCs, summary plan descriptions,
enrollment materials, marketing materials, or other materials, the
actuarial value of the coverage, the next lowest metal level the
coverage would otherwise satisfy, based on its actuarial value, or any
other data that would give enrollees and prospective enrollees
information about the actuarial value of the coverage.

D. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment Under the Affordable Care Act

1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2016,\8\ both the transitional
reinsurance program and permanent risk adjustment program are subject
to the fiscal year 2016 sequestration. The Federal government's 2016
fiscal year began on October 1, 2015. The reinsurance program will be
sequestered at a rate of 6.8 percent for payments made from fiscal year
2016 resources (that is, funds collected during the 2016 fiscal year).
To meet the sequestration requirement for the risk adjustment program
for fiscal year 2016, HHS will sequester risk adjustment payments made
using fiscal year 2016 resources in all States where HHS operates risk
adjustment at a sequestration rate of 7.0 percent. HHS estimates that
increasing the sequestration rate for all risk adjustment payments made
in fiscal year 2016 to all issuers in the States where HHS operates
risk adjustment by 0.2 percent will permit HHS to meet the required
national risk adjustment program

[[Page 75499]]

sequestration percentage of 6.8 percent noted in the OMB Report to
Congress.
---------------------------------------------------------------------------

\8\ Available at: https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_jc_sequestration_report_speaker.pdf.
---------------------------------------------------------------------------

HHS, in coordination with the OMB, has determined that, under
section 256(k)(6) of the Balanced Budget and Emergency Deficit Control
Act of 1985, as amended, and the underlying authority for these
programs, the funds that are sequestered in fiscal year 2016 from the
reinsurance and risk adjustment programs will become available for
payment to issuers in fiscal year 2017 without further Congressional
action. If the Congress does not enact deficit reduction provisions
that replace the Joint Committee reductions, these programs would be
sequestered in future fiscal years, and any sequestered funding would
become available in the fiscal year following that in which it was
sequestered.
2. Provisions and Parameters for the Permanent Risk Adjustment Program
In subparts D and G of 45 CFR part 153, we established standards
for the administration of the 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 accordance with Sec. 153.310(a), 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. Overview of the HHS Risk Adjustment Model (Sec. 153.320)
The HHS risk adjustment model predicts plan liability for an
average enrollee based on that person's age, sex, and diagnoses (risk
factors), producing a risk score. The HHS risk adjustment methodology
utilizes separate models for adults, children, and infants to account
for cost differences in each of these age groups. In each of the adult
and child models, the relative costs assigned to an individual's age,
sex, and diagnoses are added together to produce a risk score. Infant
risk scores are determined by inclusion in one of 25 mutually exclusive
groups, based on the infant's maturity and the severity of its
diagnoses. If applicable, the risk score is multiplied by a cost-
sharing reduction adjustment.
The enrollment-weighted average risk score of all enrollees in a
particular risk adjustment-covered plan, or the plan liability risk
score, within a geographic rating area is one of the inputs into the
risk adjustment payment transfer formula, which determines the payment
or charge that an issuer will receive or be required to pay for that
plan. Thus, the HHS risk adjustment model predicts average group costs
to account for risk across plans, which, as we stated in the 2014
Payment Notice, accords with the Actuarial Standards Board's Actuarial
Standards of Practice for risk classification.
b. Proposed Updates to the Risk Adjustment Model (Sec. 153.320)
We propose to continue to use the same risk adjustment methodology
finalized in the 2014 Payment Notice. We propose to make certain
updates to the risk adjustment model to incorporate preventive services
into our simulation of plan liability, and to reflect more current
data. The proposed data updates are similar to the ones we effectuated
for 2016 risk adjustment in the 2016 Payment Notice. We propose to
recalculate the weights assigned to the various hierarchical condition
categories (HCCs) and demographic factors in our risk adjustment models
using the most recent data available. As we previously described, in
the adult and child models, enrollee health risks are estimated using
the HHS risk adjustment model, which assigns a set of additive factors
that reflect the relative costs attributable to demographics and
diagnoses. Risk adjustment factors are developed using claims data and
reflect the costs of a given disease relative to average spending. The
longer the lag in data used to develop the risk factors, the greater
the potential that the costs of treating one disease versus another
have changed in a manner not fully reflected in the risk factors.
To provide risk adjustment factors that best reflect more recent
treatment patterns and costs, we propose to recalibrate the HHS risk
adjustment models for 2017 by using more recent claims data to develop
updated risk factors. The risk factors published in the 2016 Payment
Notice for use in 2016 were developed using the Truven Health Analytics
2011, 2012 and 2013 MarketScan[supreg] Commercial Claims and Encounters
database (MarketScan); we are proposing to update the risk factors in
the HHS risk adjustment model using 2012, 2013, and 2014 MarketScan
data. We would publish and finalize the updated factors in the final
rule. We seek comment on this proposal.
We are proposing to incorporate preventive services into our
simulation of plan liability in the recalibration of the risk
adjustment models for 2017. We identified preventive services for the
2012 and 2013 MarketScan samples using procedure and diagnosis codes,
prescription drug therapeutic classes, and enrollee age and sex. We
relied on lists of preventive services from several major issuers, the
preventive services used for the AV Calculator, and Medicare's
preventive services benefit to operationalize preventive services
definitions for incorporation in the risk adjustment models. We then
adjusted plan liability by adding 100 percent of preventive services
covered charges to simulate plan liability for all metal levels. We
also applied standard benefit cost sharing rules by metal level to
covered charges for non-preventive services. Total adjusted simulated
plan liability is the sum of preventive services covered charges, and
non-preventive services simulated plan liability.
We re-estimated the risk adjustment models by metal level,
predicting plan liability adjusted to account for preventive services
without cost sharing. We compared the model coefficients predicting
original (that is, non-adjusted for preventive services) and adjusted
simulated plan liability. Adjusting for preventive services increases
age-sex coefficients relative to HCC coefficients, especially in the
higher cost-sharing metal tiers (bronze and silver), and in age/sex
ranges with high preventive services expenditures (for example, young
adult females). The implication of the changes to the model
coefficients is that the risk scores of healthy enrollees (whose risk
scores are based solely on model age-sex coefficients) will likely rise
relative to the risk scores of the less healthy (whose risk scores
include one or more HCC coefficients in addition to an age-sex
coefficient), especially in bronze and silver plans. As a result of the
risk score changes for individuals, we expect that the incorporation of
preventive services would increase the risk scores of bronze and silver
plans with healthier enrollees relative to other plans' risk scores
when preventive services are taken into account. This incorporation of
preventive services will more accurately compensate risk adjustment
covered plans with enrollees who use preventive services. We seek
comment on this approach.
Additionally, we are evaluating how we may incorporate prescription
drug data in the Federally certified risk adjustment methodology that
HHS uses when it operates risk adjustment. Prescription drug data could
be used in the risk adjustment methodology to supplement diagnostic
data by using the prescription drug data as a severity indicator, or as
a proxy for diagnoses is in cases where diagnostic data are likely

[[Page 75500]]

to be incomplete. We are assessing these approaches, with particular
sensitivity to reliability and the potential for strategic behavior
with respect to prescribing behavior. As we noted in the 2014 Payment
Notice, we did not include prescription drugs to predict expenditures
to avoid creating adverse incentives to modify discretionary
prescribing. We are evaluating whether we can improve the models'
predictive power through the incorporation of prescription drugs
without unduly incentivizing altered prescribing behavior. We seek
comment and any data that may inform effective methods of incorporating
prescription drug data in future recalibrations.
Similarly, we believe we could more accurately account for high-
cost conditions with new treatments that are not reflected in our model
due to lags in the data available to us for recalibration. We believe
that stability across our models is important, but seek comment and
data that may inform better methods of accurately compensating for new
treatments for high cost conditions. For example, we seek comment on
whether there are ways to model the severity of these conditions in a
manner that will more fully capture the highest cost enrollees.
Lastly, we would like to explore the effect of partial year
enrollment in the HHS risk adjustment methodology. We have received
input that issuers are experiencing higher than expected claims costs
for partial-year enrollees. We have also received input that the
methodology does not capture enrollees with chronic conditions who may
not have accumulated diagnoses in their partial year enrollment. At the
same time, as compared to full year enrollees of the same relative
risk, partial year enrollees are less likely to have spending that
exceeds the deductible or annual limitation on cost sharing. We seek
comment and data on how the methodology could be made more predictive
for partial year enrollees.
c. List of Factors To Be Employed in the Model (Sec. 153.320)
The HHS risk adjustment models predict annualized plan liability
expenditures using age and sex categories and the HHS HCCs included in
the HHS risk adjustment model. Dollar coefficients were estimated for
these factors using weighted least squares regression, where the weight
was the fraction of the year enrolled.
We are including the same HCCs that were included in the original
risk adjustment calibration in the 2014 Payment Notice. For each model,
the factors are the statistical regression dollar values for each HCC
in the model divided by a weighted average plan liability for the full
modeling sample. The factors represent the predicted relative
incremental expenditures for each HCC. The proposed factors resulting
from the blended factors from the 2012 and 2013 separately solved
models (with the incorporation of preventive services) are shown in the
tables below. For a given enrollee, the sums of the factors for the
enrollee's HCCs are the total relative predicted expenditures for that
enrollee. Table 1 contains factors for each adult model, including the
interactions. Table 2 contains the HHS HHCs in the severity illness
indicator variable. Table 3 contains the factors for each child model.
Table 4 contains the factors for each infant model.

Table 1--Adult Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male............................... 0.242 0.183 0.117 0.077 0.076
Age 25-29, Male............................... 0.249 0.186 0.117 0.074 0.073
Age 30-34, Male............................... 0.296 0.220 0.135 0.082 0.080
Age 35-39, Male............................... 0.356 0.268 0.170 0.104 0.103
Age 40-44, Male............................... 0.435 0.335 0.221 0.143 0.142
Age 45-49, Male............................... 0.518 0.405 0.277 0.188 0.186
Age 50-54, Male............................... 0.662 0.531 0.380 0.274 0.272
Age 55-59, Male............................... 0.755 0.607 0.439 0.318 0.316
Age 60-64, Male............................... 0.907 0.733 0.538 0.395 0.392
Age 21-24, Female............................. 0.404 0.315 0.211 0.144 0.143
Age 25-29, Female............................. 0.491 0.383 0.262 0.181 0.180
Age 30-34, Female............................. 0.613 0.488 0.350 0.259 0.257
Age 35-39, Female............................. 0.704 0.570 0.423 0.327 0.325
Age 40-44, Female............................. 0.785 0.638 0.477 0.369 0.367
Age 45-49, Female............................. 0.802 0.649 0.480 0.364 0.362
Age 50-54, Female............................. 0.905 0.739 0.554 0.421 0.419
Age 55-59, Female............................. 0.921 0.748 0.554 0.412 0.409
Age 60-64, Female............................. 1.003 0.814 0.601 0.445 0.442
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS...................................... 5.924 5.438 5.099 5.113 5.114
Septicemia, Sepsis, Systemic Inflammatory 11.809 11.632 11.526 11.587 11.589
Response Syndrome/Shock......................
Central Nervous System Infections, Except 7.068 6.960 6.891 6.914 6.914
Viral Meningitis.............................
Viral or Unspecified Meningitis............... 4.995 4.743 4.574 4.530 4.530
Opportunistic Infections...................... 9.345 9.238 9.168 9.156 9.156
Metastatic Cancer............................. 24.911 24.456 24.139 24.207 24.209
Lung, Brain, and Other Severe Cancers, 11.344 10.991 10.744 10.751 10.752
Including Pediatric Acute Lymphoid Leukemia..
Non-Hodgkin`s Lymphomas and Other Cancers and 6.079 5.829 5.643 5.597 5.596
Tumors.......................................
Colorectal, Breast (Age <50), Kidney, and 5.522 5.272 5.082 5.034 5.034
Other Cancers................................
Breast (Age 50+) and Prostate Cancer, Benign/ 3.188 3.005 2.861 2.807 2.806
Uncertain Brain Tumors, and Other Cancers and
Tumors.......................................
Thyroid Cancer, Melanoma, Neurofibromatosis, 1.556 1.392 1.248 1.153 1.152
and Other Cancers and Tumors.................

[[Page 75501]]

Pancreas Transplant Status/Complications...... 5.898 5.665 5.517 5.542 5.543
Diabetes with Acute Complications............. 1.261 1.113 0.984 0.875 0.873
Diabetes with Chronic Complications........... 1.261 1.113 0.984 0.875 0.873
Diabetes without Complication................. 1.261 1.113 0.984 0.875 0.873
Protein-Calorie Malnutrition.................. 14.543 14.553 14.565 14.629 14.630
Mucopolysaccharidosis......................... 2.246 2.121 2.018 1.963 1.962
Lipidoses and Glycogenosis.................... 2.246 2.121 2.018 1.963 1.962
Amyloidosis, Porphyria, and Other Metabolic 2.246 2.121 2.018 1.963 1.962
Disorders....................................
Adrenal, Pituitary, and Other Significant 2.246 2.121 2.018 1.963 1.962
Endocrine Disorders..........................
Liver Transplant Status/Complications......... 15.618 15.437 15.325 15.338 15.339
End-Stage Liver Disease....................... 5.957 5.705 5.543 5.560 5.561
Cirrhosis of Liver............................ 2.417 2.245 2.128 2.094 2.093
Chronic Hepatitis............................. 2.212 2.059 1.942 1.881 1.880
Acute Liver Failure/Disease, Including 4.584 4.410 4.290 4.284 4.284
Neonatal Hepatitis...........................
Intestine Transplant Status/Complications..... 35.083 35.028 34.981 35.010 35.009
Peritonitis/Gastrointestinal Perforation/ 12.704 12.429 12.241 12.279 12.279
Necrotizing Enterocolitis....................
Intestinal Obstruction........................ 6.960 6.679 6.497 6.526 6.527
Chronic Pancreatitis.......................... 5.898 5.665 5.517 5.542 5.543
Acute Pancreatitis/Other Pancreatic Disorders 2.929 2.728 2.583 2.538 2.537
and Intestinal Malabsorption.................
Inflammatory Bowel Disease.................... 3.154 2.884 2.680 2.572 2.571
Necrotizing Fasciitis......................... 7.009 6.797 6.650 6.671 6.671
Bone/Joint/Muscle Infections/Necrosis......... 7.009 6.797 6.650 6.671 6.671
Rheumatoid Arthritis and Specified Autoimmune 3.718 3.455 3.263 3.242 3.242
Disorders....................................
Systemic Lupus Erythematosus and Other 1.235 1.092 0.968 0.880 0.879
Autoimmune Disorders.........................
Osteogenesis Imperfecta and Other 3.474 3.263 3.094 3.035 3.034
Osteodystrophies.............................
Congenital/Developmental Skeletal and 3.474 3.263 3.094 3.035 3.034
Connective Tissue Disorders..................
Cleft Lip/Cleft Palate........................ 1.507 1.336 1.200 1.130 1.130
Hemophilia.................................... 42.711 42.402 42.168 42.178 42.179
Myelodysplastic Syndromes and Myelofibrosis... 12.218 12.073 11.973 11.984 11.985
Aplastic Anemia............................... 12.218 12.073 11.973 11.984 11.985
Acquired Hemolytic Anemia, Including Hemolytic 9.749 9.576 9.446 9.441 9.441
Disease of Newborn...........................
Sickle Cell Anemia (Hb-SS).................... 9.749 9.576 9.446 9.441 9.441
Thalassemia Major............................. 9.749 9.576 9.446 9.441 9.441
Combined and Other Severe Immunodeficiencies.. 5.252 5.095 4.985 4.991 4.992
Disorders of the Immune Mechanism............. 5.252 5.095 4.985 4.991 4.992
Coagulation Defects and Other Specified 2.989 2.884 2.801 2.774 2.773
Hematological Disorders......................
Drug Psychosis................................ 3.809 3.542 3.340 3.241 3.240
Drug Dependence............................... 3.809 3.542 3.340 3.241 3.240
Schizophrenia................................. 3.100 2.840 2.647 2.568 2.567
Major Depressive and Bipolar Disorders........ 1.777 1.601 1.450 1.346 1.344
Reactive and Unspecified Psychosis, Delusional 1.777 1.601 1.450 1.346 1.344
Disorders....................................
Personality Disorders......................... 1.188 1.050 0.913 0.805 0.803
Anorexia/Bulimia Nervosa...................... 2.786 2.612 2.469 2.406 2.405
Prader-Willi, Patau, Edwards, and Autosomal 2.824 2.684 2.579 2.531 2.531
Deletion Syndromes...........................
Down Syndrome, Fragile X, Other Chromosomal 1.042 0.933 0.828 0.752 0.751
Anomalies, and Congenital Malformation
Syndromes....................................
Autistic Disorder............................. 1.188 1.050 0.913 0.805 0.803
Pervasive Developmental Disorders, Except 1.188 1.050 0.913 0.805 0.803
Autistic Disorder............................
Traumatic Complete Lesion Cervical Spinal Cord 13.957 13.787 13.663 13.665 13.666
Quadriplegia.................................. 13.957 13.787 13.663 13.665 13.666
Traumatic Complete Lesion Dorsal Spinal Cord.. 10.170 10.005 9.884 9.875 9.875
Paraplegia.................................... 10.170 10.005 9.884 9.875 9.875
Spinal Cord Disorders/Injuries................ 6.086 5.864 5.707 5.679 5.679
Amyotrophic Lateral Sclerosis and Other 3.246 2.997 2.827 2.787 2.788
Anterior Horn Cell Disease...................
Quadriplegic Cerebral Palsy................... 1.400 1.183 1.020 0.960 0.959
Cerebral Palsy, Except Quadriplegic........... 0.000 0.000 0.000 0.000 0.000
Spina Bifida and Other Brain/Spinal/Nervous 0.126 0.033 0.000 0.000 0.000
System Congenital Anomalies..................
Myasthenia Gravis/Myoneural Disorders and 5.285 5.129 5.018 4.995 4.995
Guillain-Barre Syndrome/Inflammatory and
Toxic Neuropathy.............................
Muscular Dystrophy............................ 2.211 2.034 1.907 1.835 1.834
Multiple Sclerosis............................ 9.367 8.954 8.667 8.708 8.710
Parkinson's, Huntington's, and Spinocerebellar 2.211 2.034 1.907 1.835 1.834
Disease, and Other Neurodegenerative
Disorders....................................
Seizure Disorders and Convulsions............. 1.485 1.319 1.184 1.109 1.108
Hydrocephalus................................. 7.352 7.229 7.123 7.098 7.097
Non-Traumatic Coma, and Brain Compression/ 9.834 9.691 9.579 9.574 9.574
Anoxic Damage................................
Respirator Dependence/Tracheostomy Status..... 37.369 37.364 37.365 37.433 37.434
Respiratory Arrest............................ 11.456 11.296 11.192 11.262 11.264
Cardio-Respiratory Failure and Shock, 11.456 11.296 11.192 11.262 11.264
Including Respiratory Distress Syndromes.....

[[Page 75502]]

Heart Assistive Device/Artificial Heart....... 35.695 35.429 35.257 35.324 35.325
Heart Transplant.............................. 35.695 35.429 35.257 35.324 35.325
Congestive Heart Failure...................... 3.387 3.271 3.190 3.186 3.186
Acute Myocardial Infarction................... 10.835 10.482 10.255 10.380 10.382
Unstable Angina and Other Acute Ischemic Heart 5.666 5.370 5.186 5.209 5.210
Disease......................................
Heart Infection/Inflammation, Except Rheumatic 6.510 6.365 6.260 6.240 6.239
Specified Heart Arrhythmias................... 3.099 2.940 2.818 2.765 2.764
Intracranial Hemorrhage....................... 10.244 9.944 9.743 9.761 9.761
Ischemic or Unspecified Stroke................ 3.640 3.440 3.319 3.331 3.332
Cerebral Aneurysm and Arteriovenous 4.354 4.138 3.986 3.947 3.946
Malformation.................................
Hemiplegia/Hemiparesis........................ 6.079 5.979 5.919 5.967 5.967
Monoplegia, Other Paralytic Syndromes......... 3.944 3.803 3.705 3.688 3.688
Atherosclerosis of the Extremities with 11.784 11.679 11.619 11.694 11.695
Ulceration or Gangrene.......................
Vascular Disease with Complications........... 8.222 8.025 7.892 7.898 7.898
Pulmonary Embolism and Deep Vein Thrombosis... 4.155 3.978 3.852 3.829 3.829
Lung Transplant Status/Complications.......... 35.331 35.127 34.994 35.078 35.080
Cystic Fibrosis............................... 12.237 11.906 11.656 11.667 11.667
Chronic Obstructive Pulmonary Disease, 1.009 0.883 0.768 0.687 0.686
Including Bronchiectasis.....................
Asthma........................................ 1.009 0.883 0.768 0.687 0.686
Fibrosis of Lung and Other Lung Disorders..... 2.091 1.961 1.867 1.828 1.827
Aspiration and Specified Bacterial Pneumonias 8.033 7.949 7.895 7.913 7.914
and Other Severe Lung Infections.............
Kidney Transplant Status...................... 10.464 10.180 9.997 9.991 9.991
End Stage Renal Disease....................... 40.683 40.431 40.270 40.401 40.403
Chronic Kidney Disease, Stage 5............... 2.212 2.102 2.031 2.026 2.026
Chronic Kidney Disease, Severe (Stage 4)...... 2.212 2.102 2.031 2.026 2.026
Ectopic and Molar Pregnancy, Except with Renal 1.372 1.177 0.993 0.798 0.794
Failure, Shock, or Embolism..................
Miscarriage with Complications................ 1.372 1.177 0.993 0.798 0.794
Miscarriage with No or Minor Complications.... 1.372 1.177 0.993 0.798 0.794
Completed Pregnancy With Major Complications.. 3.837 3.331 3.033 2.879 2.880
Completed Pregnancy With Complications........ 3.837 3.331 3.033 2.879 2.880
Completed Pregnancy with No or Minor 3.837 3.331 3.033 2.879 2.880
Complications................................
Chronic Ulcer of Skin, Except Pressure........ 2.399 2.270 2.183 2.168 2.168
Hip Fractures and Pathological Vertebral or 9.757 9.532 9.381 9.425 9.426
Humerus Fractures............................
Pathological Fractures, Except of Vertebrae, 1.951 1.817 1.700 1.626 1.624
Hip, or Humerus..............................
Stem Cell, Including Bone Marrow, Transplant 32.229 32.225 32.223 32.243 32.243
Status/Complications.........................
Artificial Openings for Feeding or Elimination 10.912 10.812 10.748 10.791 10.792
Amputation Status, Lower Limb/Amputation 6.029 5.865 5.760 5.790 5.791
Complications................................
----------------------------------------------------------------------------------------------------------------
Interaction Factors
----------------------------------------------------------------------------------------------------------------
Severe illness x Opportunistic Infections..... 11.440 11.678 11.854 11.949 11.950
Severe illness x Metastatic Cancer............ 11.440 11.678 11.854 11.949 11.950
Severe illness x Lung, Brain, and Other Severe 11.440 11.678 11.854 11.949 11.950
Cancers, Including Pediatric Acute Lymphoid
Leukemia.....................................
Severe illness x Non-Hodgkin's Lymphomas and 11.440 11.678 11.854 11.949 11.950
Other Cancers and Tumors.....................
Severe illness x Myasthenia Gravis/Myoneural 11.440 11.678 11.854 11.949 11.950
Disorders and Guillain-Barre Syndrome/
Inflammatory and Toxic Neuropathy............
Severe illness x Heart Infection/Inflammation, 11.440 11.678 11.854 11.949 11.950
Except Rheumatic.............................
Severe illness x Intracranial Hemorrhage...... 11.440 11.678 11.854 11.949 11.950
Severe illness x HCC group G06 (G06 is HCC 11.440 11.678 11.854 11.949 11.950
Group 6 which includes the following HCCs in
the blood disease category: 67, 68)..........
Severe illness x HCC group G08 (G08 is HCC 11.440 11.678 11.854 11.949 11.950
Group 8 which includes the following HCCs in
the blood disease category: 73, 74)..........
Severe illness x End-Stage Liver Disease...... 2.193 2.336 2.443 2.529 2.530
Severe illness x Acute Liver Failure/Disease, 2.193 2.336 2.443 2.529 2.530
Including Neonatal Hepatitis.................
Severe illness x Atherosclerosis of the 2.193 2.336 2.443 2.529 2.530
Extremities with Ulceration or Gangrene......
Severe illness x Vascular Disease with 2.193 2.336 2.443 2.529 2.530
Complications................................
Severe illness x Aspiration and Specified 2.193 2.336 2.443 2.529 2.530
Bacterial Pneumonias and Other Severe Lung
Infections...................................
Severe illness x Artificial Openings for 2.193 2.336 2.443 2.529 2.530
Feeding or Elimination.......................
Severe illness x HCC group G03 (G03 is HCC 2.193 2.336 2.443 2.529 2.530
Group 3 which includes the following HCCs in
the musculoskeletal disease category: 54, 55)
----------------------------------------------------------------------------------------------------------------

[[Page 75503]]

Table 2--HHS HCCs in the Severity Illness Indicator Variable
------------------------------------------------------------------------
Description
-------------------------------------------------------------------------
Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.
Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis.
Seizure Disorders and Convulsions.
Non-Traumatic Coma, Brain Compression/Anoxic Damage.
Respirator Dependence/Tracheostomy Status.
Respiratory Arrest.
Cardio-Respiratory Failure and Shock, Including Respiratory Distress
Syndromes.
Pulmonary Embolism and Deep Vein Thrombosis.
------------------------------------------------------------------------

Table 3--Child Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male................................. 0.251 0.167 0.082 0.032 0.031
Age 5-9, Male................................. 0.176 0.113 0.048 0.012 0.011
Age 10-14, Male............................... 0.224 0.158 0.084 0.045 0.044
Age 15-20, Male............................... 0.290 0.216 0.134 0.084 0.083
Age 2-4, Female............................... 0.205 0.131 0.061 0.024 0.024
Age 5-9, Female............................... 0.140 0.086 0.033 0.006 0.005
Age 10-14, Female............................. 0.210 0.148 0.083 0.050 0.050
Age 15-20, Female............................. 0.348 0.262 0.165 0.105 0.104
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS...................................... 3.608 3.174 2.855 2.743 2.742
Septicemia, Sepsis, Systemic Inflammatory 18.093 17.932 17.830 17.855 17.856
Response Syndrome/Shock......................
Central Nervous System Infections, Except 12.330 12.136 11.998 12.005 12.005
Viral Meningitis.............................
Viral or Unspecified Meningitis............... 3.826 3.606 3.444 3.341 3.340
Opportunistic Infections...................... 23.638 23.563 23.513 23.505 23.505
Metastatic Cancer............................. 38.499 38.239 38.029 38.030 38.030
Lung, Brain, and Other Severe Cancers, 13.275 12.966 12.718 12.660 12.660
Including Pediatric Acute Lymphoid Leukemia..
Non-Hodgkin's Lymphomas and Other Cancers and 9.665 9.384 9.151 9.061 9.060
Tumors.......................................
Colorectal, Breast (Age <50), Kidney, and 3.995 3.755 3.539 3.419 3.417
Other Cancers................................
Breast (Age 50+) and Prostate Cancer, Benign/ 3.123 2.910 2.725 2.614 2.612
Uncertain Brain Tumors, and Other Cancers and
Tumors.......................................
Thyroid Cancer, Melanoma, Neurofibromatosis, 1.892 1.713 1.548 1.438 1.436
and Other Cancers and Tumors.................
Pancreas Transplant Status/Complications...... 33.115 32.960 32.863 32.876 32.877
Diabetes with Acute Complications............. 2.630 2.290 2.028 1.773 1.770
Diabetes with Chronic Complications........... 2.630 2.290 2.028 1.773 1.770
Diabetes without Complication................. 2.630 2.290 2.028 1.773 1.770
Protein-Calorie Malnutrition.................. 14.811 14.720 14.655 14.683 14.683
Mucopolysaccharidosis......................... 6.419 6.134 5.907 5.866 5.865
Lipidoses and Glycogenosis.................... 6.419 6.134 5.907 5.866 5.865
Congenital Metabolic Disorders, Not Elsewhere 6.419 6.134 5.907 5.866 5.865
Classified...................................
Amyloidosis, Porphyria, and Other Metabolic 6.419 6.134 5.907 5.866 5.865
Disorders....................................
Adrenal, Pituitary, and Other Significant 6.419 6.134 5.907 5.866 5.865
Endocrine Disorders..........................
Liver Transplant Status/Complications......... 33.115 32.960 32.863 32.876 32.877
End-Stage Liver Disease....................... 13.699 13.535 13.419 13.421 13.422
Cirrhosis of Liver............................ 12.715 12.528 12.391 12.343 12.344
Chronic Hepatitis............................. 1.566 1.405 1.257 1.186 1.185
Acute Liver Failure/Disease, Including 13.286 13.119 12.987 12.966 12.967
Neonatal Hepatitis...........................
Intestine Transplant Status/Complications..... 33.115 32.960 32.863 32.876 32.877
Peritonitis/Gastrointestinal Perforation/ 16.433 16.077 15.815 15.844 15.845
Necrotizing Enterocolitis....................
Intestinal Obstruction........................ 6.156 5.905 5.705 5.620 5.619
Chronic Pancreatitis.......................... 9.291 9.008 8.815 8.801 8.800
Acute Pancreatitis/Other Pancreatic Disorders 2.803 2.658 2.528 2.436 2.435
and Intestinal Malabsorption.................
Inflammatory Bowel Disease.................... 5.919 5.531 5.229 5.120 5.118
Necrotizing Fasciitis......................... 5.073 4.814 4.608 4.555 4.554
Bone/Joint/Muscle Infections/Necrosis......... 5.073 4.814 4.608 4.555 4.554
Rheumatoid Arthritis and Specified Autoimmune 3.361 3.116 2.901 2.803 2.801
Disorders....................................
Systemic Lupus Erythematosus and Other 1.226 1.061 0.899 0.778 0.776
Autoimmune Disorders.........................
Osteogenesis Imperfecta and Other 1.704 1.565 1.432 1.357 1.356
Osteodystrophies.............................
Congenital/Developmental Skeletal and 1.704 1.565 1.432 1.357 1.356
Connective Tissue Disorders..................
Cleft Lip/Cleft Palate........................ 1.660 1.433 1.242 1.127 1.125
Hemophilia.................................... 56.279 55.780 55.399 55.383 55.384

[[Page 75504]]

Myelodysplastic Syndromes and Myelofibrosis... 17.181 17.007 16.867 16.847 16.847
Aplastic Anemia............................... 17.181 17.007 16.867 16.847 16.847
Acquired Hemolytic Anemia, Including Hemolytic 7.999 7.705 7.476 7.409 7.407
Disease of Newborn...........................
Sickle Cell Anemia (Hb-SS).................... 7.999 7.705 7.476 7.409 7.407
Thalassemia Major............................. 7.999 7.705 7.476 7.409 7.407
Combined and Other Severe Immunodeficiencies.. 6.480 6.287 6.134 6.076 6.075
Disorders of the Immune Mechanism............. 6.480 6.287 6.134 6.076 6.075
Coagulation Defects and Other Specified 5.201 5.051 4.911 4.837 4.835
Hematological Disorders......................
Drug Psychosis................................ 5.249 4.979 4.782 4.717 4.717
Drug Dependence............................... 5.249 4.979 4.782 4.717 4.717
Schizophrenia................................. 5.328 4.926 4.626 4.528 4.527
Major Depressive and Bipolar Disorders........ 1.935 1.707 1.495 1.332 1.329
Reactive and Unspecified Psychosis, Delusional 1.935 1.707 1.495 1.332 1.329
Disorders....................................
Personality Disorders......................... 0.781 0.645 0.486 0.344 0.341
Anorexia/Bulimia Nervosa...................... 2.818 2.603 2.423 2.357 2.356
Prader-Willi, Patau, Edwards, and Autosomal 3.727 3.503 3.351 3.317 3.317
Deletion Syndromes...........................
Down Syndrome, Fragile X, Other Chromosomal 1.555 1.360 1.203 1.114 1.113
Anomalies, and Congenital Malformation
Syndromes....................................
Autistic Disorder............................. 1.867 1.660 1.462 1.308 1.305
Pervasive Developmental Disorders, Except 0.923 0.772 0.592 0.421 0.418
Autistic Disorder............................
Traumatic Complete Lesion Cervical Spinal Cord 13.459 13.418 13.402 13.481 13.482
Quadriplegia.................................. 13.459 13.418 13.402 13.481 13.482
Traumatic Complete Lesion Dorsal Spinal Cord.. 11.430 11.214 11.066 11.066 11.066
Paraplegia.................................... 11.430 11.214 11.066 11.066 11.066
Spinal Cord Disorders/Injuries................ 5.506 5.254 5.060 4.983 4.982
Amyotrophic Lateral Sclerosis and Other 8.929 8.672 8.473 8.435 8.435
Anterior Horn Cell Disease...................
Quadriplegic Cerebral Palsy................... 4.067 3.800 3.630 3.648 3.648
Cerebral Palsy, Except Quadriplegic........... 0.974 0.772 0.616 0.531 0.530
Spina Bifida and Other Brain/Spinal/Nervous 1.210 1.053 0.917 0.845 0.843
System Congenital Anomalies..................
Myasthenia Gravis/Myoneural Disorders and 9.746 9.558 9.412 9.372 9.372
Guillain-Barre Syndrome/Inflammatory and
Toxic Neuropathy.............................
Muscular Dystrophy............................ 3.762 3.552 3.387 3.308 3.307
Multiple Sclerosis............................ 6.689 6.337 6.076 6.037 6.037
Parkinson's, Huntington's, and Spinocerebellar 3.762 3.552 3.387 3.308 3.307
Disease, and Other Neurodegenerative
Disorders....................................
Seizure Disorders and Convulsions............. 2.136 1.942 1.755 1.619 1.617
Hydrocephalus................................. 6.047 5.916 5.820 5.814 5.814
Non-Traumatic Coma, and Brain Compression/ 8.776 8.612 8.487 8.448 8.447
Anoxic Damage................................
Respirator Dependence/Tracheostomy Status..... 42.997 42.897 42.854 42.982 42.984
Respiratory Arrest............................ 13.335 13.131 12.994 12.998 12.998
Cardio-Respiratory Failure and Shock, 13.335 13.131 12.994 12.998 12.998
Including Respiratory Distress Syndromes.....
Heart Assistive Device/Artificial Heart....... 33.115 32.960 32.863 32.876 32.877
Heart Transplant.............................. 33.115 32.960 32.863 32.876 32.877
Congestive Heart Failure...................... 7.307 7.189 7.087 7.047 7.046
Acute Myocardial Infarction................... 11.965 11.749 11.601 11.612 11.613
Unstable Angina and Other Acute Ischemic Heart 6.781 6.652 6.566 6.583 6.584
Disease......................................
Heart Infection/Inflammation, Except Rheumatic 16.783 16.643 16.539 16.519 16.519
Hypoplastic Left Heart Syndrome and Other 6.142 5.922 5.704 5.578 5.575
Severe Congenital Heart Disorders............
Major Congenital Heart/Circulatory Disorders.. 1.945 1.808 1.640 1.529 1.527
Atrial and Ventricular Septal Defects, Patent 1.370 1.252 1.106 1.021 1.019
Ductus Arteriosus, and Other Congenital Heart/
Circulatory Disorders........................
Specified Heart Arrhythmias................... 4.748 4.549 4.375 4.309 4.308
Intracranial Hemorrhage....................... 17.965 17.699 17.514 17.509 17.510
Ischemic or Unspecified Stroke................ 8.807 8.679 8.600 8.623 8.624
Cerebral Aneurysm and Arteriovenous 4.116 3.893 3.725 3.664 3.663
Malformation.................................
Hemiplegia/Hemiparesis........................ 5.352 5.230 5.146 5.127 5.127
Monoplegia, Other Paralytic Syndromes......... 3.500 3.334 3.220 3.178 3.178
Atherosclerosis of the Extremities with 15.636 15.350 15.141 15.046 15.045
Ulceration or Gangrene.......................
Vascular Disease with Complications........... 18.385 18.204 18.079 18.077 18.077
Pulmonary Embolism and Deep Vein Thrombosis... 15.215 15.029 14.908 14.927 14.928
Lung Transplant Status/Complications.......... 33.115 32.960 32.863 32.876 32.877
Cystic Fibrosis............................... 14.859 14.403 14.062 14.084 14.084
Chronic Obstructive Pulmonary Disease, 0.484 0.390 0.262 0.170 0.169
Including Bronchiectasis.....................
Asthma........................................ 0.484 0.390 0.262 0.170 0.169
Fibrosis of Lung and Other Lung Disorders..... 3.395 3.241 3.101 3.038 3.037
Aspiration and Specified Bacterial Pneumonias 9.223 9.149 9.092 9.104 9.104
and Other Severe Lung Infections.............
Kidney Transplant Status...................... 14.429 14.054 13.797 13.798 13.798
End Stage Renal Disease....................... 39.233 39.038 38.913 38.998 38.999

[[Page 75505]]

Chronic Kidney Disease, Stage 5............... 10.493 10.315 10.152 10.039 10.037
Chronic Kidney Disease, Severe (Stage 4)...... 10.493 10.315 10.152 10.039 10.037
Ectopic and Molar Pregnancy, Except with Renal 1.160 0.967 0.768 0.565 0.561
Failure, Shock, or Embolism..................
Miscarriage with Complications................ 1.160 0.967 0.768 0.565 0.561
Miscarriage with No or Minor Complications.... 1.160 0.967 0.768 0.565 0.561
Completed Pregnancy With Major Complications.. 3.354 2.882 2.584 2.386 2.385
Completed Pregnancy With Complications........ 3.354 2.882 2.584 2.386 2.385
Completed Pregnancy with No or Minor 3.354 2.882 2.584 2.386 2.385
Complications................................
Chronic Ulcer of Skin, Except Pressure........ 1.654 1.541 1.428 1.366 1.365
Hip Fractures and Pathological Vertebral or 5.891 5.601 5.355 5.259 5.257
Humerus Fractures............................
Pathological Fractures, Except of Vertebrae, 1.718 1.565 1.392 1.270 1.268
Hip, or Humerus..............................
Stem Cell, Including Bone Marrow, Transplant 33.115 32.960 32.863 32.876 32.877
Status/Complications.........................
Artificial Openings for Feeding or Elimination 15.795 15.698 15.662 15.783 15.785
Amputation Status, Lower Limb/Amputation 8.011 7.729 7.525 7.418 7.416
Complications................................
----------------------------------------------------------------------------------------------------------------

Table 4--Infant Risk Adjustment Models Factors
----------------------------------------------------------------------------------------------------------------
Group Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity Level 5 409.050 407.618 406.498 406.512 406.513
(Highest)....................................
Extremely Immature * Severity Level 4......... 203.011 201.612 200.519 200.501 200.502
Extremely Immature * Severity Level 3......... 54.774 53.619 52.671 52.503 52.501
Extremely Immature * Severity Level 2......... 54.774 53.619 52.671 52.503 52.501
Extremely Immature * Severity Level 1 (Lowest) 54.774 53.619 52.671 52.503 52.501
Immature * Severity Level 5 (Highest)......... 193.052 191.689 190.621 190.640 190.641
Immature * Severity Level 4................... 91.573 90.161 89.057 89.058 89.059
Immature * Severity Level 3................... 54.774 53.619 52.671 52.503 52.501
Immature * Severity Level 2................... 31.501 30.277 29.298 29.119 29.116
Immature * Severity Level 1 (Lowest).......... 31.501 30.277 29.298 29.119 29.116
Premature/Multiples * Severity Level 5 180.068 178.688 177.612 177.587 177.588
(Highest)....................................
Premature/Multiples * Severity Level 4........ 34.716 33.374 32.329 32.210 32.210
Premature/Multiples * Severity Level 3........ 18.143 17.052 16.164 15.859 15.855
Premature/Multiples * Severity Level 2........ 9.619 8.708 7.919 7.456 7.447
Premature/Multiples * Severity Level 1 6.761 6.055 5.326 4.813 4.803
(Lowest).....................................
Term * Severity Level 5 (Highest)............. 148.077 146.787 145.765 145.664 145.663
Term * Severity Level 4....................... 17.881 16.823 15.955 15.592 15.587
Term * Severity Level 3....................... 6.615 5.913 5.209 4.662 4.651
Term * Severity Level 2....................... 3.999 3.438 2.791 2.206 2.195
Term * Severity Level 1 (Lowest).............. 1.717 1.385 0.811 0.379 0.371
Age 1 * Severity Level 5 (Highest)............ 55.723 55.014 54.446 54.372 54.371
Age 1 * Severity Level 4...................... 9.659 9.128 8.675 8.484 8.481
Age 1 * Severity Level 3...................... 3.494 3.127 2.751 2.528 2.524
Age 1 * Severity Level 2...................... 2.210 1.911 1.570 1.327 1.323
Age 1 * Severity Level 1 (Lowest)............. 0.603 0.465 0.288 0.206 0.205
Age 0 Male.................................... 0.723 0.672 0.641 0.584 0.582
Age 1 Male.................................... 0.168 0.148 0.127 0.101 0.100
----------------------------------------------------------------------------------------------------------------

Table 5--HHS HCCS Included in Infant Model Maturity Categories
------------------------------------------------------------------------
Maturity category HCC/Description
------------------------------------------------------------------------
Extremely Immature................... Extremely Immature Newborns,
Birthweight <500 Grams.
Extremely Immature................... Extremely Immature Newborns,
Including Birthweight 500-749
Grams.
Extremely Immature................... Extremely Immature Newborns,
Including Birthweight 750-999
Grams.
Immature............................. Premature Newborns, Including
Birthweight 1000-1499 Grams.
Immature............................. Premature Newborns, Including
Birthweight 1500-1999 Grams.
Premature/Multiples.................. Premature Newborns, Including
Birthweight 2000-2499 Grams.
Premature/Multiples.................. Other Premature, Low Birthweight,
Malnourished, or Multiple Birth
Newborns.
Term................................. Term or Post-Term Singleton
Newborn, Normal or High
Birthweight
Age 1................................ All age 1 infants.
------------------------------------------------------------------------

Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
Severity category HCC
------------------------------------------------------------------------
Severity Level 5 (Highest)........... Metastatic Cancer.
Severity Level 5..................... Pancreas Transplant Status/
Complications.
Severity Level 5..................... Liver Transplant Status/
Complications.

[[Page 75506]]

Severity Level 5..................... End-Stage Liver Disease.
Severity Level 5..................... Intestine Transplant Status/
Complications.
Severity Level 5..................... Peritonitis/Gastrointestinal
Perforation/Necrotizing
Enterocolitis.
Severity Level 5..................... Respirator Dependence/
Tracheostomy Status.
Severity Level 5..................... Heart Assistive Device/Artificial
Heart.
Severity Level 5..................... Heart Transplant.
Severity Level 5..................... Congestive Heart Failure.
Severity Level 5..................... Hypoplastic Left Heart Syndrome
and Other Severe Congenital
Heart Disorders.
Severity Level 5..................... Lung Transplant Status/
Complications.
Severity Level 5..................... Kidney Transplant Status.
Severity Level 5..................... End Stage Renal Disease.
Severity Level 5..................... Stem Cell, Including Bone Marrow,
Transplant Status/Complications.
Severity Level 4..................... Septicemia, Sepsis, Systemic
Inflammatory Response Syndrome/
Shock.
Severity Level 4..................... Lung, Brain, and Other Severe
Cancers, Including Pediatric
Acute Lymphoid Leukemia.
Severity Level 4..................... Mucopolysaccharidosis.
Severity Level 4..................... Major Congenital Anomalies of
Diaphragm, Abdominal Wall, and
Esophagus, Age <2.
Severity Level 4..................... Myelodysplastic Syndromes and
Myelofibrosis.
Severity Level 4..................... Aplastic Anemia.
Severity Level 4..................... Combined and Other Severe
Immunodeficiencies.
Severity Level 4..................... Traumatic Complete Lesion
Cervical Spinal Cord.
Severity Level 4..................... Quadriplegia.
Severity Level 4..................... Amyotrophic Lateral Sclerosis and
Other Anterior Horn Cell
Disease.
Severity Level 4..................... Quadriplegic Cerebral Palsy.
Severity Level 4..................... Myasthenia Gravis/Myoneural
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.
Severity Level 4..................... Non-Traumatic Coma, Brain
Compression/Anoxic Damage.
Severity Level 4..................... Respiratory Arrest.
Severity Level 4..................... Cardio-Respiratory Failure and
Shock, Including Respiratory
Distress Syndromes.
Severity Level 4..................... Acute Myocardial Infarction.
Severity Level 4..................... Heart Infection/Inflammation,
Except Rheumatic.
Severity Level 4..................... Major Congenital Heart/
Circulatory Disorders.
Severity Level 4..................... Intracranial Hemorrhage.
Severity Level 4..................... Ischemic or Unspecified Stroke.
Severity Level 4..................... Vascular Disease with
Complications.
Severity Level 4..................... Pulmonary Embolism and Deep Vein
Thrombosis.
Severity Level 4..................... Aspiration and Specified
Bacterial Pneumonias and Other
Severe Lung Infections.
Severity Level 4..................... Chronic Kidney Disease, Stage 5.
Severity Level 4..................... Hip Fractures and Pathological
Vertebral or Humerus Fractures.
Severity Level 4..................... Artificial Openings for Feeding
or Elimination.
Severity Level 3..................... HIV/AIDS.
Severity Level 3..................... Central Nervous System
Infections, Except Viral
Meningitis.
Severity Level 3..................... Opportunistic Infections.
Severity Level 3..................... Non-Hodgkin`s Lymphomas and Other
Cancers and Tumors.
Severity Level 3..................... Colorectal, Breast (Age <50),
Kidney and Other Cancers.
Severity Level 3..................... Breast (Age 50+), Prostate
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.
Severity Level 3..................... Lipidoses and Glycogenosis.
Severity Level 3..................... Adrenal, Pituitary, and Other
Significant Endocrine Disorders.
Severity Level 3..................... Acute Liver Failure/Disease,
Including Neonatal Hepatitis.
Severity Level 3..................... Intestinal Obstruction.
Severity Level 3..................... Necrotizing Fasciitis.
Severity Level 3..................... Bone/Joint/Muscle Infections/
Necrosis.
Severity Level 3..................... Osteogenesis Imperfecta and Other
Osteodystrophies.
Severity Level 3..................... Cleft Lip/Cleft Palate.
Severity Level 3..................... Hemophilia.
Severity Level 3..................... Disorders of the Immune
Mechanism.
Severity Level 3..................... Coagulation Defects and Other
Specified Hematological
Disorders.
Severity Level 3..................... Prader-Willi, Patau, Edwards, and
Autosomal Deletion Syndromes.
Severity Level 3..................... Traumatic Complete Lesion Dorsal
Spinal Cord.
Severity Level 3..................... Paraplegia.
Severity Level 3..................... Spinal Cord Disorders/Injuries.
Severity Level 3..................... Cerebral Palsy, Except
Quadriplegic.
Severity Level 3..................... Muscular Dystrophy.
Severity Level 3..................... Parkinson's, Huntington's, and
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders.
Severity Level 3..................... Hydrocephalus.
Severity Level 3..................... Unstable Angina and Other Acute
Ischemic Heart Disease.
Severity Level 3..................... Atrial and Ventricular Septal
Defects, Patent Ductus
Arteriosus, and Other Congenital
Heart/Circulatory Disorders.
Severity Level 3..................... Specified Heart Arrhythmias.
Severity Level 3..................... Cerebral Aneurysm and
Arteriovenous Malformation.
Severity Level 3..................... Hemiplegia/Hemiparesis.
Severity Level 3..................... Cystic Fibrosis.

[[Page 75507]]

Severity Level 3..................... Fibrosis of Lung and Other Lung
Disorders.
Severity Level 3..................... Pathological Fractures, Except of
Vertebrae, Hip, or Humerus.
Severity Level 2..................... Viral or Unspecified Meningitis.
Severity Level 2..................... Thyroid, Melanoma,
Neurofibromatosis, and Other
Cancers and Tumors.
Severity Level 2..................... Diabetes with Acute
Complications.
Severity Level 2..................... Diabetes with Chronic
Complications.
Severity Level 2..................... Diabetes without Complication.
Severity Level 2..................... Protein-Calorie Malnutrition.
Severity Level 2..................... Congenital Metabolic Disorders,
Not Elsewhere Classified.
Severity Level 2..................... Amyloidosis, Porphyria, and Other
Metabolic Disorders.
Severity Level 2..................... Cirrhosis of Liver.
Severity Level 2..................... Chronic Pancreatitis.
Severity Level 2..................... Inflammatory Bowel Disease.
Severity Level 2..................... Rheumatoid Arthritis and
Specified Autoimmune Disorders.
Severity Level 2..................... Systemic Lupus Erythematosus and
Other Autoimmune Disorders.
Severity Level 2..................... Congenital/Developmental Skeletal
and Connective Tissue Disorders.
Severity Level 2..................... Acquired Hemolytic Anemia,
Including Hemolytic Disease of
Newborn.
Severity Level 2..................... Sickle Cell Anemia (Hb-SS).
Severity Level 2..................... Drug Psychosis.
Severity Level 2..................... Drug Dependence.
Severity Level 2..................... Down Syndrome, Fragile X, Other
Chromosomal Anomalies, and
Congenital Malformation
Syndromes.
Severity Level 2..................... Spina Bifida and Other Brain/
Spinal/Nervous System Congenital
Anomalies.
Severity Level 2..................... Seizure Disorders and
Convulsions.
Severity Level 2..................... Monoplegia, Other Paralytic
Syndromes.
Severity Level 2..................... Atherosclerosis of the
Extremities with Ulceration or
Gangrene.
Severity Level 2..................... Chronic Obstructive Pulmonary
Disease, Including
Bronchiectasis.
Severity Level 2..................... Chronic Ulcer of Skin, Except
Pressure.
Severity Level 1 (Lowest)............ Chronic Hepatitis.
Severity Level 1..................... Acute Pancreatitis/Other
Pancreatic Disorders and
Intestinal Malabsorption.
Severity Level 1..................... Thalassemia Major.
Severity Level 1..................... Autistic Disorder.
Severity Level 1..................... Pervasive Developmental
Disorders, Except Autistic
Disorder.
Severity Level 1..................... Multiple Sclerosis.
Severity Level 1..................... Asthma.
Severity Level 1..................... Chronic Kidney Disease, Severe
(Stage 4).
Severity Level 1..................... Amputation Status, Lower Limb/
Amputation Complications.
Severity Level 1..................... No Severity HCCs.
------------------------------------------------------------------------

d. Cost-Sharing Reductions Adjustments (Sec. 153.320)
We propose to continue including an adjustment for the receipt of
cost-sharing reductions in the model to account for increased plan
liability due to increased utilization of health care services by
enrollees receiving cost-sharing reductions. The proposed cost-sharing
reduction adjustment factors for 2017 risk adjustment are unchanged
from those finalized in the 2016 Payment Notice and are set forth in
Table 7. These adjustments are effective for 2015, 2016, and 2017 risk
adjustment, and are multiplied against the sum of the demographic,
diagnosis, and interaction factors. We will continue to evaluate this
adjustment in future years as more data becomes available. We seek
comment on this approach.

Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
Induced utilization
Household income Plan AV factor
------------------------------------------------------------------------
Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL.............. Plan Variation 1.12
94%.
150-200% of FPL.............. Plan Variation 1.12
87%.
200-250% of FPL.............. Plan Variation 1.00
73%.
>250% of FPL................. Standard Plan 1.00
70%.
------------------------------------------------------------------------
Zero Cost-Sharing Recipients
------------------------------------------------------------------------
<300% of FPL................. Platinum (90%).. 1.00
<300% of FPL................. Gold (80%)...... 1.07
<300% of FPL................. Silver (70%).... 1.12
<300% of FPL................. Bronze (60%).... 1.15
------------------------------------------------------------------------
Limited Cost-Sharing Recipients
------------------------------------------------------------------------
>300% of FPL................. Platinum (90%).. 1.00

[[Page 75508]]

>300% of FPL................. Gold (80%)...... 1.07
>300% of FPL................. Silver (70%).... 1.12
>300% of FPL................. Bronze (60%).... 1.15
------------------------------------------------------------------------

e. Model Performance Statistics (Sec. 153.320)
To evaluate the model's performance, we examined its R-squared and
predictive ratios. The R-squared statistic, which calculates the
percentage of individual variation explained by a model, measures the
predictive accuracy of the model overall. The predictive ratios measure
the predictive accuracy of a model for different validation groups or
subpopulations. The predictive ratio for each of the HHS risk
adjustment models is the ratio of the weighted mean predicted plan
liability for the model sample population to the weighted mean actual
plan liability for the model sample population. The predictive ratio
represents how well the model does on average at predicting plan
liability for that subpopulation. A subpopulation that is predicted
perfectly would have a predictive ratio of 1.0. For each of the HHS
risk adjustment models, the R-squared statistic and the predictive
ratio are in the range of published estimates for concurrent risk
adjustment models.\9\ Because we are proposing to blend the
coefficients from separately solved models based on MarketScan 2012 and
2013 data (and 2012, 2013, and 2014 data in the final rule), we are
publishing the R-squared statistic for each model and year separately
to verify their statistical validity. The R-squared statistic for each
model is shown in Table 8.
---------------------------------------------------------------------------

\9\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis of
Claims-Based Tools for Health Risk Assessment.'' Society of
Actuaries. April 2007.

Table 8--R-Squared Statistic for HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
R-Squared statistic
----------------------------------------------------------------------------------------------------------------
Risk adjustment model 2012 2013
----------------------------------------------------------------------------------------------------------------
Platinum Adult................................................ 0.3936 0.3820
Platinum Child................................................ 0.2855 0.2774
Platinum Infant............................................... 0.2844 0.3215
Gold Adult.................................................... 0.3895 0.3775
Gold Child.................................................... 0.2804 0.2722
Gold Infant................................................... 0.2823 0.3195
Silver Adult.................................................. 0.3858 0.3735
Silver Child.................................................. 0.2757 0.2674
Silver Infant................................................. 0.2808 0.3182
Bronze Adult.................................................. 0.3836 0.3713
Bronze Child.................................................. 0.2732 0.2649
Bronze Infant................................................. 0.2807 0.3181
Catastrophic Adult............................................ 0.3836 0.3712
Catastrophic Child............................................ 0.2732 0.2648
Catastrophic Infant........................................... 0.2807 0.3181
----------------------------------------------------------------------------------------------------------------

f. Overview of the Payment Transfer Formula (Sec. 153.320)
We do not propose to alter our payment transfer methodology. Plan
average risk scores will continue to be calculated as the member month-
weighted average of individual enrollee risk scores. We defined the
calculation of plan average actuarial risk and the calculation of
payments and charges in the Premium Stabilization Rule. In the 2014
Payment Notice, we combined those concepts into a risk adjustment
payment transfer formula. Risk adjustment transfers (payments and
charges) will be calculated after issuers have completed risk
adjustment data reporting. The payment transfer formula includes a set
of cost adjustment terms that require transfers to be calculated at the
geographic rating area level for each plan (that is, HHS will calculate
two separate transfer amounts for a plan that operates in two rating
areas).
The payment transfer formula is designed to provide a per member
per month (PMPM) transfer amount. The PMPM transfer amount derived from
the payment transfer formula would be multiplied by each plan's total
member months for the benefit year to determine the total payment due
or charge owed by the issuer for that plan in a rating area.
(1) Overview of the Payment Transfer Formula
Although we do not propose to change the payment transfer formula
from what was finalized in the 2014 Payment Notice (78 FR 15430 through
15434), we believe it would be useful to republish the formula in its
entirety, since, as noted above, we are proposing to recalibrate the
HHS risk adjustment model. Transfers (payments and charges) will be
calculated as the difference between the plan premium estimate
reflecting risk selection and the plan premium estimate not reflecting
risk selection. As finalized in the 2014 Payment Notice, the HHS risk
adjustment payment transfer formula is:

[[Page 75509]]

[GRAPHIC] [TIFF OMITTED] TP02DE15.002

Where:

PS = State average premium;
PLRSI = plan i's plan liability risk score;
AVi = plan i's metal level AV;
ARFi = allowable rating factor;
IDFi = plan i's induced demand factor;
GCFi = plan i's geographic cost factor;
Si = plan i's share of State enrollment.

The denominator is summed across all plans in the risk pool in the
market in the State.
The difference between the two premium estimates in the payment
transfer formula determines whether a plan pays a risk transfer charge
or receives a risk transfer payment. Note that the value of the plan
average risk score by itself does not determine whether a plan would be
assessed a charge or receive a payment--even if the risk score is
greater than 1.0, it is possible that the plan would be assessed a
charge if the premium compensation that the plan may receive through
its rating practices (as measured through the allowable rating factor)
exceeds the plan's predicted liability associated with risk selection.
Risk adjustment transfers are calculated at the risk pool level, and
catastrophic plans are treated as a separate risk pool for purposes of
risk adjustment.
g. State-Submitted Alternate Risk Adjustment Methodology
The Commonwealth of Massachusetts has expressed interest in having
an HHS-operated risk adjustment program, beginning in the 2017 benefit
year. If HHS operates risk adjustment in Massachusetts for 2017 using
the Federally certified methodology we use in all States in which we
operate risk adjustment, we would announce this in the final rule.
h. Risk Adjustment User Fee (Sec. 153.610(f))
As noted above, 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 with the
meaning of Sec. 153.20 must remit a user fee to HHS 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 issuers of risk adjustment covered
plans because it will mitigate the financial instability associated
with potential adverse risk selection. The risk 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 2016 Payment Notice, we estimated Federal administrative
expenses of operating the risk adjustment program to be $1.75 per
enrollee per year, based on our estimated contract costs for risk
adjustment operations. For the 2017 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. To calculate the user fee, we 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 2017 will be approximately
$52 million, and that the risk adjustment user fee would be $1.80 per
enrollee per year. The risk adjustment user fee contract costs for 2017
include costs related to 2017 risk adjustment data validation, and are
slightly higher than the 2016 contract costs as the result of some
contracts that were rebid. We do not anticipate Massachusetts' decision
to use the Federal risk adjustment methodology will substantially
affect the risk adjustment user fee rate for 2017.
3. 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 the 2015 Payment Notice, we established 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. In the 2016 Payment
Notice, we established the reinsurance payment parameters and uniform
reinsurance contribution rate for the 2016 benefit year and certain
clarifying provisions related to the operation of the reinsurance
program.
a. Decreasing the Reinsurance Attachment Point for the 2016 Benefit
Year
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 non-grandfathered, individual market issuers for
high-risk claims that provides for the equitable allocation of funds.
In the Premium Stabilization Rule (77 FR 17228), we provided that
reinsurance payments to issuers of reinsurance-eligible plans 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.
We finalized in the 2015 Payment Notice (79 FR 13777) that HHS will
use

[[Page 75510]]

any excess contributions for reinsurance payments for a benefit year by
increasing the coinsurance rate for that benefit year up to 100 percent
before rolling over any remaining funds in the next year. If any
contribution amounts remain after calculating reinsurance payments for
the 2016 benefit year (and after HHS increases the coinsurance rate to
100 percent for the 2016 benefit year), we propose to decrease the 2016
attachment point of $90,000 to pay out any remaining contribution
amounts in an equitable manner for the 2016 benefit year. We believe
that expending all remaining reinsurance contribution funds as payments
for the 2016 benefit year will support the reinsurance program's goals
of promoting nationwide premium stabilization and market stability in
the early years of Exchange operations while providing issuers with
incentives to continue to effectively manage enrollee costs. The final
attachment point and coinsurance rate for the 2016 benefit year will be
calculated based on total available reinsuance collections and accepted
reinsurance payment requests. We seek comment on this proposal.
b. Audit Authority Extends to Entities That Assist Contributing
Entities (Sec. 153.405(i))
In accordance with Sec. 153.405(i), HHS or its designee has the
authority to audit a contributing entity to assess compliance with the
reinsurance program requirements. In 2014, HHS implemented a
streamlined approach through which a contributing entity, or a third
party such as a third party administrator or an administrative
services-only contractor acting on behalf of a contributing entity,
could register on Pay.gov, calculate the annual enrollment count and
schedule reinsurance contribution payments. During the 2014
contribution submission process, many third party administrators and
administrative services-only contractors assisted contributing entities
by calculating the contributing entity's annual enrollment count and
maintaining the records necessary to validate that enrollment. To
ensure that reported annual enrollment counts are calculated correctly
in accordance with Sec. Sec. 153.405(d) through 153.405(g) and
applicable guidance, we propose to amend Sec. 153.405(i) to specify
that the audit authority extends to any third party administrators,
administrative services-only contractors, or other third parties that
complete any part of the reinsurance contribution submission process on
behalf of contributing entities or otherwise assist contributing
entities with compliance with the requirements for the transitional
reinsurance program. This would include third party administrators,
administrative services-only contractors or other third parties that
provide contributing entities with their annual enrollment counts or
maintain records to substantiate the annual enrollment counts, even if
the third party does not submit the annual enrollment count to HHS.
Additionally, we propose to amend Sec. 153.405(i) to specify that a
contributing entity that chooses to use a third party administrator,
administrative services-only contractor, or other third party to
complete the reinsurance contribution submission process on its behalf
must ensure that this third party administrator, administrative
services-only contractor, or other third party cooperate with any audit
under this section. Contributing entities, not third party
administrators, administrative services-only contractors, or other
third parties, remain responsible for the payment of reinsurance
contributions. We seek comment on these amendments.
4. Provisions for the Temporary Risk Corridors Program
This section contains proposals related to the temporary risk
corridors program, and therefore applies only to issuers of QHPs, as
defined at Sec. 153.500, with respect to the benefit years 2014
through 2016.
a. Risk Corridors Payment Methodology (Sec. 153.510(g))
To ensure the integrity of data used in risk corridors and MLR
calculations, in prior guidance \10\ we indicated that we would propose
in the HHS Notice of Benefit and Payment Parameters for 2017 an
adjustment to correct for any inaccuracies in risk corridors payment
and charge amounts that could result from issuers reporting a certified
estimate of cost-sharing reductions on the 2014 MLR and Risk Corridors
Annual Reporting Form.\11\ The use of a certified estimate that is
lower than the actual cost-sharing reductions provided would affect the
MLR calculation and the risk corridors financial transfers by
increasing incurred claims and allowable costs, thereby increasing the
MLR and potentially increasing the risk corridors payment or lowering
the risk corridors charge. We believe that requiring an update of these
reported amounts through recalculation of the risk corridors and MLR
amounts for the 2014 benefit year will be disruptive to the market and
consumers, as well as administratively burdensome and difficult to
operationalize for issuers and HHS. Therefore, consistent with our
earlier guidance, we are proposing to add a new paragraph (g) to the
risk corridors payment methodology set forth in Sec. 153.510 to
propose that if the issuer reported a certified estimate of 2014 cost-
sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting
Form that is lower than the actual cost-sharing reductions provided (as
calculated under Sec. 156.430(c) for the 2014 benefit year, which will
take place in the spring of 2016), HHS would make an adjustment to the
amount of the issuer's 2015 benefit year risk corridors payment or
charge measured by the full difference between the certified estimate
reported and the actual cost-sharing reductions provided as calculated
under Sec. 156.430(c) in order to address the impact of the inaccurate
reporting on the risk corridors and MLR calculations for the 2014
benefit year. We seek comment on this proposal.
---------------------------------------------------------------------------

\10\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf.
\11\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf
---------------------------------------------------------------------------

b. Risk Corridors Data Requirements (Sec. 153.530)
Due to the fact that the actual value of cost-sharing reductions
provided by an issuer was not available in time for risk corridors and
MLR reporting for 2014, for the purpose of adjusting allowable costs in
the risk corridors calculation and incurred claims in the MLR
calculation for 2014, HHS instructed issuers to report the amount of
the cost-sharing reduction portion of the advance payments received by
the issuer for 2014 (to the extent not reimbursed to the provider
furnishing the item or service).\12\ Additionally, issuers were
permitted to report a certified estimate of the amount of cost-sharing
reductions provided in 2014 (to the extent not reimbursed to the
provider furnishing the item or service) in their risk corridors and
MLR reporting for the 2014 benefit year.
---------------------------------------------------------------------------

\12\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Advance-CSR-Payment-and-RC-MLR-submission_6192015.pdf
---------------------------------------------------------------------------

We propose to amend Sec. 153.530 to add a new paragraph
(b)(2)(iii) to require an issuer to adjust the cost-sharing reduction
amount it reports on its 2015 risk corridors and MLR forms by the
difference (if any) between the reported cost-sharing reduction amount
used to adjust allowable costs and

[[Page 75511]]

incurred claims on the 2014 MLR Annual Reporting Form and the actual
cost-sharing reductions provided by the issuer for the 2014 benefit
year (as calculated under Sec. 156.430(c) for the 2014 benefit year,
which will take place in the spring of 2016). Issuers must report the
amount as calculated under Sec. 156.430(c) when reporting risk
corridors and MLR for the applicable benefit year. As discussed
elsewhere in this preamble, we are proposing to modify the issuer data
reporting requirements in Sec. 153.710(h)(1)(iii) to reflect this
change.
In addition, in the May 23, 2012 Premium Stabilization Rule (77 FR
17220), we defined ``allowable costs'' to reference the MLR term
``incurred claims'' and to include quality improvement activity
expenditures as defined in the MLR rule. Incurred claims, as defined in
Sec. 158.140 for the MLR program, are generally comprised of claims
incurred during the reporting year and paid through the applicable run-
out period beyond the end of the year, plus the liabilities and
reserves estimating claims incurred during the reporting year but still
unpaid at the end of the run-out period, with certain other
adjustments.
Thus, the MLR definition of incurred claims relies only on reserves
and liabilities at the end of the reporting year, rather than a trued
up year-over-year change in reserves and liabilities. In the MLR
calculation, these drawbacks are mitigated to some extent because the
MLR calculation is based on 3 years of data, and consequently the
estimates of unpaid claims are trued up over the following 2 years.
However, because the risk corridors calculation is based on only a
single year of data, an issuer's estimate of unpaid claims is never
trued up, and consequently any inaccuracy in these estimates can have a
significant impact on the accuracy of the risk corridors payment or
charge calculation.
Therefore, to preserve the integrity of the risk corridors program,
we propose to amend Sec. 153.530 to add a new paragraph (b)(2)(iv) to
require issuers to adjust the claims reported as allowable costs for
the 2015 and later benefit years by the amount by which the issuer's
estimate of unpaid claims for the preceding benefit year exceeded (or
fell below) the actual payments that the issuer made after the date of
the estimate for claims attributable to the preceding benefit year. For
example, if in calculating its 2014 allowable costs, an issuer
overestimated the amount of claims it incurred in 2014 that were unpaid
as of March 31, 2015, then under this proposal, in calculating its 2015
allowable costs, the issuer would be required to subtract the amount by
which its March 31, 2015 claims estimate exceeded the actual payments
for 2014 claims that the issuer made between March 31, 2015 and June
30, 2016 (the claims reserves and liabilities valuation dates for the
2014 and 2015 benefit years, respectively). We seek comment on the most
appropriate way to true up estimates of unpaid claims for 2016. For
example, we could provide for a 2017 payment or charge (calculated with
2018 MLR), provide for a simplified true-up process, require that the
2016 estimate be based on actual 2014 and 2015 amounts, or provide for
no true-up at all in the final year.
5. Distributed Data Collection for the HHS-Operated Programs
a. Interim Dedicated Distributed Data Environment Reports (Sec.
153.710(d))
Effective for the 2016 benefit year, we propose deleting Sec.
153.710(d), which sets forth an interim discrepancy reporting process
by which an issuer must notify HHS of any discrepancy it identifies
between the data to which the issuer has provided access to HHS through
its dedicated distributed data environment (that is, an issuer's EDGE
server) and the interim dedicated distributed data environment report,
or 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. Many
issuers viewed the interim discrepancy process for the 2014 benefit
year as an additional burden and an administrative reporting exercise
that they had to complete in order to preserve their appeal rights. The
process also required significant resources and extensive support from
HHS. Additionally, the information collected during the 2014 interim
formal discrepancy process largely focused on the problems that issuers
were encountering with the data submission process, as opposed to
issues involving the dedicated distributed data environment report
matching the data the issuer made accessible in its environment. HHS is
committed to working with issuers prior to the data submission deadline
to address any data issues so that reinsurance payment and risk
adjustment transfer calculations can be made accurately and timely.
After the initial submission period and prior to the data submission
deadline (that is, April 30 of the year following the applicable
benefit year), issuers should identify any problems that the issuer is
experiencing in loading complete and accurate data; HHS must know about
these data issues during this period to assist issuers in addressing
these issues prior to the data submission deadline and in advance of
reinsurance payment and risk adjustment transfer calculations.
Throughout the data collection period, HHS will continue to maintain a
help desk to assist issuers with data submission errors and to provide
technical assistance. We believe that removing the requirement to file
an interim discrepancy report starting in the 2016 benefit year will
alleviate the administrative burden on issuers and HHS, as well as
streamline outreach and communications during the data submission
window. In light of this proposal, we propose to remove any cross-
references to the interim discrepancy reporting process currently
codified at Sec. 153.710(d) in Sec. Sec. 153.710 and 156.1220. We
also propose conforming amendments to redesignate paragraph (e) as
paragraph (d), as well as to revise and redesignate paragraph (f) as
(e). We seek comment on this proposal and the proposed effective date.
b. Evaluation of Quality and Quantity of EDGE Data Submissions (Sec.
153.710(f))
Under Sec. 153.740(b), if an issuer of a risk adjustment covered
plan fails to provide HHS with access to the required data in a
dedicated data environment such that HHS cannot apply the applicable
Federally certified risk adjustment methodology to calculate the risk
adjustment payment transfer amount for the risk adjustment covered plan
in a timely fashion, HHS will assess a default risk adjustment charge.
Similarly, under Sec. Sec. 153.420 and 153.740(a), an issuer of a
reinsurance-eligible plan will forfeit reinsurance payments it
otherwise might have received if the issuer fails to establish a
dedicated data environment or fails to meet certain data requirements.
HHS released guidance on April 24, 2015, entitled ``Evaluation of EDGE
Data Submissions'' describing the approach it would use, starting with
data submissions for the 2014 benefit year, to evaluate whether an
issuer provided access in a dedicated data environment to data that was
sufficient for HHS to calculate reinsurance payments and apply the HHS
risk adjustment methodology.\13\ The approach evaluated the sufficiency
of an issuer's data in terms of the quantity and quality of the data.
In this rulemaking, we propose to

[[Page 75512]]

codify this practice for future benefit years to support the integrity
of payments and charges made under the HHS-operated risk adjustment
program and payments under the reinsurance program, both of which
depend upon the submission of accurate and complete data by issuers to
their EDGE servers.
---------------------------------------------------------------------------

\13\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-guidance-42415-final.pdf.
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Consistent with the approach for review of 2014 benefit year data,
to determine if an issuer meets data quantity standards, HHS would
compare an issuer's self-reported baseline data on its total enrollment
and claims counts by market to the issuer's data submitted to its
dedicated data environment. An issuer with a low enrollment count
following the submission deadline would be subject to a default risk
adjustment charge under Sec. 153.740(b). An issuer with a low claims
count following the submission deadline would be subject to a default
risk adjustment charge if the default charge is lower than the charge
it would have received through the risk adjustment transfer
calculation. Additionally, an issuer with either a low enrollment count
or a low claims count would forgo reinsurance payments for any claims
that it failed to submit. HHS proposes to set forth in guidance, on an
annual basis, the appropriate threshold by which HHS will deem data
sufficient as to quantity for a given benefit year. HHS will also
specify in guidance the format and timeline for submission of baseline
data to HHS.
To determine if an issuer meets the data quality standards required
for HHS to calculate reinsurance payments and apply the HHS risk
adjustment methodology, HHS proposes to perform an outlier analysis
using select metrics that target reinsurance data quality and risk
adjustment data quality. For the 2014 benefit year, HHS used the
following five key metrics: Percentage of all enrollees with at least
one HCC; average number of conditions per enrollee with at least one
HCC; issuer average risk score; percentage of individual market
enrollees with reinsurance payments; and average reinsurance payment
per enrollee for which the issuer would receive reinsurance payments.
Similar to data quantity, HHS plans to describe in guidance, on an
annual basis, the metrics used for a given benefit year. An issuer may
be assessed a risk adjustment default charge if it does not meet data
quality standards on any of the risk adjustment metrics and may forfeit
reinsurance payments it might otherwise have received if it does not
meet data quality standards for any of the reinsurance metrics.
HHS would conduct these data quality and quantity analyses after
the deadline for submission of data specified in Sec. 153.730 (that
is, April 30, of the year following the applicable benefit year). In
Sec. 153.710, we propose to add a paragraph (f). In the new paragraph
(f), we propose to specify that HHS will assess default risk adjustment
charges based on these analyses no later than the date of the
notification provided by HHS under Sec. 153.310(e) (that is, June 30
of the year following the applicable benefit year); and to describe the
responsibilities of issuers in relation to the quality and quantity
analyses. In Sec. 153.710(f)(1), we propose to codify the requirement
for issuers to provide baseline data on their total enrollment and
claims counts by market, in a format and on a timeline that we intend
to specify in guidance. In Sec. 153.710(f)(2), we propose that if HHS
identifies a data anomaly that would cause the data that a risk
adjustment covered plan or a reinsurance-eligible plan made available
through a dedicated data environment to fail HHS's quality thresholds,
the issuer may, within 10 calendar days of receiving notification of
the anomaly, submit an explanation of the anomaly for HHS to consider
in determining whether the issuer met the reinsurance and risk
adjustment data requirements.
HHS expects to perform informal data sufficiency analyses
throughout the data submission process. Issuers are encouraged to
provide explanations and corrected enrollment or claims counts at any
time during the data submission process. The timeframe we propose in
Sec. 153.710(f)(2) would apply to the final data sufficiency analyses
only, which are performed following the deadline for submission of data
specified in Sec. 153.730 (that is, April 30, of the year following
the applicable benefit year). We seek comment on this proposal.
c. Data Requirements (Sec. 153.710(g))
We are proposing to make conforming amendments to the introductory
language at Sec. 153.710(g)(1) to remove the cross-references to the
interim discrepancy reporting process currently codified at Sec.
153.710(d). However, because we have learned in the first year of the
implementation of the premium stabilization and Exchange financial
assistance programs that flexibility is often needed in reporting the
amounts on risk corridors and MLR forms, we also propose that HHS have
the ability to modify these instructions in sub-regulatory guidance.
Our intent in issuing any such guidance would be to avoid having the
application of the instructions in exceptional circumstances lead to
unfair or misleading financial reporting. We propose to capture this
flexibility through a new proposed paragraph at Sec. 153.710(g)(3).
We also propose to change Sec. 153.710(g)(1)(iii) to require an
issuer to report the amount of cost-sharing reductions calculated under
Sec. 156.430(c) in its annual MLR and risk corridors report,
regardless of whether the issuer had any unresolved discrepancy under
Sec. 156.1210, or whether the issuer had submitted a request for
reconsideration under Sec. 156.1220(a)(1)(v). Additionally, consistent
with the process outlined in Sec. 153.710(g)(2), we propose to require
an issuer to adjust the cost-sharing reduction amount it reports on its
2015 risk corridors and MLR forms by the difference (if any) between
the reported cost-sharing reduction amount used to adjust allowable
costs and incurred claims on the 2014 MLR Annual Reporting Form and the
amount of cost-sharing reductions as calculated under Sec. 156.430(c)
for the 2014 benefit year.
Consistent with the approach currently outlined in Sec.
153.710(g)(2), we propose to amend this paragraph to require an issuer
to report any adjustment made or approved by HHS for any risk
adjustment payment or charge, reinsurance payment, cost-sharing
reduction payment to reflect actual cost-sharing reduction amounts
received, or risk corridors payment or charge, where the adjustment has
not been accounted for in a prior MLR and Risk Corridors Annual
Reporting Form in the next following year. By way of example, if an
issuer's risk adjustment charges or payments are adjusted as a result
of the administrative appeals process, the issuer should adjust these
reported amounts in the next MLR and risk corridors reporting cycle,
after the appeal has been resolved. Similarly, if HHS makes changes to
an issuer's risk adjustment charges or payments after the risk
corridors and MLR reporting cycle has closed for the applicable
reporting year, the issuer should adjust these reported amounts in the
next MLR and risk corridors reporting cycle to account for the
difference between the reported amounts and the amounts actually
received or paid for the previous benefit year. However, if an issuer
is notified about the modification during an open MLR and risk
corridors submission period, it must report the modified amounts in
that open reporting cycle.
We also propose to clarify in Sec. 153.710(g)(1)(iii) that cost-
sharing reduction amounts to be reported under this section must
exclude amounts reimbursed to providers of services or

[[Page 75513]]

items. This clarifying language is consistent with how the instructions
for cost-sharing reductions amounts are reported under Sec.
153.530(b)(2)(iii) (risk corridors data requirements) and Sec.
158.140(b)(iii) (MLR data requirements).
Lastly, we propose to revise paragraph (g)(1)(iv) to require that
for medical loss ratio reporting only, issuers should report the risk
corridors payment to be made or charge assessed by HHS, as reflected
under Sec. 153.510.
d. Good Faith Safe Harbor
In the second Program Integrity Rule, we finalized Sec.
153.740(a), which permits HHS to impose civil money penalties upon
issuers of risk adjustment covered plans and reinsurance-eligible plans
for failure to adhere to certain standards relating to their dedicated
distributed data environments. In the preamble to that rule, we stated
that if we are able to determine that an issuer of a risk adjustment
covered plan or reinsurance-eligible plan is making good faith efforts
to comply with the standards set forth in Sec. 153.740(a), consistent
with our policy codified at Sec. 156.800(c), we would not seek to
impose CMPs for noncompliance with those standards during 2014 (78 FR
65061). In the 2016 Payment Notice (80 FR 10780), we extended the good
faith safe harbor to the 2015 calendar year, and stated that we would
not apply the good faith safe harbor to non-compliance with dedicated
distributed data environment standards applicable during the 2016
calendar year, even where the non-compliance relates to data for the
2015 benefit year. As we have previously said, we are not proposing to
extend the good-faith safe harbor. Starting in the 2016 calendar year
and beyond, civil money penalties may be imposed if an issuer of a risk
adjustment covered plan or reinsurance-eligible plan fails to establish
a dedicated distributed data environment in a manner and timeframe
specified by HHS; fails to provide HHS with access to the required data
in such environment in accordance with Sec. 153.700(a) or otherwise
fails to comply with the requirements of Sec. Sec. 153.700 through
153.730; fails to adhere to the reinsurance data submission
requirements set forth in Sec. 153.420; or fails to adhere to the risk
adjustment data submission and data storage requirements set forth in
Sec. Sec. 153.610 through 153.630, even if the issuer has made good
faith efforts to comply with these requirements.
e. Default Risk Adjustment Charge (Sec. 153.740(b))
In the second Program Integrity Rule and the 2015 Payment Notice,
HHS indicated that a default risk adjustment charge will be assessed if
an issuer does not establish a dedicated distributed data environment
or submits inadequate risk adjustment data. In the 2016 Payment Notice,
we established how a default risk adjustment charge will be allocated
among risk adjustment covered plans.
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 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 other reliable
data sources.
In the 2015 Payment Notice, we determined that we would calculate
Cn--the PMPM amount for a plan--equal to the product of the
Statewide average premium (expressed as a PMPM amount) for a risk pool
and the 75th percentile plan risk transfer amount expressed as a
percentage of the respective Statewide average PMPM premiums for the
risk pool. The nationwide percentile would reflect only plans in States
where HHS is operating the risk adjustment program and would be
calculated based on the absolute value of plan risk transfer amounts.
The PMPM amount determined using the method described here would be
multiplied by the non-compliant plan's enrollment, as determined using
the sources finalized in the second final Program Integrity Rule, to
establish the plan's total default risk adjustment charge.
For the second year of risk adjustment, the 2015 benefit year, we
are proposing to calculate Cn in the same manner, but
increased to the 90th percentile plan risk transfer amount expressed as
a percentage of the respective Statewide average PMPM premiums for the
risk pool. We believe that the 75th percentile was reasonable for the
initial year of risk adjustment, as we did not yet know the
distribution of risk adjustment transfers and issuers were more likely
to experience technical difficulties in establishing a dedicated
distributed data environment. In the second year of risk adjustment,
now that issuers have set up EDGE servers and participated in the
calculation of risk adjustment transfers, we believe that adjusting the
default charge upwards to the 90th percentile of plan risk transfer
amounts expressed as a percentage of the respective Statewide average
PMPM premiums for the risk pool will encourage continued compliance
with risk adjustment data submission requirements. We are concerned
that, absent this change, some issuers may prefer receiving a default
charge at the 75th percentile over participating in the risk adjustment
program; a default charge at this level lacks sufficient deterrent
value. In contrast, we believe the proposed 90th percentile default
charge will adequately incentivize issuers to participate in the risk
adjustment program. We seek comment on this approach.
For the 2016 benefit year, we propose a separate calculation of
Cn for issuers where En Statewide, in the
individual and small group markets combined, is 500 billable member
months or less. For these issuers, we are proposing to calculate
Cn, or the PMPM charge for a plan, as 14 percent of premium,
which we have calculated as the mean charge as a percent of premium of
issuers with 500 billable member months or fewer in the 2014 benefit
year in the small group market. We are basing the charge itself on the
experience of small group issuers in the 2014 benefit year, as we
believe that individual market issuers are more likely to set up an
EDGE server because of the availability of reinsurance. Limiting the
applicability in the 2016 benefit year of this default charge to
issuers with 500 billable member months or fewer is intended to ensure
that the only issuers with this option are ones that are so small that
their removal from the overall risk adjustment risk pool would have a
minimal impact on transfers nationwide. In 2014, approximately 125
issuers would have had fewer than 500 member months in the individual
and small group markets combined. Of those approximately 125 small
issuers, 80 were assessed risk adjustment charges greater than the
proposed default charge of 14 percent of premium PMPM. Those charges
amounted to less than 0.09 percent of total risk adjustment charges
assessed nationally. Assuming every one of those issuers elect to
accept the proposed 14 percent default risk charge, and none of

[[Page 75514]]

the small issuers that owed risk adjustment payments, or with charges
below 14 percent of premium PMPM, did so (which we believe unlikely,
due to the administrative expenses of setting up an EDGE server), the
assessment of the proposed 14 percent of premium default charge on
those 80 issuers (and only those 80 issuers) would have resulted in a
0.05 percent (that is, one twentieth of one percent) reduction in risk
adjustment charges collected nationally. Because issuers of this size
are immaterial to the overall risk adjustment risk pools and have a
disproportionately high operational burden to comply with risk
adjustment data submission requirements, we believe that a separate
default charge for these issuers would promote efficiency and data
quality in the risk adjustment program. We propose to establish this
risk adjustment default charge as the mean charge in the small group
for these small issuers, or 14 percent of statewide average premium
PMPM, to compensate on average for the absence of these immaterial
amounts in the affected risk pools. We intend that this policy would
apply only to the very smallest issuers, in recognition of the
disproportionately high operational burden on these issuers, and seek
comment on this approach.
f. Insolvent Issuers
We are aware that a health insurance issuer may become insolvent or
exit a market during a benefit year. In some cases, another entity,
such as another issuer or liquidator may take over the issuer's
operations, or a State guaranty fund may become responsible for paying
claims for the insolvent issuer. In some instances when this occurs,
both the entity seeking to acquire business from an insolvent issuer
and the insolvent issuer lack a full year's data to submit for the risk
adjustment or reinsurance programs.
To address this concern, we propose to clarify that an entity
acquiring or entering into another arrangement with an issuer to serve
the current enrollees under a plan, or a State guaranty fund that is
responsible for paying claims on behalf of the insolvent issuer, with
substantially the same terms may accrue the previous months of claims
experience for purposes of risk adjustment and reinsurance to fully
reflect the enrollees' risk and claims costs. We propose the
``substantially the same'' standard because we understand that in many
of these situations an acquiring entity's platform may require some
adjustments to the plan arrangements. To meet this standard would
require the carryover of accumulators for deductibles and annual
limitations on cost sharing. If the ``substantially the same'' standard
is met, and the insolvent issuer and acquiring entity agree that the
acquiring entity will accrue the previous months of claims experience,
the acquiring entity must take responsibility for submitting to HHS
complete and accurate claims and baseline information for that benefit
year (including data from the insolvent issuer) in accordance with
HHS's operational guidance. We also recognize that guaranty funds may
not meet all of the requirements to be considered a risk adjustment
covered plan or reinsurance eligible plan (for example, they may not
meet the definition of ``health insurance issuer''), and so we propose
to permit a guaranty fund to participate in those programs
notwithstanding these definition, to the extent it has taken over
liability for a risk adjusted covered plan or reinsurance eligible plan
during a benefit year.
We seek comment on these policies, including with respect to
permissible ways in which the acquiring entity's arrangements may
differ and other ways of ensuring the submission of the data necessary
for HHS to calculate the risk adjustment financial transfer amounts and
the reinsurance payment amounts when another party will take over
operations of the insolvent issuer, or pay claims on behalf of the
insolvent issuer, during a benefit year. We also solicit comments on
whether additional flexibility is needed with respect to the data
submission requirements for the reinsurance and risk adjustment
programs, such as with respect to the definition of a ``paid claim'' to
account for situations when an issuer is unable to pay claims for
covered services, for example, due to insolvency.

E. Part 154--Health Insurance Issuer Rate Increases: Disclosure and
Review Requirements

1. General Provisions
This section includes proposals related to the rate review program
under part 154. The amendments in this part would apply to rates filed
during the 2016 calendar year for coverage effective on or after
January 1, 2017.
2. Disclosure and Review Provisions
a. Rate Increases Subject To Review (Sec. 154.200)
In Sec. 154.200, we propose amending paragraph (c)(2) to provide
that a rate increase for single risk pool coverage \14\ beginning on or
after January 1, 2017 meets or exceeds the applicable threshold for
review if the average increase, including premium rating factors
described in Sec. 147.102 of the subchapter, for all enrollees
weighted by premium volume for any plan within the product meets or
exceeds the applicable threshold. We previously provided that a rate
increase for single risk pool coverage beginning on or after January 1,
2017 meets or exceeds the applicable threshold if an increase in the
plan-adjusted index rate for any plan within the product meets or
exceeds the applicable threshold.
---------------------------------------------------------------------------

\14\ The phrase ``single risk pool coverage'' is used to
describe non-grandfathered health insurance coverage in the
individual or small group (or merged) market that is subject to all
of the single risk pool provisions at 45 CFR 156.80. Although we are
proposing that student health insurance plans be subject to the
index rating methodology specified in 45 CFR 56.80(d), such plans
would not have to be included in an issuers' individual (or merged)
market single risk pool. Rather they could be included in one or
more separate risk pools. Student health plan issuers submit the
required rate filing information using the Rate Review Justification
Template rather than the Unified Rate Review Template. Student
health insurance plans are referred to as ``non-single risk pool
coverage'' for purposes of the requirements established in 45 CFR
part 154.
---------------------------------------------------------------------------

We propose this change under paragraph (c)(2) because the plan-
adjusted index rate does not reflect changes to adjustments for rating
area, family size, age, or tobacco factors. Therefore, it would be
possible for an issuer to change geographic rating area factors such
that members in a certain rating area receive a larger increase, even
though the overall rate increase would not be subject to rate review
because the plan-adjusted index rate does not increase by 10 percent or
more. We believe the annual review of unreasonable increases must
include review of the underlying rates that are used to develop the
premiums, as opposed to the actual premiums themselves. We do not
expect this to result in additional rate increases that meet the
threshold, but will measure rate increases in plans more accurately. We
seek comment on this proposal. Consistent with the approach finalized
in the 2016 Payment Notice (80 FR 10781), we note that starting with
rates filed for single risk pool coverage beginning on or after January
1, 2017, rate increases would be calculated at the plan level as
opposed to the product level when determining whether an increase is
subject to review. We are not proposing any changes to that policy.
b. Submission of Rate Filing Justification (Sec. 154.215)
Under Sec. 154.215, health insurance issuers are currently
required to submit a Rate Filing Justification for all single

[[Page 75515]]

risk pool coverage products (including new or discontinued products)
when any plan within a product in the individual or small group (or
merged) market is subject to a rate increase, regardless of the size of
the increase. This requirement was established, in part, to carry out
the Secretary's responsibility, in conjunction with the States, under
section 2794(b)(2)(A) of the PHS Act to monitor premium increases of
health insurance coverage offered through an Exchange and outside of an
Exchange beginning in 2014. However, our experience with the rate
review program has shown that premium increases cannot reasonably be
monitored without evaluating the net effect on premiums, including the
impact of rate decreases, plans with unchanged rates, and new plans'
rates. We therefore propose to revise paragraphs (a) and (b) to address
this gap in information.
We propose to revise paragraph (a)(1) to require health insurance
issuers to submit the Unified Rate Review Template (also known as Part
I of the Rate Filing Justification) for all single risk pool coverage
products in the individual or small group (or merged) market,
regardless of whether any plan within a product is subject to a rate
increase. We note that most issuers offering single risk pool coverage
already submit a Unified Rate Review Template because:
A plan within the issuer's single risk pool has a rate
increase;
The issuer's State regulator requires submission of the
Rate Filing Justification for all rates;
The issuer is seeking to offer a QHP through a Federally-
Facilitated or State Partnership Exchange; or
The issuer chooses to use the Rate Filing Justification to
satisfy the requirement to annually set an index rate.
We believe that requiring the submission of the Unified Rate Review
Template, rather than requiring submission of a new document, will
reduce administrative burden for issuers while providing the Secretary
and the States with the information necessary to more effectively carry
out their responsibilities to monitor premium increases inside and
outside of Exchanges.
We propose to revise paragraph (a)(2) so that issuers must submit a
Unified Rate Review Template and an Actuarial Memorandum (also known as
Parts I and III of the Rate Filing Justification) when a plan within a
product is subject to a rate increase. The Unified Rate Review Template
and Actuarial Memorandum are submitted at the risk pool level, but the
requirement to submit is based on increases at the plan level. This is
the current policy but we are revising regulatory text for clarity.
We propose to revise paragraph (a)(3) to provide that all three
parts of the Rate Filing Justification (that is, the Unified Rate
Review Template, a written description justifying a rate increase, and
the Actuarial Memorandum) must be filed when a plan within a product
has a rate increase that is subject to review. The information is
submitted at the risk pool level, but the requirement to submit is
based on increases at the plan level. This is the current policy but we
are revising regulatory text for clarity.
We also propose to revise paragraph (b) to provide that a Unified
Rate Review Template, a written description justifying a rate increase,
and rate filing documentation (commonly referred to as an Actuarial
Memorandum) are part of a Rate Filing Justification. One or all of
those parts of the Rate Filing Justification may be required by CMS and
the State, depending on the change, if any, to plan rates. We also
propose to remove and reserve paragraph (c), as it would be unnecessary
in light of the proposed amendments to paragraphs (a) and (b).
These proposed amendments and clarifications will ensure that the
rate review process is transparent regardless of whether coverage is
included in the individual market or small group market single risk
pool, and will allow HHS and the States to more effectively monitor
premium increases for coverage offered through or outside of an
Exchange. Furthermore, the proposed amendments and clarifications will
introduce consistent submission requirements for all issuers of single
risk pool coverage, regardless of whether the issuer is increasing,
decreasing, or maintaining rates.
We also remind issuers of student health insurance plans to use the
Rate Review Justification (RRJ) module of the Health Insurance
Oversight System (HIOS) to submit the required rate filing
information.\15\ Even though we propose to amend Sec. 147.145 in this
rulemaking (see III.C.4. of this preamble) to extend the index rate
setting methodology to student health insurance plans for plan years
beginning on or after January 1, 2017, we do not propose to change the
form or manner of submission of rate filing information under 45 CFR
part 154 for such coverage. In States without Effective Rate Review
programs, issuers would be required to submit Preliminary
Justifications for all student health insurance plans with rate
increases subject to review to CMS by the earlier of the date that the
issuer files the Preliminary Justification with the State or a date
prior to implementation of the rate increase. In the States where CMS
enforces the Public Health Service Act requirements, as amended by the
Affordable Care Act, issuers must submit rate filings for student
health insurance plan coverage for (a) rate increases of 10 percent or
more into the HIOS RRJ module; and (b) rate increases of less than 10
percent into the HIOS Document Collection Form Filing Module.
---------------------------------------------------------------------------

\15\ See Rate Review Student Health Plans FAQ published on
August 12, 2015. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Rate_Review_Student_Health_Plans_FAQ_20150812_Final.pdf.
---------------------------------------------------------------------------

We propose to permit the Secretary to specify in guidance, as
provided under Sec. 154.220(b)(2), different submission deadlines for
Rate Filing Justifications for single risk pool coverage plans versus
non-single risk pool coverage plans.
In accordance with paragraph (h)(2), we intend to make public on an
HHS Web site the information contained in parts I and III of each Rate
Filing Justification that is not a trade secret or confidential
commercial or financial information, as defined in HHS' Freedom of
Information Act regulations, 45 CFR 5.65. We intend to disclose such
information for all single risk pool coverage proposed rate increases
(regardless of whether the increase is subject to review) and for all
final rate increases. We note that we currently make such information
available to the public for single risk pool coverage proposed rate
increases subject to review and all final rates. The disclosure of
information for all single risk pool coverage proposed rate increases,
rather than only proposed rate increases subject to review, will
provide the public with more comprehensive information and increase the
transparency of the rate setting process.
c. Timing of Providing the Rate Filing Justification (Sec. 154.220)
Section 154.220 establishes time frames for required rate filing
justifications. As previously discussed, we propose to collect a
Unified Rate Review Template for all single risk pool coverage products
in the individual or small group (or merged) market, regardless of
whether any plan within a product is subject to a rate increase. We
propose technical changes to the language in this section to align with
this proposal to remove references to rate increases and clarify that
the time frames listed pertain to all single risk

[[Page 75516]]

pool coverage products with or without rate changes. Specifically, we
propose to revise the introductory language to this section with
accompanying edits to the language in paragraphs (b) and (b)(1).
d. Submission and Posting of Final Justifications for Unreasonable Rate
Increases (Sec. 154.230)
We propose a technical change to paragraph (c)(2)(i). That
paragraph currently includes a reference to Sec. 154.215(i) but no
such paragraph exists. We propose to fix the typographical error and
change the cross reference to Sec. 154.215(h).
e. CMS's Determinations of Effective Rate Review Programs (Sec.
154.301)
Section 154.301 sets forth criteria for evaluating whether a State
has an Effective Rate Review Program in the individual and small group
(or merged) markets. In the 2016 Payment Notice (80 FR 10783), we
provided that the criteria for determining whether a State has an
Effective Rate Review program includes making rate information
available to the public at a uniform time (rather than on a rolling
basis) for proposed rate increases subject to review and all final rate
increases, including those not subject to review (as applicable) for
single risk pool coverage in the relevant market segment and without
regard to whether coverage is offered through an Exchange or outside of
an Exchange. As this was the first year for these uniform posting
requirements, and because the uniform timelines were published by CMS
well into 2015, CMS understands that some States had significant
challenges in meeting the specified timelines for rates filed for
coverage beginning on or after January 1, 2016. For rates filed for
coverage beginning on or after January 1, 2017, we intend to make a
proposed timeline for release of rate information for single risk pool
coverage available for comment from States and other stakeholders in
December and finalize the timeline no later than March. We believe the
comment process will allow States and other stakeholders to identify in
advance any challenges that the timeline may pose and allow us to make
adjustments as may be necessary to accommodate State-specific needs and
other considerations. We also believe this process will better support
States that seek to operate an Effective Rate Review program in
compliance with these requirements for rates filed for coverage
beginning on or after January 1, 2017.
We consider the posting of proposed rate increases that are subject
to review and the posting of all final rate increases (including those
not subject to review) for single risk pool coverage at a uniform time
a criterion for a State retaining its designation as having an
Effective Rate Review Program. We will continue to monitor States to
ensure that single risk pool coverage rate filings are posted at a
uniform time, in the relevant market segment and without regard to
whether the coverage is offered through or outside of an Exchange, in
accordance with these requirements and guidance issued by CMS.

F. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act

1. General Provisions
a. Definitions (Sec. 155.20)
In Sec. 155.20, we propose to amend the definition of
``applicant'' for the small group market so that the term also includes
an employer seeking eligibility to purchase coverage through a SHOP,
without necessarily enrolling in that coverage themselves. The current
definition of an applicant contemplates an employer, employee, or
former employee seeking eligibility for enrollment in a QHP through the
SHOP for himself or herself. For consistency with our existing
regulations governing the SHOP application process at Sec. Sec.
155.710 and 155.715 and for consistency with how the small group market
typically works, we propose that the term applicant also include an
employer who is seeking eligibility to purchase coverage through a
SHOP, but who is not seeking to enroll in that coverage himself or
herself.
We also propose to amend Sec. 155.20 to add a definition for
``Federal platform agreement'' to apply to this part. We propose to
define a Federal platform agreement to mean an agreement entered into
by a State Exchange and HHS, under which the State Exchange elects to
rely on the Federal platform to carry out select Exchange functions.
We also propose to modify the definitions of a ``small employer''
and ``large employer'' at Sec. 155.20 to align with the Protecting
Affordable Coverage for Employees Act (Pub. L. 114-60), which was
recently enacted, as further described in the preamble for Sec.
144.103. As described in that section of the preamble, consistent with
section 1304(b) of the Affordable Care Act and section 2791(e) of the
PHS Act, we propose to codify that in the case of an employer that was
not in existence throughout the preceding calendar year, the
determination of whether the employer is a large employer or a small
employer be based on the average number of employees that it is
reasonably expected the employer will employ on business days in the
current calendar year. We do not propose to change the applicability of
the counting methodology under 4980H(c)(2) of the Code to these
definitions, but we propose to eliminate language about the timing of
its applicability, which will no longer be relevant when this rule is
finalized.
2. General Standards Related to the Establishment of an Exchange
a. Election To Operate an Exchange After 2014 (Sec. 155.106)
We propose to modify the timeframes for submission and approval of
documentation specifying how an Exchange established by a State or a
regional Exchange meets the Exchange approval standards (that is, the
Exchange Blueprint). Based on our experience over the last two open
enrollment periods, we believe the current Exchange Blueprint
application deadlines for States intending to operate a State Exchange
do not sufficiently balance the need to provide States with time to
adequately prepare their Blueprint applications against the need to
ensure HHS has sufficient time to accurately assess a State's progress
and ability to timely build the necessary Exchange information
technology. In our experience, the process for seeking approval to
operate a State Exchange involves substantial technical assistance and
collaboration between HHS and the State in developing plans to
transition from one Exchange operational model and information
technology infrastructure to another, including key milestones,
deadlines, and contingency measures. Since the completion of some of
these key milestones and deadlines would need to occur prior to the
submission of the Blueprint application, we propose that we will make
that technical assistance available and initiate the transition
planning process following submission of a declaration letter from the
State, as provided for in the Blueprint approval process. The
declaration letter would serve as formal notification to HHS of a
State's intent to pursue approval to operate a State Exchange, and will
initiate coordination between the State and HHS on a transition plan.
We would seek a declaration letter approximately 21 months prior to the
beginning of the SBE's first annual enrollment and 9 months prior to
the beginning of an SBE-FP's first annual open enrollment.
In Sec. 155.106(a)(2), we propose to require States that are
establishing a State Exchange (not including a State Exchange using the
Federal platform for

[[Page 75517]]

select functions) to submit an Exchange Blueprint at least 15 months
prior to the date the Exchange proposes to begin open enrollment as a
State Exchange. We also propose in Sec. 155.106(a)(3) to increase the
time that the State must have in effect an approved or conditionally
approved Exchange Blueprint from 6.5 months to 14 months prior to the
date the Exchange proposes to begin open enrollment as a State
Exchange. We recognize that in some situations the open enrollment
period may not have been established when Blueprints are due.
Therefore, we propose in paragraph (a)(5), if the open enrollment
period for the year the State intends to begin operating an SBE has not
been established, a State should assume open enrollment will begin on
the same date as open enrollment is to begin for the year in which they
are submitting the Blueprint.
We propose to revise paragraph (b) to clarify that HHS will operate
the Exchange if a State Exchange ceases operations.
We propose to add a paragraph (c) to establish requirements for a
State that elects to operate an SBE-FP. These States must submit an
Exchange Blueprint (or submit an update to an existing approved
Exchange Blueprint) at least 3 months prior to the date open enrollment
is to begin for the State as an SBE-FP; and must have in effect an
approved, or conditionally approved, Exchange Blueprint and operational
readiness assessment at least 2 months prior to the date on which the
Exchange proposes to begin open enrollment as an SBE-FP. If the State
Exchange has a conditionally approved Exchange Blueprint application,
we propose that it would not be required to submit a new Blueprint
application, but must submit any significant changes to that
application for HHS approval at least 3 months prior to the date on
which the Exchange proposes to begin open enrollment as an SBE-FP. Upon
receipt of approval or conditional approval of the Exchange Blueprint
or amended Blueprint, and prior to the start of the open enrollment
period, we propose that these States must execute a Federal platform
agreement and be required to coordinate with HHS on a transition plan.
Lastly, we want to be clear that we are only proposing changes to
the timelines for submission of the Blueprint application. We are not
otherwise proposing any modifications to the information and documents
that States must submit as part of the actual Exchange Blueprint
application.
We seek comment on these proposals.
b. Additional Required Benefits (Sec. 155.170)
Section 1311(d)(3)(B) of the Affordable Care Act permits a State,
at its option, to require QHPs to cover benefits in addition to the
essential health benefits, but requires a State to make payments,
either to the individual enrollee or to the issuer on behalf of the
enrollee, to defray the cost of these additional State-required
benefits. In the 2016 Payment Notice, we instructed States to select a
new EHB base-benchmark plan to take effect beginning for the 2017 plan
year. The final EHB base-benchmark plans selected as a result of this
process have been made publicly available.\16\
---------------------------------------------------------------------------

\16\ Available at https://downloads.cms.gov/cciio/FinalListofBMPs_15_10_21.pdf.
---------------------------------------------------------------------------

Section 1311(d)(3)(B) of the Affordable Care Act refers to
situations in which the State requires QHPs to cover benefits. That
section is not specific to State statutes and we have interpreted that
section to apply not only in cases of legislative action but also in
cases of State regulation, guidance, or other State action. Therefore,
we propose to reword Sec. 155.170(a)(2) to make clear that a benefit
required by the State through action taking place on or before December
31, 2011 is considered an EHB.
In the EHB Rule (78 FR 12837 through 12838), we discussed Sec.
155.170(a)(2), which implements section 1311(d)(3)(B) of the Affordable
Care Act. In our discussion of that provision, we provided that
``State-required benefits enacted on or before December 31, 2011 (even
if not effective until a later date) may be considered EHB, which would
obviate the requirement for the State to defray costs for these State-
required benefits.'' This policy continues to apply. Therefore,
benefits required by a State through action taking place after December
31, 2011 that directly apply to the QHPs are not considered EHB (unless
enactment is directly attributable to State compliance with Federal
requirements, as discussed below).
Although benefits requirements enacted by States after December 31,
2011 that directly apply to the QHP and that were not enacted for
purposes of compliance with Federal requirements are not considered
EHB,\17\ the base-benchmark plan might cover some of those non-EHB.
Nonetheless, issuers must treat those benefits as they would other non-
EHB, such as those identified in Sec. 156.115(d) \18\ and the State
must defray the cost. We propose to codify this interpretation in Sec.
155.170(a)(2). We seek comment on this proposal.
---------------------------------------------------------------------------

\17\ The 2016 Payment Notice provides that States are not
expected to defray the cost of State-required benefits enacted on or
after January 1, 2012 that were required in order to comply with new
Federal requirements. (80 FR 10749, 10813 (Feb. 27, 2015)).
\18\ An issuer of a plan offering EHB may not include routine
non-pediatric dental services, routine non-pediatric eye exam
services, long-term/custodial nursing home care benefits, or non-
medically necessary orthodontia as EHB.
---------------------------------------------------------------------------

At Sec. 155.170(a)(3), we currently require the Exchange to
identify which additional State-required benefits, if any, are in
excess of EHB. We propose to amend paragraph (a)(3) to designate the
State, rather than the Exchange, as the entity that identifies which
State-required benefits are not EHB. We propose this change because we
believe insurance regulators are generally more familiar with State-
required benefits. We believe each State should determine the
appropriate State entity best suited to identify newly required
benefits. Additionally, for consistency of terminology, we propose to
amend paragraph (a)(3) to replace the reference to ``in excess of EHB''
to ``in addition to EHB.''
In current Sec. 155.170(c)(2)(iii), we require QHP issuers to
quantify the cost attributable to each additional State-required
benefit and report their calculations to the Exchange. We also propose
to designate the State as the entity that receives issuer calculations
in paragraph (c)(2)(iii). Since the State is required by statute to
remit a payment to an enrollee or issuer, we believe the calculation
should be sent directly to the State rather than to the Exchange. We
seek comment on this proposal.
The 2016 Payment Notice specified that a State may need to
supplement habilitative services if the base-benchmark plan does not
cover such services. If a State supplements the base-benchmark plan,
there is no requirement to defray the cost of the benefits added
through supplementation, as long as the State imposes the requirement
to comply with the Affordable Care Act or another Federal requirement.
Examples of such Federal requirements include: Requirements to provide
benefits and services in each of the 10 categories of EHB; requirements
to cover preventive services; requirements to comply with the Mental
Health Parity and Addiction Equity Act; and the removal of
discriminatory age limits from existing benefits.
In some States, the base-benchmark plan may be a large group (non-
Medicaid HMO) or State employee plan. We have received questions
regarding State-required benefits that are

[[Page 75518]]

embedded in those large group (non-Medicaid HMO) base-benchmark plans.
As stated earlier in this section, if the State-required benefit in
question was required by State action after December 31, 2011, applies
directly to the QHP, and was not enacted for purposes of compliance
with Federal requirements, the benefit is not considered EHB, even if
the benefit is embedded in the base-benchmark plan. However, a benefit
required only in the large group market and reflected in a large group
base-benchmark plan is not an EHB for QHPs offered in the individual or
small group markets because such a benefit requirement does not apply
directly to those plans, and to the extent it is included in the base-
benchmark plan, it may be ``substituted'' for, in accordance with Sec.
156.115(b). Therefore, the State would not have to defray the cost of
individual and small group market QHPs covering State-required benefits
that are required in the large group market only. (However, to the
extent the State permits large group plans to be sold as QHPs through
the State's Exchange, the State would have to defray the cost of the
large group QHPs covering the mandated benefit.) We note that plans
subject to the EHB requirements offered in the individual and small
group markets in those States would have to be substantially equal to
the base-benchmark plan, and therefore may cover the State-required
benefit as EHB since it is embedded in the base-benchmark plan. In such
a case, the benefit is an EHB because it is covered by the base-
benchmark plan, but the cost of coverage by individual and small group
QHPs does not have to be defrayed, because the State-required benefit
does not apply directly to those QHPs.
Some States have imposed new benefit requirements only on
individual and small group plans that are not QHPs such that only
individual and small group plans sold outside the Exchange must cover
the State-required benefit. We note that a QHP generally may be sold
outside the Exchanges in which case it would be subject to the new
benefit requirements. States are cautioned, however, that imposing
different benefit mandates depending on a plan's status as a QHP or
because it is sold through the Exchange may violate section 1252 of the
Affordable Care Act. Under this section, State standards or
requirements implementing, or related to, standards or requirements in
title I of the Act must be applied uniformly within a given insurance
market. Thus, if a State requires that non-QHPs in the individual or
small group market provide any benefits, under section 1252, the State
must require QHPs sold through the Exchange to provide those same
benefits, and consistent with our earlier stated policy at Sec.
155.170(a)(2), States would generally be required to defray the cost of
QHPs providing the required benefits if they were required through
State action taking place after December 31, 2011.
As noted earlier, the Protecting Affordable Coverage for Employees
Act, enacted in October 2015, amended the definitions of small employer
and large employer in section 1304(b) of the Affordable Care Act and
section 2791(e) of the PHS Act such that a small employer is generally
\19\ an employer with 1-50 employees, with the option for States to
expand the definition of small employer to 1-100 employees.\20\ We have
proposed amendments to Sec. 144.103 to reflect these statutory
amendments.
---------------------------------------------------------------------------

\19\ Prior to enactment of the Protecting Affordable Coverage
for Employees Act, small employer was defined to mean, in connection
with a group health plan with respect to a calendar year and a plan
year, an employer who employed 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. In case of plan years beginning before January 1, 2016, a
State was able to elect to define small employer by substituting
``50 employees'' for ``100 employees''. For ease of reference with
regard to this section, we will refer to employers as having 1-50 or
1-100 employees.
\20\ States that elect to extend the small employer definition
were requested to notify CMS of their election by October 30, 2015
at marketreform@cms.hhs.gov.
---------------------------------------------------------------------------

Several States have enacted benefit requirements that would apply
to small group insurance plans offered to employers with 51-100
employees, but not to employers with 1-50 employees. This may arise
because the State-required benefit was designed to apply only in the
large group market when the large group market included employers with
more than 50 employees, but the State has since then availed itself of
the option to define a ``small employer'' as an employer with 1-100
employees.
Section 2702 of the PHS Act and Sec. 147.104 generally require an
issuer to offer all approved products to any individual or employer in
the market for which the product was approved and to accept any
individual or employer that applies for any approved product in a given
market. If a State elects to expand the definition of small employer so
that it covers employers with 1-100 employees, all products approved
for sale in the small group market (defined by the State as 1-100
employees) generally must be offered to employers with 1-100 employees.
This effectively means that existing State benefits mandates that apply
to insurance coverage sold to employers with 51-100 employees would
then effectively also apply to all products sold to employers with 1-
100 employees. As long as the benefit was required by State action
taken on or before December 31, 2011, the expansion of coverage would
not trigger the requirement to defray, because the expansion was
required to comply with Federal guaranteed availability laws. If a
State does not opt to expand the definition of small employer to 1-100
employees, then any State-required benefits applicable in the large
group market (including to employers with 51-100 employees) would
continue to not apply in the small group market. If a State-required
benefit was imposed by State action taking place January 1, 2012 or
later, then defrayal generally would be required.
3. General Functions of an Exchange
a. Functions of an Exchange (Sec. 155.200)
We propose to amend Sec. 155.200(a) to include reference to
subpart M, which establishes oversight and program integrity standards
for State Exchanges, and subpart O, which establishes quality reporting
standards for Exchanges. These subparts were not originally
incorporated into this paragraph because they were finalized after
Sec. 155.200(a) was finalized. We propose incorporating them now
because we view them as providing important safeguards for consumers.
We also propose to amend Sec. 155.200 by adding a paragraph (f) to
address SBE-FPs. This arrangement is intended to permit a State
Exchange to leverage existing Federal assets and operations by relying
on HHS services for performing certain Exchange functions, particularly
eligibility and enrollment functions. The SBE-FP would also rely on HHS
to perform certain consumer call center functions and casework
processes, and maintain related information technology infrastructure.
The SBE-FP would retain responsibility for plan management functions,
subject to certain rules requiring the SBE-FP to require its QHP
issuers to comply with certain FFE standards governing QHPs and issuers
(as proposed in Sec. 155.200(f)(2) of this proposed rule), and
consumer support functions, subject to FFE rules governing consumer
assistance functions.
Under Sec. 155.200(f)(1), we propose that a State may receive
approval or conditional approval to operate an SBE-FP under proposed
Sec. 155.106(c) and meet its obligations under Sec. 155.200(a)

[[Page 75519]]

by entering into a Federal platform agreement with HHS. In the Federal
platform agreement, an SBE-FP would indicate its decision to rely on
HHS for services related to the individual market Exchange, the SHOP
Exchange, or both the individual market and SHOP Exchanges. The Federal
platform agreement would specify the Federal services on which the
State Exchange relies, the user fee that HHS will collect from issuers
in that SBE-FP for the Federal services (as specified at Sec.
156.50(c)(2)), and other mutual obligations relating to the
arrangement, including obligations for the transfer of data. We intend
to release the Federal platform agreement at a later date. We note that
at this point the Federal services on which SBE-FPs may rely will come
as an entire package. That is, HHS will not at this time offer a
``menu'' of Federal services from which an SBE-FP may select some but
not other services on the Federal platform. However, we will explore
the feasibility of doing so in the future.
The Federal platform agreement would also specify expectations
between the State and HHS across various operational areas.
Although the SBE-FPs would retain primary, formal responsibility
for overseeing QHPs and issuers, we propose under Sec. 155.200(f)(2)
to require an SBE-FP to establish and oversee certain requirements for
its QHPs and QHP issuers that are no less strict than the requirements
that apply to QHPs and QHP issuers on an FFE. We propose these
requirements to include the existing and proposed standards under the
following sections: Sec. 156.122(d)(2) (the requirement for QHPs to
make available published up-to-date, accurate, and complete formulary
drug list on its Web site in a format and at times determined by HHS);
Sec. 156.230 (network adequacy standards); Sec. 156.235 (essential
community providers standards); Sec. 156.298 (meaningful difference
standards); Sec. 156.330 (changes of ownership of issuers
requirement); Sec. 156.340(a)(4) (QHP issuer compliance and compliance
of delegated and downstream entities requirements); Sec. 156.705
(maintenance of records standard), Sec. 156.715 (compliance reviews
standard); and Sec. 156.1010 (casework standards).
Applying the changes of ownership issuers' requirement to SBE-FPs
will help fulfill the Federal platform's need for data and technical
consistency. It will ensure that HHS maintains the most accurate and
updated information to present to consumers through its branded
platform, HealthCare.gov. HHS must be able to monitor and provide
regulatory oversight over change in control situations. Change in
control has a significant operational impact on the Federal platform
and requires the expenditure of considerable technical resources to
effectuate the change throughout the multiple systems that constitute
the Federal platform.
Applying the formulary drug list, network adequacy, meaningful
difference, and essential community providers standards will ensure
that all QHPs on HealthCare.gov meet a consistent minimum standard and
that consumers obtaining coverage as a result of applying through
Healthcare.gov are guaranteed plans that meet these minimum standards.
For example, all QHP issuers must meet a ``reasonable access'' network
adequacy standard, but FFE issuers must meet additional network
adequacy standards. It is important to HHS that shoppers at
HealthCare.gov do not enroll in plans that fail to meet these minimum
standards, so we propose that SBE-FPs that wish to rely on the
HealthCare.gov platform require its issuers to meet these minimum
standards as well, since their consumers are obtaining the coverage
through HealthCare.gov. SBE-FPs may exceed these minimum standards to
the extent they do not present display problems on HealthCare.gov.
Although the SBE-FPs are legally distinct from FFEs, this difference
will not always be apparent to Healthcare.gov consumers. Not having
these standards apply may lead to consumer confusion and dilution of
consumer goodwill with respect to the plans available on
HealthCare.gov. The States would conduct QHP certification reviews for
these standards.
Applying the QHP issuer compliance and compliance of delegated or
downstream entities requirement at Sec. 156.340(a)(4), which involves
the maintenance of records standards of Sec. 156.705 and the
compliance reviews for QHP issuers standards of Sec. 156.715, will
ensure that the SBE-FP has authority at least as strong as that
possessed by HHS to enforce compliance with these standards and will
ensure that the SBE-FP and HHS are able to access all records upon
request from the issuers in the SBE-FPs.
Applying the casework standards at Sec. 156.1010 will ensure that
the SBE-FP and HHS can respond to problems about which they both bear
responsibility. Since SBE-FPs must use the Health Insurance Casework
System (HICS) for handling consumer casework and meeting casework
resolution timeframes, the SBE-FP would not be overseeing casework
processes. However, as with all other Exchange types, State Departments
of Insurance will still handle appropriate consumer complaints related
to issuers in their States. For cases that are Exchange-related, or
those in which the consumer has chosen to contact the Exchange even
after contacting the appropriate Department of Insurance, HHS would
oversee the routing and resolution of casework. HHS' intent is to work
collaboratively with the SBE-FP, similar to how HHS works with SPMs.
Finally, we propose under Sec. 155.200(f)(3) that HHS will work
with SBE-FPs to enforce the FFE standards listed under Sec.
155.200(f)(2) directly against SBE-FP issuers or plans, when the SBE-FP
is not substantially enforcing one or more of these requirements. In
that circumstance, we propose that HHS would have the authority to
suppress a plan under Sec. 156.815. This will ensure that consumers
shopping for coverage on HealthCare.gov have access to plans that are
in compliance with the FFE standards with which SBE-FP issuers must
comply as a condition of offering QHPs through a State Exchange on the
Federal platform.
We intend to work closely and collaboratively with SBE-FPs, and
believe that our collaboration with States that currently use the
Federal platform with respect to enforcement matters has been close and
effective. We seek comments on all aspects of this proposal.
b. Consumer Assistance Tools and Programs of an Exchange (Sec.
155.205)
We propose two amendments to Sec. 155.205 to address functions of
an SBE-FP. First, because an SBE-FP relies on HHS to carry out call
center functions, we propose to amend Sec. 155.205(a) to exempt an
SBE-FP from the requirement to operate a toll-free call center, and
instead provide that an SBE-FP must at a minimum operate a toll-free
telephone hotline to respond to requests for assistance to consumers in
their State, in accordance with section 1311(d)(4)(B) of the Affordable
Care Act. We seek comments on this proposal.
Secondly, we propose to amend Sec. 155.205(b) by adding paragraph
(b)(7) to provide that an SBE-FP must, at a minimum, operate an
informational Internet Web site through which consumers can also be
directed to HealthCare.gov, in accordance with section 1311(d)(4)(C) of
the Affordable Care Act. We seek comments on this proposal.

[[Page 75520]]

c. Standards Applicable to Navigators under Sec. Sec. 155.210 and
155.215; Standards Applicable to Consumer Assistance Tools and Programs
of an Exchange under Sec. 155.205(d) and (e); and Standards Applicable
to Non-Navigator Assistance Personnel in an FFE and to Non-Navigator
Assistance Personnel Funded through an Exchange Establishment Grant
(Sec. Sec. 155.205, 155.210 and 155.215)
We have previously established a range of consumer assistance
programs to help consumers apply for and enroll in QHPs and insurance
affordability programs through the Exchange. These consumer assistance
programs include the Navigator program described at section
1311(d)(4)(K) and (i) of the Affordable Care Act and Sec. 155.210.
Among other duties, section 1311(i)(3) of the Affordable Care Act
requires Navigators to conduct public education activities to raise
awareness of the availability of QHPs; to distribute fair and impartial
information concerning enrollment in QHPs and the availability of
Exchange financial assistance under the Affordable Care Act; to
facilitate enrollment in QHPs; and to provide referrals to certain
State agencies for any enrollee with a grievance, complaint, or
question regarding their health plan, coverage, or a determination
under such plan or coverage.
We have also established under Sec. 155.205(d) and (e) that each
Exchange must provide consumer assistance, outreach, and education
functions. These must include a Navigator program and can include a
non-Navigator assistance personnel program.
We propose to amend Sec. 155.210(e) by adding a new paragraph
(e)(8) that would require Navigators in all Exchanges to provide
targeted assistance to serve underserved and/or vulnerable populations
within the Exchange service area. Section 155.210(b)(2)(i) already
requires Navigators to have expertise in the needs of underserved and
vulnerable populations. We believe that also requiring Navigators to
provide targeted assistance to underserved and vulnerable populations
is critical to improving access to health care for communities that
often experience a disproportionate burden of disease. In keeping with
the spirit of section 1311(i)(3)(A) of the Affordable Care Act, which
directs that Navigator entities must conduct public education
activities to raise awareness about the availability of QHPs, we
believe that Navigators should focus their outreach and enrollment
assistance efforts on harder-to-reach populations and the remaining
uninsured, to build increased awareness of the coverage options
available through the Exchange and to help new consumers find
affordable health coverage that meets their needs.
Because the characteristics of underserved and vulnerable
populations may vary over time and from region to region, we do not
propose to define and identify these populations for all Exchanges.
Instead, we propose to permit each Exchange to define and identify the
underserved and vulnerable populations in its service area, and to
update these definitions as necessary. This could include an Exchange
allowing its Navigator grantees to propose, for the Exchange's approval
(for example, in their grant applications), which communities to
target. In Federally-facilitated Exchanges, we would identify
populations as vulnerable or underserved through our Navigator Funding
Opportunity Announcements, and would give FFE Navigator grant
applicants an opportunity to propose additional communities to target
during the grant application process. Vulnerable or underserved
populations might include, for example, populations that are
disproportionately without access to coverage or care, or are at a
greater risk for poor health outcomes. We propose that these would be
the primary criteria used to identify such populations within the FFEs.
Members of these populations could be identified by age groups,
demographics, disease, geography, or other characteristics as defined
or approved by the Exchange. We believe reaching vulnerable or
underserved populations is important to increasing awareness among the
remaining uninsured of the coverage options available through the
Exchange, helping new consumers find affordable coverage that meets
their needs, and narrowing health disparities. In Federally-facilitated
Exchanges, our proposal would apply beginning with the application
process for Navigator grants awarded in 2018.
We seek comment on all aspects of this proposal, including on how
Exchanges, including the FFEs, should identify vulnerable or
underserved populations in their service areas, and on the appropriate
process and timeframes under which these populations would be
identified. Additionally, although we have not proposed to extend this
requirement to certified application counselors and non-Navigator
assistance personnel subject to Sec. 155.215, we encourage certified
application counselors and non-Navigator assistance personnel to
prioritize reaching and assisting the vulnerable and underserved
populations identified by the Exchange in their communities, and we
recognize that many of these assisters already focus their efforts on
such populations.
We note that Navigators would not exclusively be serving these
target populations, since all Navigators are required to assist any
consumer seeking assistance. As we have explained in prior rulemakings,
we interpret Navigators' duty to provide fair and impartial information
and services under Sec. 155.210(e)(2) to require that all Navigators
should have the ability to help any individual who seeks assistance,
even if that consumer is not a member of the community or group the
Navigator intends to target (see 78 FR 20589; 78 FR 42830; 79 FR 30270;
79 FR 30278).
In Sec. 155.210, we propose to add paragraph (e)(9) to specify
that Navigators in all Exchanges would be required to help consumers
with certain other types of assistance, including post-enrollment
assistance. This proposal is designed to ensure that consumers would
have access to skilled assistance beyond applying for and enrolling in
health coverage, including, for example, assistance with the process of
filing Exchange eligibility appeals or with applying through the
Exchange for exemptions from the individual shared responsibility
payment, providing basic information about reconciliation of premium
tax credits, and understanding basic concepts related to using health
coverage. Section 1311(i)(3)(D) of the Affordable Care Act and Sec.
155.210(e)(4) already expressly require Navigators to provide post-
enrollment assistance by referring consumers with complaints,
questions, or grievances about their coverage to appropriate State
agencies. This suggests that Congress anticipated that consumers would
need assistance beyond the application and enrollment process, and that
Navigators would maintain relationships with consumers and be a source
of such assistance.
Consistent with the requirements under section 1311(i)(3)(B) and
(C) of the Affordable Care Act that Navigators distribute fair and
impartial information concerning enrollment in QHPs and facilitate
enrollment in QHPs, and pursuant to the Secretary's authority under
section 1321(a)(1)(A) of the Affordable Care Act, we propose at Sec.
155.210(e)(9)(i) to require Navigators in all Exchanges to help
consumers with the process of filing appeals of Exchange eligibility
determinations. We are not proposing to establish a duty for Navigators
to represent a consumer in an appeal, sign an appeal request, or file
an appeal on the consumer's behalf. We believe that helping consumers

[[Page 75521]]

understand Exchange appeal rights when they have received an adverse
eligibility determination, and assisting them with the process of
completing and submitting appeal forms, would help to facilitate
enrollment and would help consumers obtain fair and impartial
information about enrollment, including information about available
exemptions from the individual shared responsibility payment that would
help consumers decide whether or not to enroll in coverage. We would
interpret this proposal to include helping consumers file appeals of
eligibility determinations made by an Exchange (including SHOP
Exchanges) related to enrollment in a QHP, special enrollment periods,
exemptions from the individual shared responsibility payment that are
granted by the Exchange, participation as an employer in a SHOP, and
any insurance affordability program, including eligibility
determinations for Exchange financial assistance, Medicaid, the
Children's Health Insurance Program (CHIP), and Basic Health Programs.
We also propose at Sec. 155.210(e)(9)(ii) to require that
Navigators in all Exchanges help consumers understand and apply for
exemptions from the individual shared responsibility payment that are
granted by the Exchange. We believe that it would be consistent with
the Secretary's rulemaking authority under section 1321(a)(1)(A) of the
Affordable Care Act to require Navigators to provide assistance with
exemptions that the Exchange must grant under section 1311(d)(4)(H) of
the Affordable Care Act. Additionally, we believe that this proposal is
consistent with Navigators' duty under section 1311(i)(3)(B) of the
Affordable Care Act to distribute fair and impartial information
concerning enrollment in QHPs, since impartial information concerning
the availability of exemptions from the individual shared
responsibility payment would help consumers make informed decisions
about whether or not to enroll in coverage.
This assistance with Exchange-granted exemptions would include
informing consumers about the requirement to maintain minimum essential
coverage and the individual shared responsibility payment; helping
consumers fill out and submit Exchange-granted exemption applications
and obtain any necessary forms prior to or after applying for the
exemption; explaining what the exemption certificate number is and how
to use it; and helping consumers understand and use the Exchange tool
to find bronze plan premiums. This duty would also include explaining
the general purpose of Internal Revenue Service (IRS) Form 8965 to
consumers, consistent with IRS published guidance on the topic, and
explaining how to access this form and related tax information on
irs.gov.
Navigators may not provide tax assistance or interpret tax rules
within their capacity as Exchange Navigators, and this proposal would
not require Navigators to help consumers apply for exemptions claimed
through the tax filing process. We would interpret this proposal,
however, to require helping consumers generally understand the
availability of exemptions claimed through the tax filing process and
how to obtain them. This interpretation would help ensure that
Navigators share information about the full scope of possible
exemptions while not providing actual tax assistance or tax advice. We
request comment on whether we should require that, prior to providing
this assistance and information, Navigators provide consumers with a
disclaimer stating that they are not acting as tax advisers and cannot
provide tax advice within their capacity as Exchange Navigators. We
seek comment on whether such a disclaimer would help avoid consumer
misunderstandings and detrimental reliance on Navigator advice, or
whether it might be unnecessary, impractical, or cause consumer
confusion.
We also seek comment on whether a Navigator's duty to provide
assistance with filing exemption applications under proposed Sec.
155.210(e)(9)(ii) and filing appeals of exemption application denials
under proposed Sec. 155.210(e)(9)(i) should be limited, for example,
to consumers who have applied for or have been denied coverage or
financial assistance, or whether another limitation should apply. We
are cognizant of the resource limitations that Navigators and their
funding agencies may face, and do not want to reduce the assistance
available to consumers seeking coverage, as opposed to those who only
seek to avoid the individual shared responsibility penalty. At the same
time, we recognize that consumers may be unable to access coverage for
a wide variety of reasons, including their financial circumstances,
coverage gaps, and other personal or systemic obstacles, and want to be
sure that experienced help is available so that these consumers are
fully aware of and can access their exemptions options. We seek comment
on these issues.
In addition, we propose at Sec. 155.210(e)(9)(iii) to require
Navigators to help consumers with the Exchange-related components of
the premium tax credit reconciliation process, such as by ensuring they
have access to their Forms 1095-A and receive general, high-level
information about the purpose of this form that is consistent with
published IRS guidance on the topic. This proposal stems from the
requirement under section 1311(i)(3)(B) of the Affordable Care Act that
Navigators distribute fair and impartial information concerning the
availability of the premium tax credits under section 36B of the Code.
Consumers who receive advance payments of the premium tax credit may
need help with a variety of issues related to reconciliation.
Navigators would be required to help consumers obtain IRS Forms 1095-A
and 8962, and the instructions for both, and to provide general
information, consistent with applicable IRS guidance, about the
significance of the forms. Navigators would also be required to help
consumers understand (1) how to report errors on the Form 1095-A; (2)
how to find silver plan premiums using the Exchange tool; and (3) the
difference between advance payments of the premium tax credit and the
premium tax credit and the potential implications for enrollment and
re-enrollment of not filing a tax return and reconciling any advance
payments of the premium tax credit that were paid on consumers' behalf.
As noted above, Navigators may not provide tax assistance or
advice, or interpret tax rules and forms within their capacity as
Exchange Navigators, but their expertise related to the consumer-facing
aspects of the Exchange, including eligibility and enrollment rules and
procedures, uniquely qualifies them to help consumers understand and
obtain information from the Exchange that is necessary to the premium
tax credit reconciliation process. Because this proposal would include
a requirement that Navigators provide consumers with information and
assistance understanding the availability of IRS resources, Navigators
would be expected to familiarize themselves with the availability of
materials on irs.gov, including the Form 8962 instructions, IRS
Publication 974 Premium Tax Credit, and relevant FAQs, and to refer
consumers with questions about tax law to those resources or to other
resources, such as free tax return preparation assistance from the
Volunteer Income Tax Assistance or Tax Counseling for the Elderly
programs. Again, we request comment on whether we should require that,
prior to providing this information and assistance, Navigators provide

[[Page 75522]]

consumers with a disclaimer stating that they are not acting as tax
advisers and cannot provide tax advice within their capacity as
Exchange Navigators.
To help ensure consumers have seamless access to Exchange-related
tax information beyond the basic information that Navigators can
provide, we propose at 155.210(e)(9)(v) that Navigators be required to
refer consumers to licensed tax advisers, tax preparers, or other
resources for assistance with tax preparation and tax advice related to
consumer questions about the Exchange application and enrollment
process, exemptions from the requirement to maintain minimum essential
coverage and the individual shared responsibility payment, and premium
tax credit reconciliation.
We interpret the Navigator duties to facilitate enrollment in QHPs
in section 1311(i)(3)(C) of the Affordable Care Act, to distribute fair
and impartial information concerning enrollment in QHPs under section
1311(i)(3)(B) of the Affordable Care Act, and to conduct public
education activities to raise awareness about the availability of QHPs
in section 1311(i)(3)(A) of the Affordable Care Act to include helping
consumers understand the kinds of decisions they will need to make in
selecting coverage, and how to use their coverage after they are
enrolled. We have previously stated that one overall purpose of
consumer assistance programs is to help consumers become fully informed
and health literate. (See 79 FR 30276.) To improve consumers' health
literacy related to coverage generally, and to ensure that individual
consumers are able to use their coverage meaningfully, we propose at
Sec. 155.210(e)(9)(iv) to require Navigators in all Exchanges to help
consumers understand basic concepts related to health coverage and how
to use it. These activities could be supported through the use of
existing resources such as the HHS ``From Coverage to Care''
initiative, which we encourage Navigators to review, and which are now
available in multiple languages at https://marketplace.cms.gov/c2c.
This proposal would improve consumers' access to health coverage
information not just when selecting a plan, but also when using their
coverage. For example, Navigators could help consumers understand (1)
key terms used in health coverage materials, such as ``deductible'' and
``coinsurance,'' and how they relate to the consumer's health plan; (2)
the cost and care differences between a visit to the emergency
department and a visit to a primary care provider under the coverage
options available to the consumer; (3) how to identify in-network
providers to make and prepare for an appointment with a provider; (4)
how the consumer's coverage addresses steps that often are taken after
an appointment with a provider, such as making a follow-up appointment
and filling a prescription; and (5) the right to coverage of certain
preventive health services without cost sharing. We anticipate that
this assistance would vary depending on each consumer's needs and
goals. We invite comment on whether we should provide additional
specificity for Navigators related to this proposed duty to help
consumers understand and use their coverage, and if so, which
additional topics should be included.
We note that under Sec. 155.215(b)(2), Navigators in FFEs must
already be trained on the tax implications of enrollment decisions, the
individual responsibility to have health coverage, eligibility appeals,
and rights and processes for QHP appeals and grievances. To ensure that
Navigators in all States receive training in every area for which there
would be a corresponding Navigator duty, we propose to require all
Exchanges, including State Exchanges, to provide training that would
prepare Navigators for the additional areas of responsibility proposed
in this rulemaking. In proposed Sec. 155.210(b)(2)(v) through (viii),
therefore, we would require Exchanges to develop and disseminate
training standards to be met by all entities and individuals carrying
out Navigator functions to ensure expertise in: The process of filing
appeals of Exchange eligibility determinations; general concepts
regarding exemptions from the requirement to maintain minimum essential
coverage and the individual shared responsibility payment, including
the application process for exemptions granted through the Exchange,
and IRS resources on exemptions; the Exchange-related components of the
premium tax credit reconciliation process and IRS resources on this
process; and basic concepts related to health coverage and how to use
it.
We note that providing assistance with certain other post-
enrollment issues already falls within the scope of existing required
Navigator duties. We interpret the requirement to facilitate enrollment
in a QHP under section 1311(i)(3)(C) of the Affordable Care Act, and
the requirement at Sec. 155.210(e)(2) to provide information that
assists consumers with submitting the eligibility application, to
include assistance with updating an application for coverage through an
Exchange, including reporting changes in circumstances and assisting
with submitting information for eligibility redeterminations.
Additionally, Navigators are already permitted, but not required,
to help with a variety of other post-enrollment issues. For example, we
interpret the requirements in Sec. 155.210(e)(1) and (2) that
Navigators conduct public education activities to raise awareness about
the Exchange and provide fair and impartial information about the
application and plan selection process to mean that Navigators may
educate consumers about their rights with respect to coverage available
through an Exchange, such as nondiscrimination protections,
prohibitions on preexisting condition exclusions, and preventive
services available without cost-sharing. We also interpret these
requirements, together with the requirement in section 1311(i)(3)(B) of
the Affordable Care Act that Navigators distribute fair and impartial
information concerning enrollment in QHPs, and the availability of
Exchange financial assistance, to mean that Navigators may assist
consumers with questions about paying premiums for coverage or
insurance affordability programs enrolled in through an Exchange.
Finally, we interpret the requirement in section 1311(i)(3)(D) of the
Affordable Care Act and Sec. 155.210(e)(4) to provide referrals for
certain post-enrollment issues to mean that Navigators may help
consumers obtain assistance with coverage claims denials. We request
comments on whether we should make any of the above interpretations
explicit in the regulation and whether there are additional post-
enrollment duties required or permitted by these provisions that should
be made explicit as either required or simply permitted (but not
required) duties, as well as whether there are other forms of post-
enrollment assistance that Exchanges should require Navigators to
provide, commensurate with their general legal authority, but which are
not already specifically required under our regulations.
Although we have not proposed to extend any of the requirements
under proposed Sec. 155.210(e)(8) or (9) to non-Navigator assistance
personnel subject to Sec. 155.215, we note that the requirement to
provide information that assists consumers with submitting the
eligibility application under Sec. 155.210(e)(2), which would include
helping consumers report changes in circumstances and submit
information for eligibility redeterminations, also applies to certain
non-Navigator assistance personnel through Sec. 155.215(a)(2)(i). We
also note that

[[Page 75523]]

under Sec. 155.215, the training requirements for these non-Navigator
assistance personnel are the same as for Navigators in States with an
FFE.
We have also not proposed to extend any of these requirements to
certified application counselors. However, nothing prevents non-
Navigator assistance personnel or certified application counselors from
helping with activities that are consistent with their existing
regulatory duties. We request comments on whether we should extend
these proposed requirements to help with post-enrollment and other
activities to these assisters.
We propose to amend Sec. Sec. 155.205(d) and 155.215(b)(1)(i) to
specify that any individual or entity carrying out consumer assistance
functions under Sec. 155.205(d) and (e) or Sec. 155.210, in both
State Exchanges and FFEs, would be required to complete training prior
to performing any assister duties, including before conducting outreach
and education activities, as well as before providing application and
enrollment assistance. Section 155.215(b), which establishes training
standards for Navigators and non-Navigator assistance personnel in FFEs
and for non-Navigator assistance personnel funded through Exchange
Establishment grants under section 1311(a) of the Affordable Care Act,
requires that these assisters must obtain certification by the Exchange
prior to carrying out any consumer assistance functions under Sec.
155.205(d) and (e) or Sec. 155.210. We also propose to amend Sec.
155.215(b)(1)(i) to specify that the consumer assistance functions
referenced in that provision would include outreach and education
activities. In addition, we propose to amend Sec. 155.205(d) to
specify that training would have to be completed not only before
providing the assistance described in that paragraph, but also before
conducting the outreach and education activities specified in paragraph
(e). These proposals would require that Navigators, non-Navigator
assistance personnel subject to Sec. 155.215, and other entities and
persons providing consumer assistance under Sec. 155.205(d) and
consumer outreach and education activities under Sec. 155.205(e),
complete training prior to carrying out any consumer assistance
functions, including outreach and education activities.
We note that nothing in the Exchange regulations prohibits
individuals or organizations from conducting outreach about Exchanges
and providing application and enrollment assistance without being
trained and certified as Navigators, non-Navigator assistance
personnel, certified application counselors, or other kinds of
Exchange-approved assisters. However, this proposal would ensure that
individuals and organizations do not perform any Exchange outreach and
education activities or application and enrollment assistance while
identifying as or holding themselves out to the public as Navigators,
non-Navigator assistance personnel, or certified application
counselors, prior to completing Exchange requirements, including
training and certification. This proposal would also help ensure that
Navigators and non-Navigator assistance personnel are providing
accurate information when performing outreach and education activities.
Section 155.210(d)(6) currently prohibits Navigators from providing
to an applicant or potential enrollee any gifts unless they are of
nominal value; or any promotional items that market or promote the
products or services of a third party, when those promotional items are
being used as an inducement for enrollment. Through a cross-reference
to Sec. 155.210(d) in Sec. 155.215(a)(2)(i) and a parallel provision
in Sec. 155.225(g)(4), this prohibition also applies to non-Navigator
assistance personnel subject to Sec. 155.215, and to certified
application counselors.
We have received questions indicating that there is general
confusion about when gifts and promotional items can be provided to
applicants and potential enrollees. To reduce this confusion, we
propose to amend Sec. Sec. 155.210(d)(6) and 155.225(g)(4) to specify
that gifts of any value (including third-party promotional items of any
value) should never be provided to applicants or potential enrollees as
an inducement for enrollment. We also propose to specify that gifts
that are not provided as an inducement for enrollment may be provided
to applicants and potential enrollees if they do not exceed nominal
value.\21\ This proposed nominal value restriction would apply both to
each individual gift and to the cumulative value of multiple gifts,
including promotional items, which are provided by these types of
assisters to an applicant or potential enrollee. We further propose
that the nominal value restriction on the cumulative value of multiple
gifts would only apply to single encounters between the assister and an
individual applicant or potential enrollee, and not to multiple
encounters, so that assisters would not have to collect PII as a means
of tracking the number and value of gifts provided to an individual
consumer across multiple encounters, such as all encounters in a single
calendar year or enrollment season. Since we anticipate that gifts or
promotional items of a nominal value, such as pens, magnets or
keychains, could be provided to consumers at outreach and education
events or at other forums attended by members of the general public, we
do not want to establish a nominal value restriction that would be
difficult or burdensome for assisters to enforce, or that would require
the unnecessary collection of PII from consumers. We would consider a
single outreach or educational event to be a ``single encounter''; that
is, assisters would not be permitted to provide multiple gifts to the
same consumer at the same outreach event if the cumulative value of
those gifts exceeded nominal value. We seek comments on all aspects of
this proposal, including whether the nominal value restriction should
apply to a single encounter with an individual consumer, as proposed,
or whether a longer timeframe, such as all encounters with an
individual consumer in a calendar year, in an enrollment season, or in
total, would be preferable.
---------------------------------------------------------------------------

\21\ We have previously defined ``nominal value'' as a cash
value of $15 or less, or an item worth $15 or less, based on the
retail purchase price of the item, regardless of the actual cost.
(79 FR 15831 and 79 FR 30283).
---------------------------------------------------------------------------

Finally, to simplify the rule, we propose to define ``gifts,'' for
purposes of Sec. Sec. 155.210(d)(6) and 155.225(g)(4), to include gift
items, gift cards, cash cards or cash, as well as promotional items
that market or promote the products or services of a third party. We
further propose to amend language in Sec. Sec. 155.210(d)(6) and
155.225(g)(4) that currently provides that gifts, gift cards, or cash
may exceed nominal value for the purpose of providing reimbursement for
legitimate expenses incurred by a consumer in an effort to receive
Exchange application assistance, such as travel or postage expenses. We
propose to amend this language to indicate that the reimbursement of
legitimate expenses, such as travel or postage expenses, when incurred
by a consumer in an effort to receive Exchange application assistance,
would not be considered a gift, and therefore, would not be subject to
the proposed restrictions on providing gifts.
Our proposal seeks to strike a balance between permitting these
types of assisters to provide small gifts and promotional items as part
of creative outreach and education strategies, while ensuring that
gifts, including promotional items, are never provided to applicants
and potential enrollees to

[[Page 75524]]

induce enrollment. We believe this outright prohibition on providing
gifts and promotional items, of any value, to induce enrollment, is
consistent with the duties of these assisters to provide information
and services to consumers in a fair, accurate, and impartial manner,
including clarifying the distinctions among health coverage options,
and helping consumers make informed decisions during the health
coverage selection process. We believe it would be inconsistent with
these duties for an assister to try to influence the consumer's
decision about whether to enroll in coverage by providing them with a
gift to induce enrollment.
In addition, the duty of these assisters to provide information and
services in a fair, accurate and impartial manner would make it
inappropriate for them to engage in activities that give the appearance
that they are endorsing, promoting, or marketing the products or
services of third party business interests when performing their
authorized activities and services. At the same time, we believe that
any appearance that these assisters are endorsing, promoting, or
marketing the products or services of a third party, is substantially
mitigated if the items are only of nominal value and not provided to
induce enrollment, since it is unlikely that gifts of a nominal value
will influence a consumer's health coverage selection and enrollment
decisions. We also recognize that providing gifts, including
promotional items, of a nominal value may help to attract applicants
and potential enrollees to engage in a discussion with these assisters
during an outreach event and encourage consumers to consider seeking
Exchange application assistance. For these reasons, we do not want to
entirely prohibit these types of assisters from using gifts and
promotional items as part of their outreach efforts.
Finally, we note that existing regulations under Sec.
155.210(d)(7) already prohibit the use of Exchange funds to purchase
gifts or gift cards, or promotional items that market or promote the
products or services of a third party, that would be provided to any
applicant or potential enrollee. We do not propose to amend this
provision.
We request comments on all aspects of our proposals.
d. Ability of States To Permit Agents and Brokers To Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs (Sec. 155.220)
Section 1312(e) of the Affordable Care Act directs the Secretary to
establish procedures under which a State may permit agents and brokers
to enroll qualified individuals and qualified employers in QHPs through
an Exchange, and to assist individuals in applying for financial
assistance for QHPs sold through an Exchange. Under Sec. 155.220, we
established procedures to support the States' ability to permit agents
and brokers to assist individuals, employers or employees with
enrollment in QHPs offered through an Exchange, subject to applicable
Federal and State requirements.
At Sec. 155.220(c), we established parameters for enrollment of
qualified individuals through an Exchange with the assistance of an
agent or broker. At Sec. 155.220(c)(1), we established that an agent
or broker who assists with enrollment through the Exchange must ensure
completion of an eligibility verification and enrollment application
through the Exchange Web site as described Sec. 155.405. In Sec.
155.220(c)(3), we established the standards that apply when a Web site
of an agent or broker is used to complete the QHP selection.
As described at Sec. 155.220(d), an agent or broker that enrolls
qualified individuals through an Exchange, or assists individuals in
applying for Exchange financial assistance, must comply with the terms
of a general agreement with the Exchange, as well as register with the
Exchange and receive training in the range of QHP options and insurance
affordability programs. In addition, all agents and brokers must
execute the applicable privacy and security agreement required by Sec.
155.260(b) to provide assistance with enrollment through the Exchange.
In Sec. 155.220(g), we established standards under which HHS may
terminate an agent's or broker's general agreement with the FFEs for
cause. We established that HHS may pursue termination with notice of an
agent's or broker's agreement with the FFEs if, in HHS's determination,
a specific finding of noncompliance or pattern of noncompliance is
sufficiently severe. As established, the termination for cause of the
general agreement with notice means that after a 30-day opportunity to
resolve the matter, HHS would take necessary steps to prohibit an agent
or broker from assisting or enrolling individuals in a QHP offered
through an FFE, or a web-broker's ability to securely exchange
information with HHS, if the matter is not resolved to the satisfaction
of HHS. As of the date of termination, an agent or broker would no
longer be registered with the FFEs and would not be able to assist with
enrollment through the FFEs or exchange information with HHS. Certain
obligations of the agent or broker would survive that termination,
including the duty to protect and maintain the privacy and security of
personally identifiable information (PII) it has created, collected,
accessed, or acquired through its relationship with the FFEs. We
established that an agent or broker may be considered noncompliant if
HHS finds that the agent or broker violated: (a) Any standard specified
under Sec. 155.220; (b) any term or condition of its agreement with
the FFEs required under paragraph (d) of this section, or if, the
agent's or broker's FFE privacy and security agreements under Sec.
155.260(b) are terminated; (c) any applicable State law; or (d) any
other applicable Federal law.
In Sec. 155.220(h), we established a one-level process through
which an agent or broker may request reconsideration of HHS's decision
to terminate for cause an agreement required under Sec. 155.220(d). We
established that an agent or broker must submit a request for
reconsideration to the HHS reconsideration entity within 30 calendar
days of the date of the written termination notice from HHS. We
established that the HHS reconsideration entity would provide the agent
or broker with a written reconsideration decision within 30 calendar
days of the date it receives the request for reconsideration. This
decision constitutes HHS's final determination.
i. New Exchange Standards for Web-Brokers
As specified at Sec. 155.220(c)(1), an agent or broker who assists
with an enrollment through the Exchange must ensure that the applicant
completes an eligibility verification and enrollment application
through the Exchange Internet Web site. Under this standard, agents and
brokers that use a non-Exchange Web site to assist consumers in the QHP
selection and enrollment process (``direct enrollment'' through a
``web-broker'') must redirect an applicant to go directly to the
Exchange Web site to complete the application and receive an
eligibility determination. HHS is considering an option under which an
applicant could remain on the web-broker's Web site to complete the
application and enroll in coverage, and the web-broker's Web site can
obtain eligibility information from the Exchange to support the
consumer in selecting and enrolling in a QHP with Exchange financial
assistance. The intent is to have this information exchange occur
through an Exchange-approved web service as described below, enhancing
the direct enrollment

[[Page 75525]]

process. This option would provide Exchanges offering direct enrollment
and web-brokers more operational flexibility to expand front-end,
consumer-facing channels for enrollment through a seamless consumer
experience.
HHS solicits comments related to the current consumer experience
with web-brokers and the potential integration of the streamlined
eligibility application if a non-FFE Web site is used for the entire
process. We request comment on how much flexibility a web-broker should
have relative to the consumer experience on its Web site, using the
direct enrollment channel, to provide an end-to-end eligibility and
enrollment experience. We propose that web-brokers be required to use
the FFE single streamlined application without deviation from the
language of the application questions and the sequence of information
required for an eligibility determination or redetermination. This will
ensure that the information gathered when an applicant completes an
application on the Exchange Web site will also be collected to send to
the Exchange for an eligibility determination or redetermination that
is accurate and consistent across any channel used for enrollment. We
seek comment on this standard. HHS is also considering how to ensure
that consumers understand that they are applying for Exchange coverage,
such as through specific branding or wording requirements if a non-FFE
front-end Web site is used for the entire application and enrollment
process, and we seek comment on this as well.
Accordingly, we propose to revise Sec. 155.220(c)(1) to ensure
that an applicant who initiates enrollment directly with the web-broker
for enrollment through the Exchange receives an eligibility
determination for coverage through the Exchange Web site or through an
Exchange-approved web service via the FFE single streamline
application. This maintains the role of the Exchange in determining
eligibility. We propose to adopt similar changes to the standards for
the use of QHP issuer Web sites under Sec. 156.265(b)(2)(ii). Please
see section III.G.4.c for this accompanying preamble discussion. We
seek comment on this proposal.
We are also soliciting comments about the current agent and broker
provisions in Sec. 155.220 as applied to web-brokers. We are
interested in feedback on consumer and agent/broker experiences with
enrollment through web-brokers, any concerns with privacy and security
of the information transmitted through web-brokers by expanding direct
enrollment to incorporate the FFE single streamlined application, and
suggestions for improvements in the future, such as increased
monitoring and oversight activities. For example HHS is considering
expanding audits, requiring additional information display requirements
(such as the lowest cost plan at each metal level) beyond those
outlined in Sec. 155.220(c)(3) to ensure that consumers understand
basic information about cost and availability of qualified health
plans, and requiring HHS approval of alternative enrollment pathway
processes. Additional requirements to safeguard consumer information or
enhancements to improve the consumer and web-broker experience are also
being considered. These may include establishing more robust privacy
and security requirements, requiring adoption of cyber security best
practices, additional web-broker reporting requirements and specificity
as to the collection and use of consumer information. We note that the
current oversight provisions for the general agreement, registration,
training, termination, and reconsideration in Sec. 155.220(d) through
(h), as well as the changes in paragraphs (f), (g), (j), and (k)
proposed below, would apply to web-brokers.
ii. New Standards for Termination of Agent and Broker Agreements With
the FFEs
We propose to amend existing paragraph (g)(2)(ii) that an agent or
broker may be determined noncompliant if HHS finds that the agent or
broker violated any term or condition of the agreement with the FFEs
required under paragraph (d) of this section, or any term or condition
of an agreement with the FFEs required under Sec. 155.260(b).
We propose to add paragraph (g)(5) to Sec. 155.220(g) to address
suspension or termination of an agent's or broker's agreements with the
FFEs in cases involving potential fraud or abusive conduct. These cases
would include cases in which there is an allegation of potential fraud
or abusive conduct that HHS finds to be credible; or any report of
potential fraud or abusive conduct made by a State or Federal agency or
law enforcement. We propose to add this paragraph to give HHS authority
to act quickly to terminate access to HHS systems in these instances to
prevent further harm to consumers and to support the efficient and
effective administration of the FFEs.
We propose in Sec. 155.220(g)(5)(i)(A) that if HHS reasonably
suspects that an agent or broker may have engaged in fraud or abusive
conduct using PII of Exchange applicants or enrollees, or in connection
with an Exchange enrollment or application, HHS may suspend the agent's
or broker's agreement and accompanying registration with the FFEs for
up to 90 calendar days, with the suspension effective as of the date of
the notice to the agent or broker. This would apply whether the
activity or conduct in question was committed directly by the agent or
broker, or through a third party who acts at the direction of or on
behalf of the agent or broker. This immediate and temporary suspension
would prohibit the agent or broker from assisting with or facilitating
enrollment in coverage in a manner that constitutes enrollment through
the FFEs, including enrollment through the FFE Application Programming
Interface, while the investigation is conducted during this 90-day
period. Immediate suspension is critical in these circumstances to stop
additional potentially fraudulent enrollments through the FFE during
the period of investigation. Although the agent or broker would not be
provided with advance notice, we propose under Sec.
155.220(g)(5)(i)(B) that the agent or broker may submit evidence to HHS
to rebut the allegation during this 90-day period. If HHS determines
that the agent or broker satisfactorily addresses the concerns at
issue, HHS would lift the temporary suspension and notify the agent or
broker. We further propose under Sec. 155.220(g)(5)(i)(B) that failure
to submit information during this 90-day period may result in
termination of the agreement for cause effective immediately under
Sec. 155.220(g)(5)(ii).
We propose in Sec. 155.220(g)(5)(ii) that if HHS reasonably
confirms the credibility of an allegation that an agent or broker
engaged in fraud or abusive conduct using personally identifiable
information of Exchange enrollees or applicants, or in connection with
an Exchange enrollment or application, or is notified by a State or law
enforcement authority of the State or law enforcement authority's
finding or determination of fraud or behavior that would constitute
abusive conduct in such a circumstance, HHS will notify the agent or
broker and terminate, immediately and permanently, the agent's or
broker's agreements with the FFEs for cause. In contrast to termination
for other violations listed in Sec. 155.220(g), we propose that
following an HHS reasonable confirmation of such an allegation or such
a State or law enforcement notification, termination would occur
without 30 days' advance notice and would be effective upon the date of
the termination notice. An agent or broker who engages in fraud or

[[Page 75526]]

abusive conduct may pose immediate harm to consumers and to HHS's
ability to properly administer the FFEs. Under this scenario, following
the reasonable confirmation by HHS (that is, the FFE) of fraud or
abusive conduct, HHS would notify the agent or broker of HHS's
termination action. We note that we would coordinate with OIG and other
State and Federal agencies (including law enforcement) as appropriate
when investigating these situations. Similar to any termination for
cause described in paragraph (g)(1), any termination notice would
include information on the agent's or broker's right to seek
reconsideration as described in Sec. 155.220(h). HHS currently works
with States and local law enforcement to investigate and resolve
suspected incidents of fraud. We note that termination proposed in
Sec. 155.220(g) only applies to the FFE agreement described in
paragraph (d) of this section, and the agreements required under Sec.
155.260(b)(2). While States remain the primary oversight authority for
agents and brokers, HHS reserves the right to take any other
permissible enforcement or remedial action against an agent or broker
for violation of Federal requirements.
In Sec. 155.220(g)(5)(iii), we propose that during the 90-day
suspension period, as well as following the termination of the FFE
agreements for cause, the agent or broker would not be registered with
the FFEs, or be permitted to assist with or facilitate enrollment of
qualified individuals, qualified employers, or qualified employees
through an FFE, or assist individuals in applying for Exchange
financial assistance for QHPs. However, consistent with the FFE
agreement described in Sec. 155.260(b)(2), the agent or broker must
continue to protect any PII accessed during the term of the agreement
with the FFEs. Section 155.260(g) includes penalties for failure to
continue protecting PII as described in the Sec. 155.260(b)(2)
agreement. For consistency with these proposed termination standards,
we propose corresponding updates to paragraph (g)(4). We also propose
to amend existing paragraph (f)(4) to remove the reference to paragraph
(g) for further alignment of these regulatory provisions.
We solicit comment on all aspects of these proposals, including:
The appropriate length of time for the temporary suspension period
under Sec. 155.220(g)(5)(i); whether we should provide authority for
HHS to suspend an agent's or broker's agreements with the FFEs for
cause for conduct other than potential fraud or abusive conduct; and
whether we should include a provision permitting HHS to immediately
terminate (that is, without the advance 30-day notice currently
provided under Sec. 155.220(g)(3)) an agent's or broker's agreements
with the FFEs for cause for suspected conduct other than fraud or
abusive conduct. We are also considering whether the notice
requirements captured in Sec. 155.220(f)(3)(i) that currently apply to
agent or broker initiated terminations should also be extended to
terminations for cause under Sec. 155.220(g), including these proposed
grounds for termination for cause under Sec. 155.220(g)(5). In
addition, see Sec. 155.430 below for a discussion of proposals related
to retroactive termination of coverage for consumers affected by
potential fraudulent activity by a third party related to enrollment
through the FFEs.
iii. FFE Standards of Conduct for Agents and Brokers
We propose adding a paragraph Sec. 155.220(j) to establish
standards of conduct for agents and brokers that assist consumers to
enroll in coverage through the FFEs to protect consumers and ensure the
proper administration of the FFEs. We are proposing these standards of
conduct to protect against agent and broker conduct that is harmful
towards consumers, or prevents the efficient operation of the FFEs. In
Sec. 155.220(j)(1)(i) through (iii), we propose to capture as part of
these standards of conduct the requirements that an agent or broker
that assists with or facilitates enrollment of qualified individuals,
qualified employers, or qualified employees through an FFE, or assists
individuals in applying for Exchange financial assistance for QHPs sold
through the FFEs, must (i) have executed the required agreement under
Sec. 155.260(b)(2); (ii) be registered with the FFEs as described in
paragraph (d)(1) of this section; and (iii) comply with the FFE
standards of conduct proposed in this paragraph. We note that signing
of the FFE agreement as well as all required registration steps must be
completed prior to assisting with or facilitating enrollment of
qualified individuals, qualified employers, or qualified employees
through an FFE, or assisting individuals in applying for Exchange
financial assistance for QHPs sold through the FFEs.
In Sec. 155.220(j)(2), we propose to capture as part of the
standards of conduct the requirements that the agents and brokers
described in paragraph (j)(1) must: (i) Provide consumers with correct
information, without omission of material fact, regarding the FFEs,
QHPs (including SADPs \22\) offered through the FFEs, and insurance
affordability programs, and refrain from marketing or conduct that is
misleading or coercive, or discriminates based on race, color, national
origin, disability, age, sex, gender identity, or sexual orientation;
(ii) provide the FFEs with correct information under section 1411(b) of
the Affordable Care Act; (iii) obtain the consent of the individual,
employer, or employee prior to assisting with or facilitating
enrollment in coverage through an FFE, or assisting with the
application for financial assistance for QHPs sold through the FFEs;
(iv) protect consumer PII in accordance with Sec. 155.260(b)(3) and
the agreement described in Sec. 155.260(b)(2); and (v) comply with all
applicable Federal and State laws and regulations. We note that these
proposed standards for conduct extend to naming of businesses and Web
sites associated with agents, brokers or web-brokers, and that use of
``Exchange,'' ``Marketplace,'' or other words in a name or URL that
would reasonably cause confusion with a Federal program or Web site may
be considered misleading under paragraph (j)(1)(i).
---------------------------------------------------------------------------

\22\ As detailed in the Patient Protection and Affordable Care
Act; Establishment of Exchanges and Qualified Health Plans; Exchange
Standards for Employers; Final Rule and Interim Final Rule (77 FR
18310, 18315) (March 27, 2012), with some limited exceptions, SADPs
are considered a type of QHP. We expect agents, brokers, and web-
brokers registered with the FFEs to comply with applicable rules and
requirements in connection with SADPs, just as they must comply with
those rules in connection with medical QHPs.
---------------------------------------------------------------------------

In Sec. 155.220(j)(3), we propose that an agent or broker will be
considered to be in compliance with the standard of conduct
requirements to provide consumers and the FFEs with correct information
if HHS determines that there was a reasonable cause for any failure to
provide correct information and that the agent or broker acted in good
faith.
We further propose that violation of these standards of conduct may
result in termination for cause of the agent's or broker's agreements
with the FFEs as described in paragraph Sec. 155.220(g) or the
imposition of other penalties authorized by law. We will continue to
coordinate our enforcement activities with States, other Federal
agencies, and local and Federal law enforcement, and anticipate
imposing penalties (beyond the termination of the FFE agreements) only
in instances where States do not or are unable to act.
We expect that States will continue to license and monitor agents
and brokers, and will continue to have primary responsibility to
oversee and regulate all

[[Page 75527]]

agents and brokers, both inside and outside of the Exchanges. All State
laws and regulations related to agents and brokers, including State
requirements related to appointments, contractual relationships with
issuers, and licensing and marketing requirements, will continue to
apply. To avoid duplication of oversight activities related to agents
and brokers assisting with enrollment through an FFE, we propose that
HHS will continue to focus its oversight activities primarily on
ensuring that agents and brokers assisting with enrollment through an
FFE meet the standards outlined in Sec. 155.220. In particular, HHS
plans to focus on protecting the privacy and security of PII of
applicants and enrollees through the FFEs, as well as the misuse of
such PII, to the extent this is not already covered under existing
State or Federal efforts. We will continue to collaborate with State
regulators to resolve cases of potential misconduct and to further
develop standard operating procedures for the FFEs that will be
critical to HHS oversight of agents and brokers registered to assist
with enrollment through the FFEs.
iv. Penalties Other Than Termination of the Agreements With the FFEs
In Sec. 155.220(k), we propose penalties for agents and brokers
registered with the FFEs other than termination of the agreements with
the FFEs. In Sec. 155.220(k)(1), we propose that if HHS determines
that an agent or broker fails to comply with the requirements of Sec.
155.220, he or she may be denied the right to enter into an agreement
with the FFEs in future years, and may be subject to CMPs as described
in Sec. 155.285 if the violation involved the provision of false or
fraudulent information to an Exchange or the improper use or disclosure
of information. In Sec. 155.220(k)(2), we propose that the denial of
the right to enter into an agreement with the FFEs in future years
would be subject to 30 calendar days' advance notice and the
reconsideration process established in Sec. 155.220(h). The imposition
of CMPs for the provision of false or fraudulent information to an
Exchange or the improper use of disclosure of information would be
subject to the advance notice and appeals process described in Sec.
155.285.
We are also proposing a denial of the right to enter into future
agreements with the FFEs in cases where an agent or broker has not
completed FFE registration requirements, and not entered into the
required agreements with the FFEs, but has enrolled qualified
individuals, qualified employers, or qualified employees in coverage in
a manner that constitutes enrollment through an FFE, or assisted
individual market consumers with submission of applications for
Exchange financial assistance through an FFE and has sought
compensation based on the enrollment through the FFEs in his or her
capacity as an agent or broker. We note that Sec. 155.285 applies to
agents and brokers, and we propose to specify here that agents and
brokers may also be subject to CMPs as described in Sec. 155.285 for
noncompliance if the violation involved the provision of false or
fraudulent information to an Exchange or the improper use or disclosure
of information. We seek comment on these additional proposed penalties,
including the length of time for which the prohibition on entering into
an agreement with the FFEs would apply in these cases.
We intend to continue to collaborate with State regulators to
further develop standard operating procedures for an FFE that will be
critical to HHS's oversight of agents and brokers registered to assist
with enrollment through an FFE and to ensure the efficient and
effective administration of the FFEs. We encourage comment on the
information required to carry out these activities, and on any
definitions, timeframes, or procedures described in our proposed
amendments to Sec. 155.220.
v. Agents and Brokers Assisting Consumers With Enrollment in Coverage
Through SBE-FPs
We propose adding Sec. 155.220(l) to provide that an agent or
broker who enrolls qualified individuals, qualified employers, or
qualified employees in coverage in a manner that constitutes enrollment
through an SBE-FP, or assists individual market consumers with
submission of applications for Exchange financial assistance through an
SBE-FP must comply with all applicable FFE standards in Sec. 155.220.
We believe it is important to extend the FFE standards in Sec. 155.220
to agents and brokers who assist with enrollments through an SBE-FP due
to the HHS's role in operating the FFE infrastructure and the
accompanying access that this provides to HHS data systems. We also
propose that agents and brokers in SBE-FP States would be able to
satisfy the requirement for training in Sec. 155.220(d)(2) by taking
FFE training offered by a vendor as described in Sec. 155.222.
e. Standards for HHS-Approved Vendors of FFE Training for Agents and
Brokers (Sec. 155.222)
At Sec. 155.222, we previously established a process for HHS to
approve vendors to offer training and information verification services
through which State licensed agents and brokers could complete the
training requirements necessary to assist consumers seeking coverage
through the FFEs. As part of an approved training and information
verification program, we stated that the vendor must require agents and
brokers to successfully complete identity proofing, provide identifying
information, and successfully complete the required curriculum.
Further, we established that no vendor training program would be
recognized unless it included an information verification component
under which the vendor confirms the identity and applicable State
licensure of the person who is credited with successful completion of
the training program.
We propose eliminating the Sec. 155.222 requirement that vendors
perform information verification functions, including State licensure
verification and identity proofing. Section 155.220(e) requires an
agent or broker that enrolls qualified individuals through the Exchange
or assists with the submission of applications for financial assistance
through an Exchange to comply with applicable State law, which includes
requirements related to operating as an insurance producer, such as
licensure. We expect that QHP issuers will adhere to the Sec.
156.340(a)(3) requirement to ensure their delegated and downstream
entities, which include affiliated agents and brokers, comply with the
standards of Sec. 155.220 with respect to assisting with enrollments
in QHPs, including the requirement to comply with applicable State law.
The FFE will continue to provide identity proofing services to
facilitate the registration of agents or brokers as required by Sec.
155.220(d)(1). We propose these changes to avoid duplication of
efforts. If QHP issuers are ensuring that their affiliated agents and
brokers are complying with State law, such as licensure, it is not
necessary for vendors to do so as well. Consistent with this proposal,
we propose amending Sec. 155.222(a)(1) to provide that a vendor must
be approved by HHS, and remove the reference to information
verification. We also propose in Sec. 155.222(a)(2) to remove the
requirements that vendors must require agents and brokers to provide
proof of valid State licensure.
Consistent with these changes proposed for Sec. 155.222(a), we
propose amending Sec. 155.222(b)(1) through (5) and (d) to remove
standards for information verification, identity proofing, verification
of agents' and brokers' valid State licensure, and all

[[Page 75528]]

related standards that support these functions. We propose to eliminate
the requirements in paragraphs (b)(1)(i) through (ii) to submit an
application demonstrating prior experience with verification of State
licensure and identity proofing; instead, we propose to combine into
paragraph (b)(1) the existing requirements to demonstrate prior
experience with online training and technical support for a large
customer base. In paragraph (b)(2), we propose to eliminate the
requirement to adhere to HHS specifications for content, format, and
delivery of information verification; separately, in (b)(2), we propose
to include SBE-FP States in the requirement to offer continuing
education units (CEUs) in five FFE States. In paragraph (b)(3), we
propose to eliminate the requirement that vendors collect, store, and
share with HHS all data from agent and broker users of the vendor's
training; instead we propose that vendors would only be required to
collect, store and share with HHS FFE training completion data. In
paragraph (b)(4), we propose to amend the standards for the agreement
that vendors must execute with HHS, to eliminate the requirement that
vendors implement information verification processes. We propose
amending Sec. 155.222(b)(5) and (d) to remove references to
information verification. We solicit comment on the proposals to
eliminate these requirements related to information verification.
We propose adding a paragraph (b)(6) to require vendors to provide
technical support to agent and broker users of the vendor's FFE
training as specified by HHS. Currently, paragraph (b)(1) requires
vendors to demonstrate prior experience with providing technical
support to a large customer base. We propose adding this requirement to
specify that a vendor must provide tier-one help desk support to assist
agents and broker accessing the vendor's FFE training platform from the
CMS Enterprise Portal. Tier-one support includes, for any inquiry
received by the vendor's help desk, intake, initial response, and
resolution of inquiry through a scripted response or re-routing to
another help desk. The scope of inquiries that must be answered through
scripted response will be provided by HHS in guidance. We seek comments
on the requirement that a vendor must provide technical assistance as
specified by HHS to agent and broker users of the vendor's FFE
training.
We note that HHS has the authority to require approved vendors to
provide technical support, as well as FFE training, in accordance with
HHS guidelines and in a manner and format that complies with Section
508 of the Rehabilitation Act of 1973. The World Wide Web Consortium's
Web Content Accessibility Guidelines (WCAG) 2.0 Level AA standards is
an alternative that we propose would also be considered an acceptable
national standard for Web site accessibility. For more information see,
the WCAG Web site at https://www.w3.org/TR/WCAG20/.
f. Standards Applicable to Certified Application Counselors (Sec.
155.225)
This proposed rule would also require certified application
counselor organizations to report performance data to an Exchange, in
order to improve the ability of each Exchange to monitor the work of
the organizations it has designated as certified application counselor
organizations. In accordance with the Secretary's authority under
section 1321(a)(1)(A) of the Affordable Care Act to establish standards
related to the operation of Exchanges, we propose to amend Sec.
155.225(b)(1) to provide that certified application counselor
designated organizations must, as a condition of their designation as
certified application counselor organizations by the Exchange, provide
the Exchange with information and data related to the number and
performance of the organization's certified application counselors, and
about the consumer assistance being provided by the organization's
certified application counselors, upon request, in the form and manner
specified by the Exchange.
Section 155.225(b)(1)(ii) already requires certified application
counselor designated organizations to maintain a registration process
and method to track the performance of certified application
counselors, but it does not specify the type of performance information
that must be tracked, nor does it require that information to be
provided to the Exchange.
The proposed requirement would give Exchanges valuable information
to aid in their oversight of certified application counselor programs,
and would help improve Exchanges' understanding of the scope of
consumer assistance being provided in the Exchange service area. The
proposed requirement would also improve the consumer assistance
functions of the Exchange in other significant ways, for example, by
providing information that could help an Exchange focus its outreach
and education efforts, target its recruitment of certified application
counselor organizations, and identify the need for increased technical
assistance and support for certified application counselor
organizations.
Under this proposal, Exchanges could establish reporting standards
as they determine appropriate based on their own specific needs and
objectives. In States with FFEs, HHS proposes that it would begin
collecting information and data from certified application counselor
designated organizations on a monthly basis beginning in January 2017.
We propose that the kind of information and data that the FFEs would
require from these organizations will include, at a minimum, data
regarding the number of individuals who have been certified by the
organization; the total number of consumers who received application
and enrollment assistance from the organization; and of that number,
the number of consumers who received assistance applying for and
selecting a QHP, enrolling in a QHP, or applying for Medicaid or CHIP.
We anticipate that the monthly reports submitted to the FFEs would
provide information and data from the preceding month, and would be
submitted electronically, through HIOS or another electronic submission
vehicle. We also expect that some of the data that FFEs would require
from certified application counselor designated organizations would be
similar to what is collected from Navigator grantees in the FFEs.\23\
We do not expect this information collection to include consumers' PII.
HHS recognizes the importance of certified application counselors, and
we intend that any FFE information collection would be straightforward
and place little additional burden on certified application counselor
organizations.
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\23\ The data collection requirements for FFE Navigator grantees
in 2015-2016 are specified in the Information Collection Request
(OMB control number 0938-1215) under the Cooperative Agreement to
Support Navigators in Federally-facilitated and State Partnership
Exchanges (see the PRA package associated with 80 FR 36810). https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201507-0938-001.
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We request comments on this proposal, on the scope of information
and data that Exchanges should collect, and on HHS's specific proposals
for collecting information and data from certified application
counselor organizations in the FFEs, including the proposed scope and
timing of reports by these organizations to the FFEs.
As discussed earlier in this preamble in a parallel proposal to
amend Sec. 155.210(d)(6), we propose to amend Sec. 155.225(g)(4),
which prohibits certified application counselors in all Exchanges from
providing certain kinds of gifts and promotional items to an applicant
or potential enrollee. For the

[[Page 75529]]

same reasons discussed above, we propose to amend Sec. 155.225(g)(4)
consistent with our proposed amendments to Sec. 155.210(d)(6).
We seek comment on all aspects of this proposal
g. Privacy and Security of Personally Identifiable Information (Sec.
155.260)
Section 155.260(a)(1) refers to insurance affordability programs,
as defined in Sec. 155.20. We propose to make a technical correction
to this paragraph so that Sec. 155.300, which contains the definition
of insurance affordability programs, is referenced instead.
h. Oversight and Monitoring of Privacy and Security Requirements (Sec.
155.280)
Section 155.280(a) permits HHS to oversee and monitor the FFEs and
non-Exchange entities associated with FFEs to ensure compliance with
the privacy and security standards established and implemented by an
FFE under Sec. 155.260. Section 155.280(a) also provides authority for
HHS to monitor State Exchanges for compliance with the privacy and
security standards established and implemented by the State Exchanges
under Sec. 155.260. We propose amending paragraph (a) to permit HHS to
also oversee and monitor SBE-FPs' compliance with the privacy and
security standards established and implemented by an FFE under Sec.
155.260.
4. Exchange Functions in the Individual Market: Eligibility
Determinations for Exchange Participation and Insurance Affordability
Programs
a. Options for Conducting Eligibility Determinations (Sec. 155.302)
We propose to amend Sec. 155.302(a) by adding an option for an
SBE-FP to satisfy the requirement of conducting eligibility
determinations by relying on HHS to carry out eligibility determination
activity and other requirements within subpart D, through a Federal
platform agreement. We seek comments on this proposal.
b. Eligibility Process (Sec. 155.310(h))
We propose to amend Sec. 155.310(h) related to the requirement
that the Exchange must notify an employer that an employee has been
determined eligible for Exchange financial assistance upon such
determination. This notice serves two main purposes. First, it informs
an employer that it may be liable for the payment assessed under
section 4980H of the Code because one of the employer's employees was
determined eligible for Exchange financial assistance.\24\ Second, it
may reduce an employee's tax liability because in the event an employer
prevails in an employer appeal described in Sec. 155.555, the Exchange
will redetermine the employee's eligibility (including for Exchange
financial assistance) or notify the employee of the requirement to
report changes in eligibility, as discussed in the preamble section
III.F.6.g of this proposed rule. Currently under Sec. 155.310(h), the
Exchange is directed to notify an employer that an employee has been
determined eligible for Exchange financial assistance. We propose to
revise this requirement so that the Exchange must notify an employer
that an employee has been determined eligible for Exchange financial
assistance only if the employee has also enrolled in a QHP through the
Exchange. For purposes of this provision, an employee is determined
eligible for cost-sharing reductions when the employee is determined
eligible for cost-sharing reductions based on income in accordance with
Sec. 155.305(g) or Sec. 155.350(a).
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\24\ Only certain employers (called applicable large employers)
are subject to the employer shared responsibility provisions under
section 4980H of the Code. In general, applicable large employers
must either offer minimum essential coverage that is ``affordable''
and that provides ``minimum value'' to their full-time employees
(and their dependents), or make an employer shared responsibility
payment to the IRS if at least one full-time employee receives the
premium tax credit under section 36B of the Code. For more
information on which employers are subject the employer shared
responsibility provisions and under what circumstances an applicable
large employer will be subject to a payment (and how the payments
are calculated), see Shared Responsibility for Employers Regarding
Health Coverage; Final Rule, 79 FR 8544 (Feb. 12, 2014).). Liability
for the employer shared responsibility payment is determined
independently by the IRS. More information on the IRS process can be
found at www.irs.gov.
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We believe this change better reflects the statutory requirement to
send employer notices and will reduce confusion among employers and
employees. The relevant statutes that address the employer notice
requirement contemplate that employer notices will be provided for
enrolled individuals who have been determined eligible for Exchange
financial assistance. Sections 4980H(a)(2) and (b)(1)(B) of the Code
provide that an assessable payment may be imposed on an employer if at
least one full-time employee is certified as having enrolled in a QHP
for which Exchange financial assistance is allowed or paid for the
employee.
In the case of an employee who has been determined eligible for
Exchange financial assistance but has not enrolled in a QHP, it would
be inaccurate and confusing to send a notice under Sec. 155.310(h)
because the employer receiving the notice would not be liable for a
payment assessed under section 4980H of the Code if its employee does
not enroll in a QHP through the Exchange (even if the employee could
have received Exchange financial assistance if the employee had
enrolled in a QHP). Futhermore, because sections 36B(b)(1) and
(c)(2)(A) of the Code provide that a premium tax credit amount may not
be allowed for any month in which, as of the first day of the month a
tax filer (or the tax filer's spouse or tax dependent) was not enrolled
in a QHP through the Exchange, a notice under Sec. 155.310(h) serves
no purpose in protecting an employer from potential tax liability under
section 4980H or an employee from tax liability under section 36B when
the employee has been determined eligible for Exchange financial
assistance but has not enrolled in a QHP through the Exchange. We also
propose to revise paragraph (h)(2) so that a notice sent in accordance
with Sec. 155.310(h) must indicate that an employee has been
determined eligible for Exchange financial assistance and has enrolled
in a QHP through the Exchange.
Additionally, for purposes of operational efficiency with regard to
the timing of the employer notification required under paragraph (h),
we propose that the Exchange may choose to either (a) notify employers
on an employee-by-employee basis as eligibility determinations are made
for Exchange financial assistance and enrollment in a QHP through the
Exchange, or (b) notify employers for groups of employees who are
determined eligible for Exchange financial assistance and enroll in a
QHP through the Exchange. Under both options, the Exchange must notify
employers within a reasonable timeframe following any month an employee
was determined eligible for either form of Exchange financial
assistance and enrolled in a QHP, with the goal to notify employers as
soon as possible to provide the greatest benefit to enrollees. We seek
comment on these proposals.
c. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
We propose to revise Sec. 155.320(c)(3)(vi) to allow the Exchange
to establish a reasonable threshold at which the Exchange must follow
the alternate verification process for decreases in the annual
household income between the applicant's

[[Page 75530]]

attestation of projected annual household income and the annual income
computed in accordance with Sec. 155.320(c)(3)(ii)(A). The reasonable
threshold would be subject to approval by HHS. Current regulations
require the Exchange to follow the alternate verification process under
Sec. 155.320(c)(3)(vi) if either (1) the attested annual household
income submitted by the consumer is more than 10 percent less than
income data received from trusted data sources, or (2) if no data is
available from trusted data sources. We recognize that many consumers
have difficulty projecting their annual household income and complying
with the verification requirements. Annual household income may
fluctuate year to year and throughout the year, making it difficult for
consumers to project their income for the year ahead. Income data from
trusted data sources can be up to 2 years old. In addition, consumers
with lower incomes have a smaller margin for error in dollar terms
under the current percentage-based threshold. We recognize that the
current threshold of 10 percent may not be adequate to allow for normal
variation in a consumer's annual household income, and may be too
sensitive a threshold in terms of triggering the alternate verification
process. Accordingly, we propose that the Exchange may set a reasonable
threshold for when an applicant enters the alternate verification
process in cases where the applicant's attestation of projected annual
household income is lower than income data received from trusted data
sources. A reasonable standard would allow for a realistic variation in
a consumer's projected annual household income for the year for which
they are seeking coverage from previous years' income data received
from trusted data sources and may be defined in terms of a percentage,
or a percentage and a fixed dollar amount (for example, the greater of
20 percent or $5,000). A threshold set less than 10 percent would not
be a reasonable standard since it would not allow for small projected
reductions in income from a previous year. HHS will provide additional
guidance on what constitutes a reasonable threshold. This proposal
would allow the Exchange to establish a threshold that effectively
maintains program integrity, while minimizing burdens to consumers to
the extent possible. It would also allow the Exchange to make
adjustments in future years as more data becomes available. We seek
comment on this proposal.
In Sec. 155.320(d), we make certain proposals related to
alternative processes relating to verification of enrollment in an
eligible employer-sponsored plan and eligibility for qualifying
coverage in an eligible employer-sponsored plan.
In paragraph (d)(3), we propose to redesignate paragraph (d)(3)(i)
as (d)(3)(ii) and redesignate paragraph (d)(3)(ii) as (d)(3)(i). To
preserve the accuracy of the redesignated paragraph (d)(3)(ii), we
propose to update the cross-reference to paragraph (d)(3)(ii) with
(d)(3)(i), and paragraph (d)(3)(iii) with (d)(4)(i), discussed below.
We also propose to remove paragraph (d)(3)(iii), which requires the
Exchange to select a statistically significant random sample of
applicants for whom the Exchange does not have data as specified in
paragraphs (d)(2)(i) through (iii) and take steps to contact any
employer identified on the application for the applicant and the
members of his or her household to verify whether the applicant is
enrolled in an eligible employer-sponsored plan or is eligible for
qualifying coverage in an eligible employer-sponsored plan for the
benefit year for which coverage is requested. This process is referred
to as ``sampling.'' We propose to modify this requirement, and describe
that proposal in our discussion of proposed paragraph (d)(4) below. We
believe these amendments to paragraph (d)(3) will organize and simplify
the regulatory text.
We propose to add paragraph (d)(4) concerning a survey of
verification procedures. In paragraph (d)(4), we propose that the
Exchange must follow the procedures described in paragraph (d)(4)(i)
or, in the alternative, for benefit years 2016 and 2017, the Exchange
may follow the procedures specified in paragraph (d)(4)(ii), for any
benefit year for which it does not reasonably expect to obtain
sufficient verification data as described in paragraphs (d)(2)(i)
through (iii). For the purposes of this section, the Exchange
reasonably expects to obtain sufficient verification data for any
benefit year when, for the benefit year, the Exchange is able to obtain
data about enrollment in and eligibility for qualifying coverage in an
eligible employer-sponsored plan from at least one electronic data
source that is available to the Exchange and has been approved by HHS,
based on evidence showing that the data source is sufficiently current,
accurate, and minimizes administrative burden, as described in
paragraph (d)(2)(i).
In paragraph (d)(4)(i), we propose that the Exchange may conduct
sampling. This paragraph is substantially the same as current paragraph
(d)(3)(iii), with three differences. First, we propose to remove the
absolute requirement to conduct sampling, and for benefit years 2016
and 2017, allow the Exchange to implement an alternate process approved
by HHS. This proposal and rationale is described in more detail in the
discussion of paragraph (d)(4)(ii), below. Second, we propose to remove
the language that currently appears in paragraph (d)(3)(iv) since the
relief it provided only applied to eligibility determinations that were
effective before January 1, 2015. Third, we propose to replace two
internal cross-references to paragraph (d)(3)(iii) with appropriate
cross-references to paragraph (d)(4)(i).
We propose moving the sampling requirement from paragraph (d)(3)
and adding it to new paragraph (d)(4) to more accurately reflect the
role of the sampling process. Paragraph (d)(3) contains standards for
``[v]erification procedures'' applicable to all applicants for Exchange
financial assistance. The sampling process, however, does not involve
verification of eligibility information for all applicants, and is
primarily intended to serve as a way for the Exchange to gain insight
into whether consumers provide accurate information on the application
regarding their enrollment in and eligibility for qualifying coverage
in an eligible employer-sponsored plan and the effectiveness of an
Exchange's verification of such information.
In paragraph (d)(4)(ii), we propose to permit an Exchange the
option to implement an alternate process approved by HHS for the
benefit years 2016 and 2017. We believe this option will provide
Exchanges with needed flexibility as verification processes are refined
and employer databases compiled over the next several years, to improve
long-term verification programs. We seek comment on these proposals.
d. Medicare Notices
Over the course of the first two years of Exchange operations, we
have realized the importance of providing notification to enrollees in
coverage through the Exchange of their potential eligibility for
Medicare. We recognize the importance of a smooth transition to
Medicare coverage, and seek comment on whether and how to implement a
notification that an enrollee may have become eligible for Medicare.
For example, for enrollees in an FFE, we are considering ``pop up''
text on HealthCare.gov for individuals who are going to turn 65 during
the benefit year. We seek comment on this and other ways to promote
smooth coverage transitions.

[[Page 75531]]

5. Exchange Functions in the Individual Market: Enrollment in Qualified
Health Plans
a. Annual Eligibility Redetermination (Sec. 155.335(j))
In the Patient Protection and Affordable Care Act; Annual
Eligibility Redeterminations for Exchange Participation and Insurance
Affordability Programs; Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges final
rule (79 FR 52994, 53000 (Sept. 5, 2014)), we established a renewal and
re-enrollment hierarchy at Sec. 155.335(j) to minimize potential
enrollment disruptions. To further minimize potential disruptions of
enrollee eligibility for cost-sharing reductions, we propose to amend
Sec. 155.335(j)(1) to create a new re-enrollment hierarchy for all
enrollees in a silver-level QHP that is no longer available for re-
enrollment. Specifically, if such an enrollee's current silver-level
QHP is not available and the enrollee's current product no longer
includes a silver-level QHP available through the Exchange, the
enrollee's coverage would be renewed in a silver-level QHP in the
product offered by the same issuer that is the most similar to the
enrollee's current product, rather than in a plan one metal level
higher or lower than his or current silver-level QHP, but within the
same product. Transitioning enrollees in this manner is an
operationally efficient way of maintaining continuity for enrollees
eligible for cost-sharing reductions, and, because the benchmark plans
for establishing the amount of the premium tax credit for which an
eligible taxpayer is eligible is a silver-level plan, continued
enrollment in a silver-level plan, as opposed to enrollment in a plan
at a different metal level but in the same product is likely to be more
consumer protective. We request comment on this proposal, including the
best means of determining which product is most similar to the
enrollee's current product. We also seek comment on whether the
hierarchy should permit a QHP enrollee to be automatically re-enrolled
into a plan not available through an Exchange, and under what
circumstances such a re-enrollment should occur.
In the 2016 Payment Notice proposed rule, we also noted that we are
exploring a change to the re-enrollment hierarchy at Sec. 155.335(j),
which currently prioritizes re-enrollment with the same issuer in the
same or a similar plan. As we discussed in that rulemaking, many
consumers place a high value on low premiums when selecting a plan, and
the approach we were exploring would recognize that plans that have
competitively priced premiums in one year may not continue to be the
most competitively priced in subsequent years. As a result, default
enrollment in the same or similar plan may sometimes encourage
consumers to remain in plans that are significantly more expensive than
the lowest cost plans available to the enrollee.
We are considering an approach under which an enrollee in an FFE
would be offered a choice of re-enrollment hierarchies at the time of
initial enrollment, and could thereby opt into being re-enrolled by
default for the subsequent year into a low-cost plan, rather than his
or her current plan or the plan specified in the current re-enrollment
hierarchy. The alternative enrollment hierarchy could be triggered if
the enrollee's current plan's premium increased from the prior year, or
increased relative to the premium of other similar plans (such as plans
of the same metal tier), by more than a threshold amount, such as 5
percent or 10 percent. For example, in those conditions, the enrollee
would be placed into a QHP of the same metal level with the lowest
premium in the enrollee's service area, or perhaps one of three such
QHPs with the lowest premiums, by random allocation or another
appropriate allocation process. As is the case under the existing
approach, a consumer would retain the option to take action to enroll
in a different plan during open enrollment if he or she wished to do
so.
We received a number of comments regarding the discussion in the
2016 Payment Notice proposed rule. Some commenters supported the
approach generally. Other commenters stated that the approach does not
give adequate deference to the plan an enrollee has selected during
open enrollment, or to the impact of cost sharing. A number of
commenters had concerns that consumers may not realize that opting into
a default enrollment hierarchy based on low-cost premiums may result in
other significant changes to their coverage, and emphasized the
importance of education by the Exchanges with respect to this re-
enrollment hierarchy. We received a few alternative ideas for re-
enrollment hierarchies, including basing re-enrollment on factors
consumers identify as most important to them, or basing re-enrollment
on the consumer's original choice of premium. Similarly, one commenter
suggested implementing this approach only for those consumers currently
enrolled in the lowest-cost or second-lowest cost silver plan.
Continuing the discussion in the 2016 Payment Notice, we are
requesting further comment on this concept to update our policy in the
final rule. In particular, we are interested in understanding how to
ensure that consumers understand the increased risk of being re-
enrolled automatically in a plan with a significantly different
provider network, benefits, cost-sharing structure, or service area. We
seek comment on the timing and form of the notice related to plan re-
enrollment that the Federally-facilitated Exchange would provide to
consumers opting in to such an enrollment hierarchy. We seek comment on
whether hierarchies that considered factors other than metal level or
premiums, such as plan type (for example, HMO versus PPO) or network
breadth could help to reduce the risk that consumers are re-enrolled
automatically into a plan that does not suit their needs. We are
interested in comments on what premium growth in the current plan (or
what growth relative to other similar plans) would trigger re-
enrollment into a low-cost plan, and how to determine which enrollees
get assigned to which plans, for example if enrollees are allocated
among one of the three lowest cost QHPs of the metal level in the
enrollee's service area. We seek comment on how best to deal with the
risk of providing small plans with excess enrollment, in order to avoid
destabilizing such plans with a deluge of new enrollments. As we did
last year, we seek comment on how these types of default re-enrollment
procedures have functioned in other programs and settings, and what
lessons can be drawn from those experiences. Finally, we seek comment
on the appropriate timeframe for implementing such an alternative
hierarchy.
b. Enrollment of Qualified Individuals into QHPs (Sec. 155.400)
i. Rules for First Month's Premium Payments for Individuals Enrolling
With Regular, Special, and Retroactive Coverage Effective Dates.
We propose to amend Sec. 155.400(e) related to the payment of the
first month's premium (that is, binder payments), including deadlines,
to codify previously released guidance in section 8.2 of the updated
Federally-facilitated Marketplace and Federally-facilitated Small
Business Health Options Program Enrollment Manual,\25\ that specified
our interpretation of these requirements. Specifically, we propose to
amend Sec. 155.400(e)(1)(i) and (ii) to

[[Page 75532]]

provide that, for prospective coverage, the binder payment must consist
of the first month's premium. To provide added flexibility for issuers,
we also would add to the rule to specify that the deadline for a binder
payment related to prospective coverage with a prospective special
effective date, would have to be no earlier than the coverage effective
date and no later than 30 calendar days from the date the issuer
receives the enrollment transaction or the coverage effective date,
whichever is later. This would align the requirement for enrollments
with prospective special effective dates with the requirement for
enrollments with regular effective dates. We propose to add Sec.
155.400(e)(1)(iii) to reflect our interpretation, intended to limit the
risk that issuers would provide retroactive coverage without receiving
sufficient premium payments from enrollees, that applicants requesting
coverage being effectuated under retroactive effective dates, such as
coverage in accordance with a special enrollment period or a successful
eligibility appeal, must pay a binder payment that consists of all
premium due (meaning the premium for all months of retroactive
coverage). If the applicant pays only the premium for one month of
coverage, we propose that the issuer would be required to enroll the
applicant in prospective coverage in accordance with regular effective
dates. We also propose to specify that the deadline for payment of all
premium due must be no earlier than 30 calendar days from the date the
issuer receives the enrollment transaction or notification of the
enrollment. This change to the binder payment rules is intended to
allow issuers flexibility to set a reasonable deadline for enrollees to
submit payment of retroactive premium, the total amount of which may
consist of payment for several months of coverage.
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\25\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated_ENR_Manual.pdf.
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Based on our experience implementing the grace period provisions
under our previous rulemaking, particularly in cases involving advance
payments of the premium tax credit, that require full payments of
amounts due to avoid being put in a grace period and to avoid
termination of enrollment, we have identified the need for additional
flexibility for issuers to establish reasonable policies regarding
premium collection that would allow issuers to collect a minimal amount
of premium less than that which is owed without necessarily triggering
the consequences for non-payment of premiums. For example, in the
Exchange Establishment Rule, we established that enrollees receiving
advance payments of the premium tax credit have to pay full payments of
all outstanding premiums owed in order to avoid entering a grace period
or having their coverage terminated. In response to requests from
issuers, we propose to add flexibility to this rule to allow issuers
the option to adopt a premium payment threshold policy to avoid
situations in which an enrollee who owes only a de minimis amount of
premium has his or her enrollment terminated for non-payment of
premiums.
Accordingly, at new Sec. 155.400(g), we propose to codify a
provision related to premium payment threshold policies, thereby
allowing additional issuer flexibility regarding when amounts collected
will be considered to satisfy the obligation to pay amounts due, so
long as issuers implement such a policy uniformly and without regard to
health status and that the premium payment threshold adopted is
reasonable. This would allow issuers flexibility to effectuate an
enrollment, not to place an enrollee in a grace period for failure to
pay 100 percent of the amount due, or not to terminate enrollments
after exhaustion of the applicable grace period for enrollees who owe
only a small amount of premium within the threshold.
We seek comment on these proposals.
ii. Reliance on HHS To Carry Out Enrollment and Related Functions.
We also propose to amend Sec. 155.400 by adding a new paragraph
(h) to reflect that SBE-FPs must rely on HHS to implement the functions
related to eligibility and enrollment within subpart E, through the
Federal platform agreement. This reflects that eligibility and
enrollment functions must be performed together in the FFE, and that
neither function can be performed separately by an SBE-FPs at this
time. We seek comments on this proposal.
c. Annual Open Enrollment Period (Sec. 155.410)
In Sec. 155.410, we propose to amend paragraph (e), which provides
the dates for the annual open enrollment period in which qualified
individuals and enrollees may apply for or change coverage in a QHP. We
propose to amend paragraph (e)(2) to define the open enrollment period
for coverage year 2017, which would be November 1 through January 31.
We also propose to amend the annual open enrollment period coverage
effective date provisions in paragraphs (f)(2)(i) through (iii) to
include the coverage effective dates for 2017.
We propose this time period and these coverage effective dates to
remain consistent with the 2016 open enrollment period. This time frame
will continue to partially overlap with the annual open enrollment
period for Medicare and most employer offerings, which will benefit
consumers by facilitating smooth transitions between coverage and
creating process efficiencies for issuers handling enrollments and re-
enrollments during the same period. We seek comments on this proposal.
We are also considering defining the open enrollment period for
coverage year 2018, and seek comment on what that period should be. For
example, we could incrementally shift to an earlier open enrollment
period, while maintaining the same duration, such that the open
enrollment period for benefit year 2018 would run from October 15, 2017
through January 15, 2018. Alternatively, we could shift to an earlier
open enrollment period and shorten its duration simultaneously, such
that the open enrollment period would run from October 15, 2017 through
December 15, 2017. We note that open enrollment periods for health
coverage typically end before the end of the year prior to the benefit
year to promote full-year coverage. However, in the short run, as
eligible consumers are learning about their options and the individual
shared responsibility requirement and newly insured consumers are
learning how to re-enroll into coverage for the next benefit year, we
note that there is value in a longer open enrollment period. We would
also face significant operational limitations in moving the beginning
of the open enrollment period to an earlier time. However, if we do not
shift the beginning of the open enrollment period to an earlier date,
ending the period before the end of the year would result in a shorter
open enrollment period. We seek comment on the length, start, and end
of the open enrollment period for 2018 and subsequent years.
d. Special Enrollment Periods (Sec. 155.420)
Special enrollment periods are available to consumers under a
variety of circumstances as described in Sec. 155.420. We seek comment
and any available data on existing special enrollment periods.
In addition, we have heard concerns that these special enrollment
periods may be subject to abuse. We seek comment regarding this, and
data, if available. Elsewhere in this document, we propose an amendment
to Sec. 155.430(b)(2)(vi) that would allow the

[[Page 75533]]

Exchange to initiate cancellation or retroactive termination of an
enrollee's enrollment, after a determination has been made that the
enrollment was due to fraudulent activity. We believe this proposal
would provide us with an important tool for addressing potential gaming
of these rules.
e. Termination of Coverage (Sec. 155.430)
Under our current rules, Sec. 155.430(b)(1) requires an Exchange
to permit an enrollee to cancel or terminate his or her coverage in a
QHP following appropriate notice to the Exchange or the QHP issuer. We
propose to add paragraph (b)(1)(iv) to allow an enrollee to
retroactively cancel or terminate his or her enrollment in a QHP
through the Exchange in the limited circumstances set forth below. For
enrollees whose enrollment or continued enrollment in a QHP resulted
from an error, misconduct, or fraud committed by an entity other than
the enrollee, we aim to increase flexibility under the regulations to
permit such enrollees to avoid the consequences of that entity's
actions by canceling the QHP coverage. To this end, we propose to
redesignate current paragraph (b)(2)(vi) as (b)(2)(vii) and add a new
paragraph (b)(2)(vi) to permit the Exchange to cancel an enrollee's
enrollment in a QHP under certain circumstances. This rule would permit
cancellations of fraudulent enrollments that the Exchange discovers,
even if the enrollee is never aware of the enrollment.
New paragraph (b)(1)(iv)(A) would provide that the enrollee would
be permitted to retroactively terminate his or her coverage or
enrollment if he or she demonstrates to the Exchange that he or she
attempted to terminate his or her coverage or enrollment and
experienced a technical error that did not allow the enrollee to
effectuate termination of his or her coverage or enrollment through the
Exchange. Such an enrollee would have 60 days after he or she
discovered the technical error to request retroactive termination. This
aligns with our standard 60-day window for special enrollment periods.
We propose a new paragraph (d)(9), which would provide that the
retroactive termination date under paragraph (b)(1)(iv)(A) would be no
sooner than 14 days after the earliest date that the enrollee could
demonstrate that he or she contacted the Exchange to terminate his or
her coverage or enrollment through the Exchange, unless the issuer
agrees to an earlier effective date as set forth in Sec.
155.430(d)(2)(iii). This 14-day window aligns with the regulation on
voluntary, enrollee-initiated prospective terminations.
We propose in paragraph (b)(1)(iv)(B) to provide for cancellation
for an enrollee who demonstrates to the Exchange that his or her
enrollment in a QHP through the Exchange was unintentional,
inadvertent, or erroneous and was the result of the error or misconduct
of an officer, employee, or agent of the Exchange or HHS, its
instrumentalities, or a non-Exchange entity providing enrollment
assistance or conducting enrollment activities. Such an enrollee would
have 60 days from the point he or she discovered the unintentional,
inadvertent, or erroneous enrollment to request cancellation, to align
with our standard 60-day special enrollment period window. In
determining whether an enrollee has demonstrated to the Exchange that
his or her enrollment meets the criteria for cancellation under this
paragraph, the Exchange would examine the totality of the circumstances
surrounding the enrollment, such as whether the enrollee was enrolled
in other minimum essential coverage at the time of his or her QHP
enrollment and whether he or she submitted claims for services rendered
to the QHP. These factors would serve to indicate the intentions of the
enrollee and whether the enrollment really was undesired and would be
weighed in making a determination whether a cancellation is warranted.
This approach offers a broad and fair analysis of the enrollee's
intentions and balances the interests and protection of consumers with
the interests of issuers. For example, we believe that, without
additional evidence to the contrary, one reasonably could assume that
an enrollee who was enrolled in other minimum essential coverage at the
time of his or her QHP enrollment and who submitted no claims to that
QHP likely did not intend to enroll in such QHP. Conversely, claims
submitted by an enrollee to the QHP would weigh against the enrollee's
request for cancellation because, barring contrary evidence, the
Exchange would view submittal of such claims to constitute a
ratification of the enrollee's contract with the QHP issuer, even if
the enrollee did not intend to enroll in QHP coverage. We seek comment
on what other factors are indicative of an enrollee's bona fide intent
and can limit ``gaming,'' and should be considered in this analysis.
In paragraph (b)(1)(iv)(C), we propose to allow cancellations for
enrollees who are enrolled in a QHP without their knowledge or consent
due to the fraudulent activity of any third party, including third
parties who have no connection with the Exchange. Such an enrollee
would have 60 days from the point at which he or she discovered the
fraudulent enrollment to request cancellation, to align with our
standard 60-day special enrollment period window.
New paragraph (d)(10) would provide that for cancellation or
retroactive terminations granted in accordance with paragraphs
(b)(1)(iv)(B) and (C), the cancellation or termination date would be
the original coverage effective date or a later date, as determined
appropriate by the Exchange, based on the circumstances of the
cancellation or termination.
Under our current rules, Sec. 155.430(b)(2) allows the Exchange to
initiate termination of an enrollee's coverage or enrollment in a QHP
through the Exchange, and permits a QHP issuer to terminate such
coverage or enrollment in certain circumstances. Amended paragraph
(b)(2)(ii)(A) reflects the change to Sec. 156.270(d) and (g) that
gives an enrollee who, upon failing to timely pay premium, is receiving
advance payments of the premium tax credit (APTC), a three-month grace
period. The changes to Sec. 156.270 are described in section
``Termination of Coverage or Enrollment for Qualified Individuals'' of
the preamble.
We propose in new paragraph (b)(2)(vi) that the Exchange could
cancel an enrollee's enrollment that the Exchange determines was due to
fraudulent activity, including fraudulent activity by a third party
with no connection with the Exchange.
New paragraph (d)(11) would provide that for cancellations granted
in accordance with paragraph (b)(2)(vi), the cancellation date would be
the original coverage effective date. The Exchange only would send the
cancellation transaction following reasonable notice to the enrollee
(recognizing that where no contact information is available that notice
may be impossible or impracticable).
Our current guidance recognizes that at some point, the Exchange
must discontinue the ability for enrollees to retroactively adjust
coverage for the preceding coverage year. To this end, we are
considering codifying a deadline for requesting cancellations or
retroactive terminations. We seek comment on these proposals.
6. Appeals of Eligibility Determinations for Exchange Participation and
Insurance Affordability Programs
a. General Eligibility Appeals Requirements (Sec. 155.505)
In Sec. 155.505, we make certain proposals related to the general

[[Page 75534]]

eligibility appeals requirements. Currently, paragraph (b)(1) of this
section states that an applicant or enrollee has the right to appeal an
eligibility determination made in accordance with subpart D. This right
includes the right to appeal determinations of eligibility for QHP
enrollment periods, such as special enrollment periods. To clarify the
scope of applicants' and enrollee's right to appeal, we are proposing
to add paragraph (b)(1)(iii) which would more explicitly state that
applicants and enrollees have the right to appeal a determination of
eligibility for an enrollment period. This change would apply to
appeals provided by the HHS appeals entity and a State Exchange appeals
entity.
Similarly, we propose new paragraph (b)(5) to clarify that
applicants and enrollees have the right to appeal a decision issued by
the State Exchange appeals entity. Section 155.520(c) already provides
that an appellant who disagrees with a decision of a State Exchange
appeals entity may request an appeal to the HHS appeals entity within
30 days of the notice of appeal decision. New paragraph (b)(5) would
clarify applicants' and enrollees' existing right to appeal any
decision issued by a State Exchange appeals entity in accordance with
Sec. 155.545(b), in addition their right to appeal a denial of a
request to vacate a dismissal made by a State Exchange appeals entity,
as described in Sec. 155.505(b)(4).
Finally, in paragraph (b)(4), we propose to correct a typographical
error by replacing the word ``or'' with the word ``of,'' and to replace
``pursuant to'' with ``under,'' so the last clause of the paragraph
would read, ``. . . made under paragraph (c)(2)(i) of this section. .
.''. We seek comment on these proposals.
b. Appeals Coordination (Sec. 155.510)
We propose to revise Sec. 155.510(a)(1) to give the appeals entity
and agencies administering insurance affordability programs more
flexibility in obtaining documentation and information from appellants.
To minimize burden on appellants, Sec. 155.510(a)(1) currently
prohibits the appeals entity or agency administering insurance
affordability programs from asking an appellant to provide information
or documentation that the appellant already provided. However, when
such information or documentation is not available to the appeals
entity or agency, this provision may also prevent the appeals entity or
agency from obtaining information that is necessary to properly
adjudicate the appellant's appeal. As a result, the appeals entity is
deprived of documentation that could support a decision favorable to
the appellant.
Accordingly, we propose to revise paragraph (a)(1) to allow the
appeals entity, the Exchange, or the agency administering insurance
affordability programs to request information or documentation from the
appellant that the appellant already has provided if the agency does
not have access to such information or documentation and cannot
reasonably obtain it. We believe this revision balances the need to
minimize the burden on the appellant as well as the need to ensure that
all information necessary for the appellant's appeal is available to
the appeals entity, Exchange, or agency administering the insurance
affordability program, which ultimately will inure to the appellant's
benefit by helping to ensure a correct appeal decision and eligibility
determination. We seek comment on this proposal.
c. Appeal Requests (Sec. 155.520)
We propose to add paragraph (d)(2)(i)(D), concerning appellants
whose appeal request is determined invalid for failure to request an
appeal by the date determined in paragraph (b) or (c) of this section.
Currently, when an appellant's request is invalid because it is
untimely, it is not possible for the appellant to cure the defect as
contemplated under Sec. 155.520(d)(2)(i)(C). Therefore, the appeals
entity dismisses the appeal in accordance with Sec. 155.530(a)(3). If
the appellant makes a written request within 30 days of the date of the
notice of dismissal showing good cause why the dismissal should be
vacated, the appeals entity must vacate the dismissal in accordance
with Sec. 155.530(d). Accordingly, an appellant who shows good cause
why his or her appeal should proceed even though the appeal request was
untimely (for example, an appellant who was unable to submit a timely
appeal request because he or she was hospitalized with a serious
condition) currently may proceed with an appeal, but the process is
circuitous.
This proposed addition of (d)(2)(i)(D) would require the appeals
entity to notify an appellant that, in the event the appeal request is
invalid because it was not timely submitted, the appeal request may be
considered valid if the applicant or enrollee demonstrates within a
reasonable timeframe determined by the appeals entity that failure to
timely submit was due to exceptional circumstances and should not
preclude the appeal. This would allow the appellant to demonstrate
before the appeal is dismissed that failure to submit a timely appeal
request was due to exceptional circumstances constituting good cause
why the appeal should proceed, which would minimize burden on the
appellant as well as administrative burden on the appeals entity.
The appeals entity may determine what constitutes an exceptional
circumstance that should not preclude an appeal notwithstanding the
appellant's failure to timely submit an appeal request. An appeals
entity may, for instance, find that circumstances making timely
submission impossible constitute an exceptional circumstance. A weather
emergency, such as a blizzard, a hurricane or a tornado, may cause
power outages making it impossible to prepare, mail, or fax appeal
requests to the appeals entity. Similarly, such disasters may cause
consumers to lose access to the documents they need to complete and
submit appeal requests. Likewise, if a consumer suffers a catastrophic
medical event and is consequently unable to submit an appeal request on
time, the appeals entity may determine that this constitutes an
exceptional circumstance under the proposed exception.
The appeals entity may also determine what is considered a
reasonable timeframe for an appellant to demonstrate an exceptional
circumstance. For example, if an appellant was unable to send an appeal
request on time due to a snow storm and power outage and sent the
request four months after the snow storm and power outage had been
resolved, the appeals entity may find that the appellant experienced an
exceptional circumstance as contemplated by this proposed rule, but
that the appellant waited an unreasonable amount of time to demonstrate
it. Without such flexibility for the appeals entity, appellants who
experienced an exceptional circumstance would have an unlimited amount
of time to request that the appeals entity consider their appeal. We
seek comment on this proposal.
d. Dismissals (Sec. 155.530)
We propose to revise Sec. 155.530(a)(4) to allow an appeal to
continue when an appellant dies if the executor, administrator, or
other duly authorized representative of the estate requests to continue
the appeal. We seek comment on this proposal.
e. Informal Resolution and Hearing Requirements (Sec. 155.535)
In Sec. 155.535, we propose amendments to the informal resolution
and notice of hearing requirements. In Sec. 155.535(a),

[[Page 75535]]

we propose a change to clarify that the requirements of the informal
resolution process described in paragraphs (a)(1) through (4) apply to
both the HHS appeals entity and a State Exchange appeals entity.
In Sec. 155.535(b), we propose providing two exceptions to the
requirement that the appeals entity must send written notice to the
appellant of the date, time, and location or format of the hearing no
later than 15 days prior to the hearing date. In paragraph (b)(1), we
propose an exception when an appellant requests an earlier hearing
date. Currently, the 15-day notice requirement prevents an appellant
from selecting a hearing date within 15 days even if such a date is
available and desired by the appellant. In paragraph (b)(2), we propose
an exception to the notice requirement under paragraph (b) when a
hearing date sooner than 15 days is necessary to process an expedited
appeal, as described in Sec. 155.540(a), and the appeals entity and
appellant have mutually agreed to the date, time, and location or
format of the hearing. If finalized, this amendment would create
efficiency for the appeals process as a whole and create a more
agreeable experience for the appellant. In addition, it would allow for
an earlier hearing when there is an immediate need for a health
service. We seek comment on these proposals.
f. Appeal Decisions (Sec. 155.545)
We propose several changes to Sec. 155.545. In paragraph (b)(1),
we propose to remove the third appearance of the word ``of'' to correct
a typographical error. We also propose to revise paragraph (c)(1)(i) to
include cross references to Sec. 155.330(f)(4) and (5), which discuss
effective dates for certain special enrollment periods described in
Sec. 155.420. This change aligns with our proposed change Sec.
155.505(b) to clarify that applicants and enrollees have the right to
appeal a determination of eligibility for an enrollment period.
Finally, we propose to revise Sec. 155.545(c)(1)(ii) so that the
coverage effective date for eligible appellants requesting a
retroactive appeal decision effective date is the coverage effective
date that the appellant did receive or would have received if the
appellant had enrolled in coverage under the incorrect eligibility
determination that is the subject of the appeal. This is consistent
with the coverage effective dates consumers receive in comparable
situations when given the option for retroactive coverage, such as in
the case of certain special enrollment periods. We seek comment on this
proposal.
g. Employer Appeals Process (Sec. 155.555)
We also propose to amend Sec. 155.555(l) to give the Exchange more
operational flexibility in implementing an employer appeal decision.
Currently under Sec. 155.555(l), when an employer appeal decision
affects an employee's eligibility, the Exchange is directed to
redetermine the employee's eligibility and the eligibility of the
employee's household members, if applicable. An employer's appeal
decision may affect an employee's eligibility when the employer
prevails in the appeal by establishing that it does offer the employee
employer-sponsored coverage that meets the minimum value standard and
is affordable for the employee, and the HHS appeals entity therefore
finds that the employee is not eligible for Exchange financial
assistance.
We propose to amend Sec. 155.555(l) by revising paragraph (l) and
adding paragraphs (l)(1) and (2). Under proposed paragraph (l), after
receipt of the notice under paragraph (k)(3) of this section, the
Exchange must follow the requirements in either paragraph (l)(1) or (2)
if the appeal decision affects the employee's eligibility. Under
proposed paragraph (l)(1), the Exchange must promptly redetermine the
employee's eligibility and the eligibility of the employee's household
members, if applicable, in accordance with the standards specified in
Sec. 155.305, as currently provided in paragraph (l). Under proposed
paragraph (l)(2), the Exchange must promptly notify the employee of the
requirement to report changes in eligibility as described in Sec.
155.330(b)(1). The FFE intends to implement the latter procedure to
give employees the opportunity to report any additional changes in
their eligibility information to help ensure the most accurate
redetermination of eligibility for insurance affordability programs. We
believe this amendment will also give the Exchange greater operational
flexibility.
Additionally, we propose to make a technical correction to Sec.
155.555(e)(1) by removing the cross-reference to paragraph (d)(3) of
this section, which does not exist, and replacing it with paragraph
(d)(1)(iii). We seek comment on these proposals.
7. Exchange Functions in the Individual Market: Eligibility
Determinations for Exemptions
a. Eligibility Standards for Exemptions (Sec. 155.605)
We are proposing to clarify and streamline policies related to
exemptions and are proposing to amend Sec. 155.605 to reflect those
changes. The proposed changes will simplify and streamline the process
for members of health care sharing ministries, members of Indian
tribes, and incarcerated individuals by directing consumers solely to
the tax filing process to claim these exemptions. To claim one of these
exemptions on a tax return, the individual needs only to file IRS Form
8965, Health Coverage Exemptions, with his or her tax return.
Presently, the Exchange process requires that an application be
submitted to the Exchange, and the Exchange review, process, and
respond to the application. If the individual does not complete the
Exchange application with all required information, the individual will
be asked to submit the missing information before the application can
be processed. The follow-up steps may result in a significant delay to
the individual's application if he or she does not submit the
information on a timely basis. Further, the Exchange may only grant
certain exemptions on a retrospective basis so that the individual may
need to submit multiple applications throughout the year. Finally, the
Exchange may not grant exemptions for members of health care sharing
ministries and individuals who were incarcerated for the previous year
if the individual requests the exemption after December 31 of the
previous year. This adds confusion when many individuals are preparing
their tax returns, assessing their exemption eligibility and
discovering that they can apply with the Exchange. Corresponding
requirements do not exist in the tax return process; consumers simply
claim the exemption on IRS Form 8965 when filing the tax return.
Therefore, we propose that the Exchange would no longer make
eligibility determinations for exemptions based on membership in a
health care sharing ministry, membership in an Indian tribe, or
incarceration status, and therefore propose to delete paragraphs (d)
through (f). We propose to redesignate paragraph (g) as paragraph (d).
We also propose to add a new paragraph (e), under which we propose
that certain exemptions authorized under Section 5000(A) of the
Internal Revenue Code may be claimed during the tax filing process
without obtaining an exemption certificate number (ECN) from the
Exchange. In previous guidance, we identified these exemptions and
provided that they may be claimed on a tax return without obtaining an
ECN.\26\ The IRS has also

[[Page 75536]]

published guidance identifying these exemptions, and allowing eligible
individuals to claim the exemption without first obtaining an ECN.\27\
These proposed regulations codify our prior guidance.
---------------------------------------------------------------------------

\26\ HHS Centers for Medicare & Medicaid Services, Shared
Responsibility Guidance-Filing Threshold Hardship Exemption (Sept.
18, 2014), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Filing-Threshold-Exemption-Guidance-9-18-14.pdf.
\27\ Notice 2014-76, 2014-50 I.R.B. 946 (December 8, 2014),
available at https://www.irs.gov/pub/irs-irbs/irb14-50.pdf.
---------------------------------------------------------------------------

An ECN is not required for an exemption that can be claimed on a
tax return. Rather, an individual can simply list the appropriate code
to claim the exemption per the instructions to Form 8965. The varying
requirements between the IRS and the Exchange exemption processes may
cause confusion for applicants. Further, we intend to permit
individuals who have already been granted an ECN from the Exchange on a
continuing basis (such as for members of Federally recognized tribes or
individuals eligible for services through an Indian health care
provider) to use their ECN on their Federal income tax return to claim
this exemption until such time that they no longer are eligible for
this exemption. An individual will be able to obtain information about
his or her ECN after the Exchange ceases processing tribal membership
exemptions. We also propose a clarifying amendment to Sec. 155.605(b)
to remove the cross-reference to paragraphs (f)(2) and (g) and replace
it with paragraphs (c)(2) and (d). We seek comment on all aspects of
this proposal.
We propose to redesignate Sec. 155.605(g), which discusses
hardship exemptions, as Sec. 155.605(d), and reorganize and revise the
newly redesignated paragraph (d). In newly redesignated Sec.
155.605(d)(1), we propose to limit the amount of time a general
hardship exemption may cover to the remainder of the calendar year from
the date the hardship commenced plus the next calendar year, plus the
month before the hardship began. We believe that such a maximum period
for the hardship exemption provides the individual with a sufficient
period of time during which he or she will be covered by the exemption,
and sufficient time for the individual to recover from the hardship. We
propose that an individual would need to submit a new hardship
exemption application to the Exchange to request subsequent hardship
exemptions on the same basis, however the Exchange may use the proof of
hardship submitted with the previous application as long as it is
within 3 years of an individual's initial application for the hardship
exemption. We propose that individuals would not be required to submit
additional proof within 3 years of their initial application because we
believe that this proof would be sufficiently current to support an
additional exemption application. We seek comment on this proposal, in
particular with respect to the timeframes--both the maximum timeframe
for the length of the hardship exemption, and the 3-year timeline for
submission of new supporting evidence.
Next, we propose to revise newly redesignated Sec. 155.605(d)(2)
to set out specific examples of events and circumstances that qualify
an individual for a hardship exemption under the umbrella of the
general set of events and circumstances described under newly
redesignated Sec. 155.605(d)(1). We note that these specific proposed
criteria are not intended to limit the Exchange's ability to determine
individuals' eligibility for a hardship exemption based on other
criteria provided through guidance, covering a specified duration, such
as the exemption available to individuals enrolled in CHIP Buy-In plans
in 2014. The specific illustrative criteria we propose to add are:
Homelessness;
Eviction or facing eviction or foreclosure;
Received a shut-off notice from a utility company;
Experienced domestic violence;
Experienced the death of a family member;
Experienced a fire, flood or other nature or human-caused
disaster that caused substantial damage to your property;
Filed for bankruptcy;
Experienced unexpected increases in necessary expenses due
to caring for an ill, disabled or aging family member;
Seeking categorical Medicaid eligibility under section
1902(f) of the Social Security Act (the Act) for ``209(b)'' States
(codified at Sec. 435.121);
Seeking Medicaid coverage provided to medically needy
individuals under section 1902(a)(10(C) of the Act that is not included
as government-sponsored minimum essential coverage under IRS
regulations and not recognized as MEC by the Secretary of HHS in
accordance with the CMS State Health Official (SHO) Letter #14-002;
Enrolled in Medicaid coverage provided to a pregnant woman
that is not included as government-sponsored minimum essential coverage
under IRS regulations and not recognized as minimum essential coverage
by the Secretary of HHS in accordance with CMS SHO #14-002;
Enrolled in CHIP coverage provided to an unborn child that
includes comprehensive prenatal care for the pregnant mother; or
As a result of an eligibility appeals decision the
individual is eligible for enrollment in a qualified health plan
through the Exchange, lower costs on the individual's monthly premiums
or CSRs for a time period when the individual was not enrolled in a QHP
through the Exchange. These criteria were previously laid out in
Exchange guidance, and capture many of the reasons why an individual
has requested a hardship exemption to date. We seek comment on this
proposal.
We propose to revise newly redesignated paragraph (d)(3) to require
that a hardship event or circumstance must have occurred within 3 years
from the date of the individual's hardship application submitted to the
Exchange. This proposed paragraph is in line with the requirement that
an Exchange may only accept an application for a hardship exemption up
to 3 calendar years after the month or months during which the
applicant attests that the hardship occurred under Sec. 155.610(h).
The same hardship event or circumstance may qualify an individual for
two ECNs that cover a period of 4 years total.
For example, assume an individual experiences a hardship event in
January 2015 and submits a hardship application to the Exchange in
February 2015. If the individual otherwise qualifies for the exemption,
the individual may be granted an ECN spanning December 2014 through
December 2016. If the individual submits a second hardship application
in January 2017 noting that the exemption is requested for the same
event covered by the original ECN that occurred in January 2015, the
individual may be granted a second ECN that extends through December
2018.
Next, consider an individual who experiences a hardship event in
January 2015 and submits a hardship application to the Exchange in
January 2018. The individual is eligible for a hardship exemption from
December 2014 through December 2016, and the individual may request a
second ECN to cover through December 2018.
Finally, consider an individual who experiences a hardship event in
January 2015 and submits a hardship application to the Exchange in
January 2019. The individual is not eligible for an exemption for the
January 2015 event because it happened more than 3 years from the date
of the individual's exemption application. However, if the individual
can show the Exchange that

[[Page 75537]]

the event continued or a new hardship qualifying event occurred anytime
from January 2016 to January 2019, the individual would be eligible for
a hardship exemption. We seek comment on this proposal and on whether 3
years is the appropriate length of time, or whether a shorter period is
warranted.
In addition, we propose to amend newly redesignated Sec.
155.605(d)(5), which provides an exemption for a calendar year to an
individual who has been determined ineligible for Medicaid for one or
more months during a benefit year solely as a result of a State not
implementing section 2001(a) of the Affordable Care Act. We propose to
remove the requirement to obtain an eligibility determination from the
individual's appropriate State Medicaid office. Instead, we propose
that this exemption be made available to an individual who would be
determined ineligible for Medicaid for one or more months during a
benefit year solely as a result of a State not implementing section
2001(a) of the Affordable Care Act. By removing the requirement to
obtain a Medicaid determination, we believe that we are reducing State
administrative costs and are alleviating a significant burden on
individuals who do not request this exemption until the previous
calendar year has passed and are therefore unable to obtain a Medicaid
determination for the previous year. We anticipate that this proposed
change will simplify the process for filing an exemption application
with the Exchange. We seek comment on this proposal.
Finally, we propose Sec. 155.605(e)(4) to allow individuals to
claim the exemption described in section F of I.R.S. Notice 2014-76
(Dec. 8, 2014), relating to certain individuals who reside in a State
that did not expand Medicaid eligibility, on their Federal income tax
return without first obtaining an ECN from the Exchange. We propose to
allow this exemption to be claimed beginning for the 2015 tax year so
that there is no gap in the ability for consumers to claim this
exemption on a tax return.
b. Required Contribution Percentage (Sec. 155.605(e)(3))
Under section 5000A of the Code, an individual must have minimum
essential coverage for each month, qualify for an exemption, or make a
shared responsibility payment with his or her Federal income tax
return. Under section 5000A(e)(1) of the Code, an individual is exempt
if the amount that he or she would be required to pay for minimum
essential coverage (the required contribution) exceeds a particular
percentage (the required contribution percentage) of his or her actual
household income for a taxable year. In addition, under Sec.
155.605(g)(2) (redesignated as Sec. 155.605(d)(2)), an individual is
exempt if his or her required contribution exceeds the required
contribution percentage of his or her projected household income for a
year. Finally, under Sec. 155.605(g)(5) (redesignated as Sec.
155.605(d)(5)), certain employed individuals are exempt if, on an
individual basis, the cost of individual coverage is less than the
required contribution percentage, but the aggregate cost of individual
coverage through employers exceeds the required contribution
percentage, and no family coverage is available through an employer at
a cost less than the required contribution percentage.
Section 5000A established the 2014 required contribution percentage
at 8 percent. For plan years after 2014, section 5000A(e)(1)(D) of the
Code and 26 CFR 1.5000A-3(e)(2)(ii) provide that the required
contribution percentage is the percentage determined by the Secretary
that reflects the excess of the rate of premium growth between the
preceding calendar year and 2013, over the rate of income growth for
that period.
In the 2015 Market Standards Rule (79 FR 30302), we established a
methodology for determining the excess of the rate of premium growth
over the rate of income growth for plan years after 2014. We also said
future adjustments would be published annually in the HHS notice of
benefit and payment parameters.
Under the HHS methodology, the rate of premium growth over the rate
of income growth for a particular calendar year is the quotient of (x)
1 plus the rate of premium growth between the preceding calendar year
and 2013, carried out to ten significant digits, divided by (y) 1 plus
the rate of income growth between the preceding calendar year and 2013,
carried out to ten significant digits.\28\
---------------------------------------------------------------------------

\28\ We also defined the required contribution percentage at
Sec. 155.600(a) to mean the product of 8 percent and the rate of
premium growth over the rate of income growth for the calendar year,
rounded to the nearest one-hundredth of one percent.
---------------------------------------------------------------------------

As the measure of premium growth for a calendar year, we
established in the 2015 Market Standards Rule that we would use the
premium adjustment percentage. The premium adjustment percentage is
based on projections of average per enrollee employer-sponsored
insurance premiums from the National Health Expenditure Accounts
(NHEA), which are calculated by the CMS Office of the Actuary. \29\ In
Sec. 156.130 of this proposed rule, we propose the 2017 premium
adjustment percentage of 1.1325256291 (or about 13.3 percent) over the
period from 2013 to 2016. This reflects an increase of about 5.1
percent for 2015-2016.
---------------------------------------------------------------------------

\29\ For any given year the premium adjustment percentage is the
percentage (if any) by which the most recent NHEA projection of per
enrollee employer-sponsored insurance premiums for the current year
exceeds the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2013.
---------------------------------------------------------------------------

As the measure of income growth for a calendar year, we established
in the 2015 Market Standards Rule that we would use per capita Gross
Domestic Product (GDP), using the projections of per capita GDP used
for the NHEA, which is calculated by the Office of the Actuary.
However, as noted in the 2015 Market Standards Rule (79 FR 30304),
we stated that we would consider alternative measures of income and
premium growth should projections of those measures become available.
As part of its projections of National Health Expenditures, the Office
of the Actuary published projections of personal income (PI) for the
first time in September 2014 and subsequently in July 2015. As a
result, we are considering substituting this new measure of per capita
PI for per capita GDP in the calculation for the required contribution
percentage. We believe per capita PI better aligns with the statutory
intent of measuring the income of an individual than per capita GDP.
The projections of PI published by the Office of the Actuary are
consistent with the measure published by the Bureau of Economic
Analysis, which reflects income received by individuals from all
sources, including income from participation in production.
Specifically, it includes compensation of employees (received),
supplements to wages and salaries, proprietors' income with adjustments
for inventory valuation and capital consumption, personal income
receipts on assets, rental income, and personal current transfer
receipts, less contributions for government social insurance.
The Office of the Actuary's PI projection is generated using the
University of Maryland's Long Term Inter-industry Forecasting Tool. The
Long Term Inter-industry Forecasting Tool model is a macro-economic
model that is based on the historical relationships that exist between
PI growth, GDP growth, and changes in other macro-economic variables.
For instance, the correlation between PI and GDP is influenced by
fluctuations in

[[Page 75538]]

taxes and government transfer payments, depreciation of capital stock,
and retained earnings and transfer payments of private business.\30\
Estimates of GDP in the NHE projections reflect economic assumptions
from the 2015 Medicare Trustees Report and are updated to incorporate
the latest available consensus data from the monthly Blue Chip Economic
Indicators. These same economic assumptions are used for producing
projections of PI and employer-sponsored insurance premiums, so using
this estimate will generate an internally consistent estimate of the
growth in premiums relative to growth in income. We welcome comments on
whether to substitute per capita PI for per capita GDP in the
calculation to establish the rate of income growth for the required
contribution percentage.
---------------------------------------------------------------------------

\30\ Projections of PI and GDP are available from Table 1 at:
Centers for Medicare & Medicaid Services. National Health
Expenditure Data: Projected. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html.
---------------------------------------------------------------------------

We will continue to consider other changes to the measures of
income per capita and premium growth as additional information becomes
available and as we gain experience with the current measures, and seek
comment on other indices that we should develop or consider. For
example, we have considered a measure of per capita personal income
that does not include government transfers such as social security,
Medicare, and Medicaid. We welcome comments on whether we should seek
to develop such a measure of income, and whether we should use this or
another alternative measure to establish the rate of income growth for
the required contribution percentage.
Since updating the required contribution percentage for 2017
requires calculating the cumulative difference between premium growth
and income growth between the preceding calendar year and 2013, we
propose to replace per capita GDP with per capita PI for all years
beginning in 2013 and then calculate cumulative income growth through
2016. We propose this retrospective approach as it allows for
consistency across all years with the most recent data available. We
note that potential future changes based on new data that are not
available for 2013 may be made on a prospective basis.
Under this proposal, using the NHEA data, the rate of income growth
for 2017 is the percentage (if any) by which the most recent projection
of per capita PI for the preceding calendar year ($49,875 for 2016)
exceeds the per capita PI for 2013, ($44,925), carried out to ten
significant digits. The total rate of income growth for the 3-year
period from 2013-2016 is estimated to be 1.1101836394 (or about 11.0
percent). This reflects an increase of about 2.68 percent for 2015-
2016.
Thus, using the proposed 2017 premium adjustment percentage, the
excess of the rate of premium growth over the rate of income growth for
2013-2016 is 1.1325256291/1.1101836394, or 1.0201245892. This results
in a required contribution percentage for 2017 of 8.00*1.0201245892, or
8.16 percent, when rounded to the nearest one-hundredth of one percent,
an increase of 0.37 percentage points from 2016. The required
contribution percentage is also used for 36B(b)(3)(A) and (c)(2)(C).
c. Eligibility Process for Exemptions (Sec. 155.610)
In Sec. 155.610, we propose to delete a cross-reference and add a
paragraph about the handling of incomplete exemption applications
received by the Exchange.
First, we propose to strike the cross-reference to paragraph (f) in
Sec. 155.610(h)(1) as we propose elsewhere in this proposed rule that
the Exchange will no longer process exemption applications related to
membership in an Indian tribe.
Second, we propose to add new paragraph Sec. 155.610(k) regarding
how the Exchange will handle incomplete exemption applications
submitted to the Exchange. We propose that the Exchange will handle
incomplete exemption applications similarly to how it handles
incomplete health coverage applications under Sec. 155.310(k).
Specifically, when the Exchange receives an application that does not
contain sufficient information to make an eligibility determination,
the Exchange will: (1) Provide notice to the applicant indicating that
information necessary to complete an eligibility determination is
missing, specifying the missing information, and providing instructions
on how to provide the missing information; (2) provide the applicant
with a period of no less than 10 and no more than 90 days starting from
the date on which the notice is sent to the applicant to provide the
information needed to complete the application to the Exchange; and (3)
if the Exchange does not receive the requested information, the
Exchange will notify the applicant that the Exchange will not process
the application and will provide appeal rights to the applicant. We
seek comment on this proposal.
d. Verification Process Related to Eligibility for Exemptions (Sec.
155.615)
In Sec. 155.615, we propose deletions related to exemptions that
we are proposing elsewhere in this proposed rule to remove from the
Exchange exemption eligibility determination process, and an addition
to align with newly added paragraphs pertaining to a general hardship
exemption.
First, we propose conforming edits to delete Sec. 155.615(c), (d),
(e), and (f)(3) in accordance with our proposal to remove the option to
obtain an ECN from the Exchange for certain exemptions.
Next, we propose to add paragraph Sec. 155.615(c)(2) to align with
the 3-year time frame requirement proposed in Sec. 155.605(d)(3). We
propose that if the hardship-qualifying event or circumstance in Sec.
155.605(d)(1) began more than 3 years from the date the exemption
application was submitted, and if the event or circumstance continued
beyond the initial 3-year period, the Exchange must verify the
applicant continued to experience the hardship to which he or she is
attesting during a period that is within 3 years from the date of the
exemption application submitted under Sec. 155.605(d)(1). We believe
that this requirement places minimum burden on the applicant while
ensuring that the Exchange appropriately meets the requirements in
paragraph (c)(1) of this section under the proposed 3-year time frame
in Sec. 155.605(d)(3). We seek comment on this proposal.
e. Options for Conducting Eligibility Determinations for Exemptions
(Sec. 155.625)
We propose to amend Sec. 155.625(a)(2) and (b) to remove the
deadline after which a State Exchange was to be required to process
exemption applications for residents of the State by the start of open
enrollment for 2016, and to permit an Exchange to adopt an exemption
eligibility determination made by HHS indefinitely. Based on HHS's
operation of this service to date, we have determined that the HHS
exemption option is an efficient process for State Exchanges that has
minimized confusion for consumers. This proposed rule follows an FAQ
published on July 28, 2015 in which HHS stated that it will not take
any enforcement action against State Exchanges that continue to use the
HHS service for exemptions beyond the start of open enrollment for
2016. Therefore, we propose to delete paragraphs (b)(1), (2) and (3).
We seek comment on this proposal.

[[Page 75539]]

8. Exchange Functions: Small Business Health Options Program (SHOP)
a. Functions of a SHOP (Sec. 155.705)
Sections 155.705(b)(2) and (3) set forth regulations related to
employer choice in SHOPs. We are proposing to add new paragraphs
(b)(3)(viii) and (ix) to specify that the FF-SHOPs would provide
additional options for employer choice for plan years beginning on or
after January 1, 2017.
For plan years beginning in 2015, employers offering coverage in
certain FF-SHOP States have two options for providing coverage: they
can offer a single plan or they can offer ``horizontal'' choice, in
which an employer selects a single actuarial value coverage level and
makes all plans at that coverage level available to the qualified
employees. These same two options are available to participating
employers in all FF-SHOP States for plan years beginning on or after
January 1, 2016. For plan years beginning on or after January 1, 2017,
we propose to add paragraphs (b)(3)(viii) and (ix) to this section to
add an additional employer choice option available to consumers
participating in FF-SHOPs. We are proposing to add a ``vertical
choice'' option for QHPs and SADPs under which employers will be able
to offer qualified employees a choice of all plans across all available
levels of coverage from a single issuer, for plan years beginning on or
after January 1, 2017. We anticipate that this ``vertical choice''
option would be appealing to employers because it gives employees
greater flexibility across coverage levels, and that it may encourage
more issuers to participate in SHOPs because issuers would be able to
offer all of their plans to employees. Issuers may also prefer this
option because it minimizes the risk of adverse selection by limiting
choices to their own plans. By offering multiple plans to an employer,
the issuer may be more likely to enroll a greater share of the
employer's group than if multiple issuers offering coverage in a single
coverage level were vying for members of the group. By doing so, the
issuer would be likely to enroll a more diverse risk pool from the
employer's group, minimizing the risk of adverse selection. We note
that existing SHOP regulations at Sec. 155.705(b)(3)(i)(B) and
(b)(3)(ii)(B) provide State-based SHOPs with the flexibility to provide
employers with vertical choice or other options for providing employer
choice in addition to ``horizontal'' choice, and these amendments would
not affect State-based SHOPs' flexibility in this regard.
We are also seeking comment on whether the FF-SHOPs should make
other employer choice options available. For example, we are
considering allowing participating employers to select an actuarial
value level of coverage, after which employees could choose from plans
available at that level and at the level above it. We also seek comment
on whether to give the State in which the FF-SHOP is operating an
opportunity to recommend whether the FF-SHOP in that State should
implement any additional model of employer choice. Under this approach,
a State regulatory agency, such as the State Department of Insurance,
could submit a letter to the Secretary with a recommendation for the
employer choice models that should be offered in their State, based on
the additional models of employer choice the FF-SHOP has made
available. The FF-SHOP would then evaluate the State's recommendation
and determine whether to make the additional models of employer choice
available in the State. In all States, the FF-SHOPs would continue to
give employers the option of offering a single QHP (or SADP) as well as
the option of offering a choice of all QHPs (or SADPs) at a single
actuarial value level of coverage, and States would not be given an
opportunity to recommend that these options not be implemented in their
State.
We also propose adding a new Sec. 155.705(b)(3)(x) to provide that
the employer choice models that would be available for SBE-FPs
utilizing the Federal platform for SHOP enrollment functions would be
the ones that are available through the FF-SHOP platform, because
employer choice is an integral part of the FF-SHOP platform's
enrollment functionality and system build. If we finalize an approach
under which States with an FF-SHOP would be given an opportunity to
recommend whether the FF-SHOP in that State should implement any
additional models of employer choice that would ultimately be finalized
as a result of these proposals, the same opportunity would be made
available to a State with an SBE-FP.
We propose to amend paragraph (b)(4)(ii)(B) to specify the timeline
under which qualified employers in a FF-SHOP must make initial premium
payments. Specifically, we are proposing to add paragraph
(b)(4)(ii)(B)(1) to specify that in the FF- SHOPs, payment for the
group's first month of coverage must be received by the premium
aggregation services vendor on or before the 20th day of the month
prior to the month that coverage begins. This means electronic payments
must be completed or the premium aggregation services vendor must have
receipt of any hard copy check on or before the 20th day of the month
prior to the month that coverage would begin. HHS currently advises
employers participating in FF-SHOPs to submit initial premium payments
electronically by the 15th of the month prior to the coverage effective
date to ensure that there is sufficient time for the payment to be
cleared. Selecting the 20th of the month provides sufficient time to
cancel coverage prior to the effective date. Under this proposal, if an
initial premium payment is not received by the premium aggregation
services vendor on or before the 20th day of the month prior to the
month that coverage would begin, coverage would not be effectuated. If
this happens, the employer could apply to purchase coverage that would
be effective at the beginning of another month during the year, as
coverage would not have been effectuated. The group would not need to
submit a new application, but would need to select a new coverage
effective date. Therefore, the grace period and reinstatement
opportunities under Sec. 155.735(c)(2) that are provided to groups
that do not make timely payments after coverage has taken effect are
not relevant in this context, and we are proposing amendments to the
introductory language of Sec. 155.735(c)(2) to reflect this.
In circumstances where an FF-SHOPs would be retroactively
effectuating coverage for qualified employer groups, the FF-SHOP would
need to receive payment prior to effectuating coverage. We seek comment
on the timing of when premium payment must be received by an FF-SHOP
when coverage is effectuated retroactively. We are considering a policy
under which payments for the first month's coverage and all months of
the retroactive coverage would have to be received and processed no
later than 30 days after the event that triggers the eligibility for
retroactive coverage. We believe 30 days would provide sufficient time
for groups to make these payments.
In paragraph (b)(4)(ii)(C)(2) of this section, we propose to
correct a cross reference to Sec. 155.705(b)(4)(ii)(B)(1) that should
have been updated to cross-reference Sec. 155.705(b)(4)(ii)(C)(1) when
Sec. 155.705(b)(4)(ii)(A) was added in the 2016 Payment Notice.
We also propose amendments to Sec. 155.705(b)(11)(ii), which
governs employer contributions to premiums in FF-SHOPs and applies to
both medical and dental plans. Section 155.705(b)(11)(ii) currently
states that the FF-SHOP ``must use'' the reference plan contribution
methodology

[[Page 75540]]

currently set forth at Sec. 155.705(b)(11)(ii). We propose to amend
this provision to provide for FF-SHOPs to use a ``fixed contribution
methodology,'' in addition to the reference plan methodology set forth
in the current regulation. The amendments would specify that when an
employer decides to offer a single plan to qualified employees, the
employer would be required to use the fixed contribution methodology.
Specifically, when offering a single plan, the employer would
contribute a fixed percentage of the plan's premium for each qualified
employee, and (if applicable) for each dependent of a qualified
employee. This policy for employers offering a single plan is
consistent with what was described in the preamble to the Patient
Protection and Affordable Care Act; Establishment of Exchanges and
Qualified Health Plans; Small Business Health Options Program
rulemaking (78 FR 33233), in which we explained that when a choice of
plans is not available to the employee, the single QHP offered by the
employer would be the reference plan under the reference plan
methodology described in the current regulation. See 78 FR 33236. While
the proposed methodology would be consistent with our interpretation of
the current regulation in circumstances where a choice of plans is not
offered, we are proposing to codify how the contribution methodology
would be handled operationally in those circumstances. Additionally, we
propose to permit employers to choose between the reference plan
contribution methodology set forth in the current regulation and the
proposed fixed contribution methodology when offering a choice of
plans. When offering a choice of plans, an employer opting for the
fixed percentage contribution methodology would contribute a fixed
percentage of the premiums across all plans in which any qualified
employee and, if applicable, any dependent of a qualified employee, is
enrolled. The dollar amount of the fixed percentage contribution would
vary from enrollee to enrollee based on their age and the plan they
choose. We believe that offering these two employer contribution
methodologies to employers offering a choice of plans would provide
employers with flexibility to contribute to their qualified employees'
plans in a manner that is appropriate for the group. We are also
proposing to add language to Sec. 155.705(b)(11)(ii) explaining that a
tobacco surcharge, if applicable, would be added to the monthly premium
after the employer contribution is applied to the premium so that the
financial impact of the surcharge is borne by the tobacco user, as
opposed to being shared with the employer or other enrollees. We also
propose to streamline the discussion of the reference plan contribution
methodology described in Sec. 155.705(b)(11)(ii), and propose removing
Sec. 155.705(b)(11)(ii)(D) because the FF-SHOPs are currently not able
to support basing employer contributions on calculated composite
premiums.
We seek comment on these proposals.
b. Eligibility Determination Process for SHOP (Sec. 155.715)
We propose to amend Sec. 155.715(g)(1), which sets forth what a
SHOP must do if a qualified employer withdraws from the SHOP, to
distinguish between terminations of enrollment and terminations of
coverage. This regulation currently provides that, if an employer
ceases to purchase coverage through a SHOP, the SHOP must ensure that
each QHP terminates the coverage of the qualified employee who is
enrolled in the QHP through the SHOP. Consistent with guaranteed
availability and guaranteed renewability, coverage purchased through a
SHOP might in many circumstances continue outside a SHOP in a manner no
longer considered to be enrollment through the SHOP. Therefore, we
propose to specify that the termination described in this paragraph
would be a termination of the employer group's enrollment through the
SHOP, rather than a termination of the group's coverage. For example,
in many circumstances, an employer may offer to continue the same
coverage outside of the SHOP, in which case the issuer should not
terminate the coverage.
We seek comment on this proposal.
c. Enrollment Periods Under SHOP (Sec. 155.725)
Section 155.725(c) discusses the annual employer election period.
We are proposing to delete paragraph (c)(1) because it is outdated,
redesignate current paragraph (c)(2) as (c) introductory text and
redesignate the remaining paragraphs to reflect the new structure of
paragraph (c).
We propose to redesignate Sec. 155.725(e) as Sec. 155.725(e)(1)
and add paragraph (e)(2). To provide adequate time for qualified
employees in FF-SHOPs to make coverage selections during their annual
open enrollment period, we propose adding paragraph (e)(2) to specify
that qualified employers in the FF-SHOP must provide qualified
employees an annual open enrollment period of at least one week. This
proposed amendment, like all of Sec. 155.725(e), would apply only with
respect to renewals.
We are also proposing amendments to Sec. 155.725(h)(2) to specify
that the event that triggers a group's coverage effective date in a FF-
SHOP is not the plan selections of the individual enrollees, but the
employer's submission of all plan selections for the group (which we
call the group enrollment), and to allow employers to opt for a
coverage effective date later than the standard dates provided for
under the rule. The proposed amendments would permit qualified
employers to set enrollment periods for their qualified employees that
could include plan selections both before and after the 15th of a
month, and would also permit employers to select a coverage effective
date later than the standard dates provided for under the rule.
Employers would be able to select a coverage effective date up to 2
months in advance, provided that small group market rates are available
for the quarter in which the employer would like coverage to take
effect. This would allow employers to maximize their enrollment periods
so that they could begin the SHOP enrollment process as soon as small
group market rates are available for the quarter in which they would
like coverage to take effect. Under the proposed amendments, if an
employer submits its group enrollment by the 15th day of any month, the
FF-SHOP would ensure a coverage effective date of the first day of the
following month, unless the employer opts for a later effective date
for which rates are available. If an employer submits its group
enrollment between the 16th day of the month and the last day of the
month, we propose that the FF-SHOP must ensure a coverage effective
date of the first day of the second following month, unless the
employer opts for a later effective date for which rates are available.
We propose to amend Sec. 155.725(i)(1), which currently provides
that if a qualified employee enrolled in a QHP through a SHOP remains
eligible for coverage, that qualified employee will remain in the QHP
selected the previous year, unless certain exceptions apply. We propose
to provide that a SHOP be permitted to, but need not, provide for auto-
renewals of qualified employees, and also propose to revise the
language of the provision for consistency with our interpretation of
guaranteed renewability. If a SHOP does not provide for auto-renewals
for qualified employees, qualified employees would have to review and
provide a response to the employer's renewal offer of coverage. If
auto-renewal is available,

[[Page 75541]]

qualified employees need not take any action to continue in the prior
year's coverage through the SHOP. We are proposing this amendment to
reflect current operational capabilities in the FF-SHOPs.
Additionally, we propose to amend paragraph (j)(2)(i) of this
section to remove a reference to Sec. 155.420(d)(10), which was
deleted in the 2016 Payment Notice. We also propose to amend the
paragraph to specify that there would not be a SHOP special enrollment
period when a qualified employee or dependent of a qualified employee
experiences an event described in Sec. 155.420(d)(1)(ii), which
provides for a special enrollment period for individuals enrolled in a
non-calendar-year group health plan.
We seek comment on these proposals.
d. Termination of SHOP Enrollment or Coverage (Sec. 155.735)
For the reasons discussed above in the preamble discussion of our
proposed amendments to Sec. 155.705(b)(4), we are proposing to modify
the introductory language of Sec. 155.735(c)(2) to specify that the
provisions related to termination of employer group health coverage for
non-payment of premiums in FF-SHOPs under paragraph (c)(2) would not
apply to premium payments for the first month of coverage.
We are also proposing amendments to Sec. 155.735(d). Under
existing regulations at Sec. 155.735(d)(2), terminations of FF-SHOP
coverage or enrollment are effective on the last day of the month in
which the FF-SHOP receives notice for enrollees that change from one
QHP to another during the employer's annual open enrollment period or
during a special enrollment period. We propose that if an enrollee
changes from one QHP to another during the annual open enrollment
period or during a special enrollment period, the last day of coverage
would be the day before the effective date of coverage in the
enrollee's new QHP. We believe that this would prevent any instances of
double coverage as well as avoid a gap in coverage.
We also propose to require at Sec. 155.735(d)(2)(iii) that the FF-
SHOPs send advance notices to qualified employees before their
dependents age off of their plan. This notice would be sent 90 days in
advance of the date when the child dependent enrollee is no longer
eligible for coverage under the plan the employer purchased through the
FF-SHOP because he or she has reached the maximum child dependent age
for the plan. The notice would include information about the plan the
dependent is currently enrolled in, the date the dependent would age
off the plan, and information about next steps. In the FF-SHOPs,
consistent with current Sec. 155.735(d)(2) and proposed Sec.
155.735(d)(2)(i), a dependent aging off of the plan loses eligibility
for dependent coverage at the end of the month of the dependent's 26th
birthday or at the end of the month in which the issuer has set the
maximum dependent age limit (but in some cases might have the option to
keep the coverage for a period of time after that date under applicable
continuation coverage laws). This notice is intended to be a courtesy
notice as enrollees would still receive a termination notice when their
coverage through the SHOP is terminating.
e. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.
155.740)
In Sec. 155.740, we make certain proposals relating to SHOP
appeals. We propose to amend paragraphs (c)(2) and (d)(2) to provide
that employers and employees may file an appeal not only if a SHOP
fails to provide an eligibility determination in a timely manner but
also if a SHOP fails to provide timely notice of an eligibility
determination, in accordance with Sec. 155.715(e) and (f). We propose
these amendments in order to better align the SHOP appeals provisions
with individual market Exchange appeals. We note that the FF-SHOPs
provide the notice of eligibility automatically when an application is
submitted. For the FF-SHOPs, the date of eligibility determination and
eligibility notice are generally the same date.
We also propose to amend paragraph (l)(3) to allow employers and
employees who successfully appeal a denial of SHOP eligibility to
select whether the effective date of coverage or enrollment through the
SHOP under their appeal decision will be retroactive to the effective
date of coverage or enrollment through the SHOP that the employer or
employee would have had if they had correctly been determined eligible,
or prospective from the first day of the month following the date of
the notice of the appeal decision. The current version of paragraph
(l)(3) requires all SHOP appeal decisions to be retroactive to the date
the incorrect eligibility determination was made. This proposed change
would grant employers and employees added flexibility regarding the
effective date of coverage or enrollment through the SHOP under their
appeal decision and would be better aligned with current and proposed
policy for individual market Exchange appeals. For example, an employer
or employee would have flexibility under this proposal to opt for a
prospective effective date because he or she did not want to pay
retrospective premiums. We also propose to revise paragraph (l)(3) to
specify that if eligibility is denied under an appeal decision, the
effective date of the coverage or enrollment through the SHOP under the
appeal decision would be the first day of the month following the date
of the notice of the appeal decision. We seek comment on these
proposals.
9. Exchange Functions: Certification of Qualified Health Plans
a. Certification Standards for QHPs (Sec. 155.1000)
In the first few years of FFE operations, HHS has generally used an
``open market'' approach to QHP certification, accepting plans that met
the minimum QHP certification criteria. As the new QHP market
developed, it has been valuable to maintain predictability for issuers,
and that remains an important consideration. For example, elsewhere in
this rulemaking, we propose codifying and making transparent standards
related to network adequacy. At the same time we are exploring the most
useful tools to ensure that QHPs offer consumers a quality product. In
this section, we seek comment on a means of improving product value by
using the authority to deny certification to QHP applications.
1. Denial of Certification
Section 1311(e)(1)(B) of the Affordable Care Act states that
Exchanges may certify a health plan as a QHP if ``(A) such health plan
meets the requirements for certification as promulgated by the
Secretary . . . and (B) the Exchange determines that making available
such health plan through such Exchange is in the interests of qualified
individuals and qualified employers.'' Section 1311(e)(1)(B) thereby
affords Exchanges the discretion to deny certification of QHPs that
meet minimum QHP certification standards, but are not ultimately in the
interests of qualified individuals and qualified employers. We
interpret the ``interest'' standard to mean QHPs should provide quality
coverage to consumers to meet the Affordable Care Act's goals.
Section 155.1000 provides Exchanges with broad discretion to
certify health plans that otherwise meet the QHP certification
standards specified in part 156. HHS will continue to focus denials of
certification in the FFEs based on the ``interest of the qualified
individuals and qualified employers'' standard to

[[Page 75542]]

cases involving the integrity of the FFEs and the plans offered through
them. Examples of issues that could result in non-certification of a
plan include concerns related to an issuer's material non-compliance
with applicable requirements, an issuer's financial insolvency, or data
errors related to QHP applications and data submissions. Under this
approach, HHS could consider an assessment of past performance,
including with respect to oversight concerns raised through compliance
reviews and consumer complaints received and the frequency and extent
of any data submission errors. HHS would adopt a measured approach in
exercising this authority that would take into consideration several
factors, including available market competition and the availability of
operational resources.
As we consider this approach, we anticipate seeking more specific
comment. We seek comment on this proposal generally, and on these and
any other factors HHS should consider when evaluating QHPs to determine
if they meet the interests of consumers and businesses. HHS would also
ensure any future policy changes do not interfere with State
activities. We seek comments, specifically from States and other
stakeholders, on this aspect of the proposal.
We note that the OPM has the sole discretion for contracting with
multi-State plans and as such retains the authority to selectively
contract with multi-State plans.

G. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges

1. Standardized Options
a. Standardized Option Definition (Sec. 156.20)
The Affordable Care Act gives Exchanges considerable flexibility in
certification and oversight of QHPs. An excessive number of health plan
options makes consumers less likely to make any plan selection, more
likely to make a selection that does not match their health needs, and
more likely to make a selection that leaves them less satisfied. In
studies of consumer behavior in Medicare Part D, Medicare Advantage,
and Medigap, a choice of 15 or fewer plans was associated with higher
enrollment rates, while a choice of 30 or more plans led to a decline
in enrollment rates.\31\ In 2015, across the 37 Exchanges using the
HealthCare.gov platform, the number of health plan choices available
per county varied from 2 to 54 plans at the bronze level, 2 to 73 plans
at the silver level, and 1 to 43 plans at the gold level.\32\ Our
experience in the first two open enrollment periods suggests that many
consumers, particularly those with a high number of health plan
options, find the large variety of cost-sharing structures available on
the Exchanges difficult to navigate.
---------------------------------------------------------------------------

\31\ Chao Zhou and Yuting Zhang, ``The Vast Majority Of Medicare
Part D Beneficiaries Still Don't Choose The Cheapest Plans That Meet
Their Medication Needs.'' Health Affairs, 31, no.10 (2012):2259-
2265.
\32\ The average number of plans available per county in 2015
were: 12 bronze plans, 15 silver plans, and 9 gold plans. Available
at: https://www.cms.gov/cciio/resources/data-resources/marketplace-puf.html.
---------------------------------------------------------------------------

We believe that standardized options will provide these consumers
the opportunity to make simpler comparisons of plans offered by
different issuers within a metal level. Consumers will be able to focus
their decision making on the providers in the plan networks, premiums,
benefits, and quality, and will not be required to make complex
tradeoffs among cost-sharing differences among a large number of plans.
Taken together, standardized options, EHB, AV, and QHP certification
standards can significantly simplify consumers' ability to compare
plans and make informed choices.
To simplify the consumer plan selection process, HHS is proposing
to establish ``standardized options'' in the individual market FFEs.
These plans would have standardized cost sharing for a key set of EHB
that comprise a large percentage of the total allowable costs for an
average enrollee. We propose that issuers would not be required to
offer standardized options in 2017 and would retain the flexibility to
offer non-standardized plans, but we are considering ways that
standardized options, when certified by an FFE, could be displayed on
HealthCare.gov in a manner that makes it easier for consumers to find
and identify them, including distinguishing them from non-standardized
plans.
We propose cost-sharing structures for standardized options at the
bronze, silver (and associated silver cost-sharing reduction plan
variations), and gold levels of coverage. At Sec. 156.20, we propose
adding a definition for standardized option. A standardized option
would be defined as a QHP with a standardized cost-sharing structure
specified by HHS and that is offered for sale through an individual
market FFE (see Table 9 for proposed models). We envision standardized
options to include a single provider tier, a fixed in-network
deductible, a fixed annual limitation on cost sharing, and standardized
copayments and coinsurance for a key set of EHB that comprise a large
percentage of the total allowable costs for an average enrollee. We
seek comment on this proposal.
b. Standardized Option Design Principles
We have designed one bronze standardized option, one silver
standardized option, one standardized option for each silver CSR plan
variation, and one gold standardized option. We are not proposing a
platinum standardized option because only a small proportion of QHP
issuers in the FFEs offered platinum plans in 2015. Silver plans are
the most common and popular plans in the FFEs.\33\ As such, we
encourage issuers to offer at least one standardized option at the
silver level of coverage (along with the associated standardized silver
CSR plan variations) to simplify the consumer shopping experience for
the greatest number of enrollees. We intend to propose standardized
option changes annually. We seek comment on these proposals.
---------------------------------------------------------------------------

\33\ In 2015, across the FFEs, there were a total of: 263
catastrophic, 1864 bronze, 2500 silver, 1774 gold, and 551 platinum
plans. Available at: https://www.cms.gov/cciio/resources/data-resources/marketplace-puf.html.
---------------------------------------------------------------------------

c. General Features of the Standardized Options
To minimize market disruption, we have designed the standardized
options to be as similar as possible to the most popular 2015 FFE QHPs
(based on enrollment), and we have sought a cost-sharing structure that
would generally not raise premiums. In arriving at these standardized
option designs, we also consulted the standardized option designs
offered in the SBEs that have provided standardized plans since the
2014 plan year (California, Connecticut, Massachusetts, New York,
Oregon, and Vermont).
i. Drug Formularies
We propose that standardized options have the four drug tiers
currently utilized in our consumer-facing applications at this time--
generic, preferred brand, non-preferred brand, and specialty drug
tiers. However, we propose to allow issuers to offer additional lower-
cost tiers if desired. Slightly more than half (56 percent) of the
proposed 2016 FFE QHPs have more than four drug tiers. We seek comment
on this design element.

[[Page 75543]]

ii. Provider Tiers
We propose that standardized options have no more than one in-
network provider tier. Varying cost sharing by provider tier affects
the actuarial value of a plan, making it difficult to standardize a
cost-sharing structure. Further, only 14 percent of FFE enrollees are
currently enrolled in QHPs with more than one in-network tier, and only
6 percent of enrollees are covered by an issuer that does not offer a
single-tier plan in addition to a multi-tier plan in the same county.
We seek comment on this design element.
iii. Deductible-Exempt Services
In designing the standardized options, we seek to exempt from the
deductible certain routine services, such as primary care, specialist
visits (at the silver and gold metal levels), and generic drugs, to
ensure that access to coverage translates into access to care for
routine and chronic conditions and that enrollees receive some up-front
value for their premium dollars. Again, in terms of this feature, we
designed the standardized options to be as similar as possible to the
most popular 2015 FFE QHPs (based on enrollment). Among those 2015 FFE
QHPs, over 85 percent of silver plan enrollees and over 50 percent of
bronze plan enrollees selected plans that cover certain services prior
to application of the deductible. (The figure for gold plan enrollees
was over 90 percent. However, many gold plans have a $0 deductible, for
which the concept of deductible-exempt services would not be
meaningful.) Primary care and generic drugs are the services most
likely to be covered without a deductible at all three metal levels.
Other services that are also likely to be covered prior to the
deductible, particularly by silver and gold plans, include specialist
visits and mental/behavioral health and substance use disorder
outpatient services. We seek comment on this design element.
iv. Copayment vs. Coinsurance
We sought to balance consumer preference for copayments over
coinsurance with the potential impact on premiums. Research shows that
consumers often prefer copayments to coinsurance because the former are
more transparent and make it easier for consumers to predict their out-
of-pocket costs. On the other hand, setting fixed copayments on a
national level could lead to disparate premium effects due to regional
and issuer-specific cost differences. We seek comment on this design
element.
d. Specific Standardized Option Designs
The proposed 2017 bronze standardized option closely resembles a
catastrophic plan, with a few key exceptions. The plan has a $6,650
deductible, an annual limitation on cost sharing equal to the maximum
allowable annual limitation on cost sharing for 2017 (proposed to be
$7,150), and 50 percent coinsurance. Primary care visits (for the first
three visits) and mental health/substance use outpatient services are
exempt from the deductible, and have a copayment of $45. Generic drugs
are also exempt from the deductible and have a copayment of $35. Note
that for all standardized options, cost-sharing rules for preventive
services under Sec. 147.130 apply (we do not list this benefit
category in Table 9).
The proposed 2017 silver standardized option has a $3,500
deductible, an annual limitation on cost sharing equal to the maximum
allowable annual limitation on sharing for 2017, and a 20 percent
enrollee coinsurance rate. Primary care visits, mental health/substance
use outpatient services, specialist visits, urgent care visits, and all
drug benefits are exempt from the deductible, and all of the
deductible-exempt benefits have copayments instead of co-insurance,
except for specialty drugs, which are subject to a 40 percent
coinsurance rate. Emergency room services are subject to the
deductible, with a $400 copayment applicable after the deductible.
The proposed 2017 silver cost-sharing reduction standardized
options reduce all cost sharing parameters successively to meet the 73
percent, 87 percent, and 94 percent AV requirements. Where possible,
the cost-sharing reduction standardized options and the non-cost-
sharing reduction standardized silver option maintain similar
differentials between the cost sharing for certain benefits like
primary care and specialty visits.
The proposed 2017 gold standardized option has a $1,250 deductible,
a $4,750 annual limitation on cost sharing, and a 20 percent enrollee
coinsurance rate. Primary care visits, mental health and substance use
outpatient services, specialist visits, urgent care visits, and all
drug benefits are not subject to the deductible. All of the benefits
not subject to the deductible have copayments except for specialty
drugs. We seek comment on these designs, in particular with respect to
whether particular cost-sharing elements, such as deductibles or
copayments for particular services, should be modified.

Table 9--Proposed 2017 Standardized Options
--------------------------------------------------------------------------------------------------------------------------------------------------------
Silver 73% Silver 87% Silver 94%
Bronze Silver actuarial value actuarial value actuarial value Gold
variation variation variation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Actuarial Value (%)............. 61.8.............. 71.00............. 73.55............. 87.47............. 94.3.............. 79.98.
Deductible...................... $6,650............ $3,500............ $3,000............ $700.............. $250.............. $1,250.
Annual Limitation on Cost $7,150............ $7,150............ $5,700............ $2,000............ $1,250............ $4,750.
Sharing.
Emergency Room Services......... 50%............... $400 (copay $300 (copay $150 (copay $100 (copay $250 (copay
applies only applies only applies only applies only applies only
after deductible. after deductible). after deductible). after deductible). after
deductible).
Urgent Care..................... 50%............... $75 (*)........... $75 (*)........... $40 (*)........... $25 (*)........... $65 (*).
Inpatient Hospital Services..... 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Primary Care Visit.............. $45 (* first 3 $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $20 (*).
visits, then
subject to
deductible and
50% coinsurance).
Specialist Visit................ 50%............... $65 (*)........... $65 (*)........... $25 (*)........... $15 (*)........... $50 (*).
Mental Health/Substance Use $45 (*)........... $30 (*)........... $30 (*)........... $10 (*)........... $5 (*)............ $20 (*).
Disorder Outpatient Services.

[[Page 75544]]

Imaging (CT/PET Scans, MRIs).... 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Rehabilitative Speech Therapy... 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Rehabilitative OT/PT............ 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Laboratory Services............. 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
X-rays.......................... 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Skilled Nursing Facility........ 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Outpatient Facility Fee......... 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Outpatient Surgery Physician/ 50%............... 20%............... 20%............... 20%............... 5%................ 20%.
Surgical.
Generic Drugs................... $35 (*)........... $10 (*)........... $10 (*)........... $5 (*)............ $3 (*)............ $10 (*).
Preferred Brand Drugs........... 50%............... $50 (*)........... $50 (*)........... $25 (*)........... $5 (*)............ $30 (*).
Non-Preferred Brand Drugs....... 50%............... $100 (*).......... $100 (*).......... $50 (*)........... $10 (*)........... $75 (*).
Specialty Drugs................. 50%............... 40% (*)........... 40% (*)........... 30% (*)........... 25% (*)........... 30% (*).
--------------------------------------------------------------------------------------------------------------------------------------------------------
(*) = not subject to the deductible.

We propose that an issuer may offer multiple plans through an FFE
for each standardized option within a service area when the plans are
meaningfully different, such as offering an HMO standardized option and
a PPO standardized option at a certain metal level. We seek comment on
this proposal.
To reduce operational complexity, we do not propose to vary the
standardized options by State or region. Instead, we propose one set of
standardized options for all FFEs, including those in which States
perform plan management functions. We recognize that some States
regulate the level of cost sharing applied to certain benefits, such as
emergency room services and specialty drugs. We invite comment from
States and other stakeholders on the proposed standardized options, and
how they may interact with State-specific cost-sharing laws or
regulations, as well as any potential options for incorporating State
cost-sharing requirements into the standardized option framework.
We do not propose to limit the number of non-standardized options
that an issuer may offer through an FFE; however, meaningful difference
standards at Sec. 156.298 and other QHP certification standards still
apply. There is currently no such cap on the number of plans that an
issuer offering a QHP through an FFE can offer, or on the number of
issuers that can offer coverage at each metal level in an FFE. In this
proposed rule, we do not propose to limit the total number of QHPs that
may be sold through an FFE in a rating area or county. However, we may
consider limiting the number of plan options in future plan years, to
further simplify the health plan shopping experience for consumers. We
seek comment as to whether we should limit the number of non-
standardized options an issuer may offer through an FFE in future
years.
We are considering making modifications to our consumer-facing plan
comparison features to readily allow consumers to identify standardized
options, and seek comment on how we should do so. We intend to conduct
consumer testing to help us make this determination. We also anticipate
providing information to explain the standardized option concept to
consumers. We expect to provide information about specific design
features through issuer testing of plan data and other fora. We seek
comment on these proposals, including whether there should be a
requirement on QHP issuers or web-brokers to differentially display
standardized options when a non-FFE Web site is used to facilitate
enrollment in an FFE. Multi-State plan issuers may use the standardized
options noted above. OPM, at its discretion, may design additional
standardized options applicable only to multi-State plan issuers,
though we would not display these OPM options in a differential manner
in order to preserve consistency in the standardized options identified
on the FFE.
2. FFE User Fee for the 2017 Benefit Year (Sec. 156.50)
Section 1311(d)(5)(A) of the Affordable Care Act permits an
Exchange to charge assessments or user fees on participating health
insurance issuers as a means of generating funding to support its
operations. In addition, 31 U.S.C. 9701 permits a Federal agency to
establish a charge for a service provided by the agency. 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. Accordingly, at Sec. 156.50(c),
we specify 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 FFEs 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
years 2014 to 2016, issuers seeking to participate in an FFE in benefit
year 2017 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

[[Page 75545]]

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.
Enrollment processes.
Certification processes for QHPs (including ongoing
compliance verification, recertification and decertification).
Administration of a SHOP Exchange.
OMB Circular No. A-25R further states that user fee 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 2017 user fee
rate for all participating FFE issuers at 3.5 percent. This user fee
rate assessed on FFE issuers is the same as the 2014 to 2016 user fee
rate. In addition, we intend to seek an exception from OMB Circular No.
A-25R, which requires that the user fee charge be sufficient to recover
the full cost to the Federal government of providing the special
benefit. We seek this exception to ensure that the FFE can support many
of the goals of the Affordable Care Act, including improving the health
of the population, reducing health care costs, and providing access to
health coverage, in cases where user fee collections do not cover the
full cost of the special benefit. We seek comments on this proposal.
Additionally, we have proposed under Sec. Sec. 155.106(c) and
155.200(f) to allow State Exchanges to enter into a Federal platform
agreement with HHS so that the State Exchange may rely on the Federal
platform for certain Exchange functions to enhance efficiency and
coordination between State and Federal programs, and to leverage the
systems established by the FFE to perform certain Exchange functions.
We propose in Sec. 156.50(c)(2) to charge SBE-FP issuers a user fee
for the services and benefits to the issuers provided by HHS. For 2017,
these functions will include the Federal Exchange information
technology and call center infrastructure used in connection with
eligibility determinations for enrollment in QHPs and other applicable
State health subsidy programs, as defined at section 1413(e) of the
Affordable Care Act and enrollment in QHPs under Sec. 155.400. As
previously discussed, 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. If our
proposals under Sec. Sec. 155.106(c) and 155.200(f) are finalized,
issuers seeking to participate in an SBE-FP in benefit year 2017 will
receive special benefits not available to the general public: The
ability to sell health insurance coverage through a State Exchange that
realizes efficiencies by relying on the Federal platform to enroll
individuals determined eligible for enrollment in a QHP, including
individuals who may be eligible for insurance affordability programs
that may support premiums paid to issuers offering plans through the
State Exchange by way of the Federal platform (HealthCare.gov), and the
ability to sell health insurance coverage to small employers eligible
to purchase QHPs for its employees through a SHOP exchange. Other
services that will be provided to issuers offering plans through State
Exchanges on the Federal platform include the Federal Exchange
information technology and call center infrastructure used in
connection with eligibility determinations for enrollment in QHPs and
other applicable State health subsidy programs. We propose to charge
issuers offering QHPs through an SBE-FP a user fee rate of 3.0 percent
of the monthly premium charged by the issuer for each policy under a
plan offered through an SBE-FP. This fee will recover funding to
support FFE operations incurred by the Federal government associated
with providing the services described above.
The proposed user fee rate was calculated based on the proportion
of FFE costs that are associated with the FFE information technology
infrastructure, the consumer call center, and eligibility and
enrollment services, and allocating a share of those costs to issuers
in the relevant SBE-FPs. A significant portion of expenditures for FFE
services are associated with the information technology, call center
infrastructure, and personnel who conduct eligibility determinations
for enrollment in QHPs and other applicable State health subsidy
programs as defined at section 1413(e) of the Affordable Care Act, and
who perform the functions set forth in Sec. 155.400 to facilitate
enrollment in QHPs. We intend to review the costs incurred to provide
these special benefits each year, and revise the user fee rate for
issuers in SBE-FPs accordingly in the annual HHS notice of benefit and
payment parameters. Additional guidance on user fee collection
processes will be provided in the future.
While a user fee rate of 3.0 percent is reflective of HHS's actual
costs, we recognize that States that are currently using the Federal
platform may find the abrupt change of the proposed user fee in 2017
challenging for their health insurance markets. Therefore, HHS is also
considering reducing for the 2017 benefit year the user fee rate by one
half or one third (that is, to 1.5 or 2.0 percent) for the issuers in
State Exchanges utilizing the Federal platform, to provide these States
additional time to integrate this user fee rate. In future years,
issuers in SBE-FPs would be charged the full user fee rate for SBE-FPs
to cover their full share of costs incurred by the FFE for those
services. We seek comment on this proposal and this possible reduction.
Additionally, to ease administrative burdens on issuers and States,
at the request of SBE-FPs, pursuant to the authority under the
Intergovernmental Cooperation Act of 1968 (IGCA), HHS will seek to
offer States the option to have HHS collect an additional user fee from
issuers at a rate specified by the State to cover costs incurred by the
State-based Exchange for the functions the State retains. If HHS grants
requests to provide such services, States may be required to reimburse
HHS any additional costs that are associated with HHS's provision of
such service. This coordination between the State and Federal programs
will reduce administrative burden on issuers as well as the SBEs-FP.
3. Single Risk Pool (Sec. 156.80)
In the small group market, an issuer may update rates on a
quarterly basis, provided that any changes to rates have effective
dates of January 1, April 1, July 1, or October 1. In the preamble to
the second Program Integrity Rule (78 FR 65067), we explained that any
new rates set by an issuer would apply for new or renewing coverage on
or after the rate effective date, and would apply for the entire the
plan year. We propose to codify this policy in Sec. 156.80(d)(3)(ii),
and to make non-substantive changes to the wording of that paragraph,
including to delete an outdated reference to when quarterly rate
changes could first be implemented.
For all issuers, we also reiterate that Sec. 156.80(d)(2) permits
a health insurance issuer to vary the plan-adjusted index rate for a
particular plan from its market-wide index rate adjusting only for the
explicitly stated factors. Any plan level adjustment not

[[Page 75546]]

specifically stated, including adjusting for morbidity of plan
enrollees, is not permissible.
4. Essential Health Benefits Package
a. Prescription Drug Benefits (Sec. 156.122)
Current Sec. 156.122(c) requires plans providing EHB to have
procedures in place that allow an enrollee, the enrollee's designee, or
the enrollee's prescribing physician (or other prescriber) to request
and gain access to clinically appropriate drugs not covered by the
plan. Such procedures must include a process to request an expedited
review based on exigent circumstances. Under the expedited process, the
issuer must make its coverage determination no later than 24 hours
after it receives the request. This requirement, commonly referred to
as the ``exceptions process,'' applies to drugs that are not included
on the plan's formulary drug list. For plan years beginning in 2016,
these processes must also include certain processes and timeframes for
the standard review process, and have an external review process if the
internal review request is denied. The costs of the non-formulary drug
provided through the exceptions process count towards the annual
limitation on cost sharing and AV of the plan.
As discussed in the 2016 Payment Notice (80 FR 10750), the
exceptions process established in this section is distinct from the
coverage appeals process established under Sec. 147.136. Specifically,
the drug exceptions process applies to drugs that are not included on
the plan's formulary drug list, while the coverage appeals regulations
apply if an enrollee receives an adverse benefit determination for a
drug that is included on the plan's formulary drug list. Because these
two processes serve different purposes, we believe they are not
duplicative and we do not propose to change these definitions. However,
we also clarified in the 2016 Payment Notice that ``nothing under this
policy (Sec. 156.122(c)) precludes a State from requiring stricter
standards in this area.''
Since finalizing the rule, we have received additional comment
regarding States' coverage appeals laws and regulations and non-
formulary drugs. For example, if a State is subjecting non-formulary
drugs to the standards under Sec. 147.136 as opposed to Sec.
156.122(c), the State's coverage appeals laws or regulations would
provide the enrollee with a different process for review, and as a
result a different process for obtaining coverage of the non-formulary
drug. Specifically, Sec. 147.136 has separate requirements for its
external review process. Also, Sec. 147.136(b)(ii)(G) allows for a
secondary level of internal review before the final internal review
determination for group plans. Therefore, if the State is subjecting
non-formulary drugs to Sec. 147.136 and the issuers are also required
to comply Sec. 156.122(c), the issuer may have to satisfy two
standards for non-formulary drugs.
We are considering amending the rule to establish that a plan, in a
State that has coverage appeals laws or regulations that are more
stringent than or are in conflict with our exceptions process under
Sec. 156.122(c), and that include reviews for non-formulary drugs,
satisfies Sec. 156.122(c) if it complies with the State's coverage
appeals laws or regulations. The purpose of Sec. 156.122(c) is to
ensure that an enrollee has the ability to request and gain access to
clinically appropriate drugs not covered by the plan. Regardless of
whether a State's coverage appeals laws or regulations are satisfying
Sec. 156.122(c) or if the issuer is meeting Sec. 156.122(c) through
its exception process, we would expect that an enrollee would retain
the ability to request and gain access to clinically appropriate drugs
not covered by the plan. Therefore, we solicit comments on the scope of
application of State appeals laws or regulations that are allowing
determinations for non-formulary drugs for this purpose, especially
under medical necessity provisions and whether these provisions would
allow the enrollee the ability to request and gain access to clinically
appropriate drugs not covered by the plan in all cases through a
State's coverage appeals laws or regulations. As the State is the
primary enforcer of the EHB requirements, the State would determine
whether its coverage appeals laws or regulations would satisfy Sec.
156.122(c) and therefore, would allow the issuers in the State to defer
to the States' coverage laws or regulations. We note that we consider
multi-State plans that comply with OPM's coverage appeals requirements
to satisfy Sec. 156.122(c), and we are considering codifying this
interpretation.
We are also considering amending the process at Sec. 156.122(c) to
allow for a second level of internal review. For example, we are
considering using the same timelines as the first level of internal
review, 72 hours for the standard review request and 24 hours for the
expedited review request. We seek comments on all of these proposals.
Lastly, opioid abuse has become a public health crisis in recent
years. In 2013, nearly 2 million Americans abused prescription
painkillers, and each day, nearly 7,000 people receive emergency
department care for misusing these drugs. We recognize that medication-
assisted treatments for substance use disorders might not be available
to all consumers as an essential health benefit. Therefore, we seek
comment on whether the substance use disorder requirement in essential
health benefits needs additional clarification with regard to
medication-assisted treatment for opioid addiction.
b. Premium Adjustment Percentage (Sec. 156.130)
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 three parameters detailed in the
Affordable Care Act: The maximum annual limitation on cost sharing
(defined at Sec. 156.130(a)), the required contribution percentage by
individuals for minimum essential coverage the Secretary may use to
determine eligibility for hardship exemptions under section 5000A of
the Code, and the assessable payment amounts under section 4980H(a) and
(b) of the Code. 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.
Under the methodology established in the 2015 Payment Notice and
amended in the 2015 Market Standards Rule for estimating average per
capita premium for purposes of calculating the premium adjustment
percentage, the premium adjustment percentage is calculated based on
the projections of average per enrollee employer-sponsored insurance
premiums from the NHEA, which is calculated by the Office of the
Actuary. Accordingly, using the employer-sponsored insurance data, the
premium adjustment percentage for 2017 is the percentage (if any) by
which the most recent NHEA projection of per enrollee employer-
sponsored insurance premiums for 2016 ($6,076) exceeds the most recent
NHEA projection of per enrollee employer-sponsored insurance premiums
for 2013 ($5,365).\34\ Using

[[Page 75547]]

this formula, the proposed premium adjustment percentage for 2017 is
13.25256291 percent. We note that the 2013 premium used for this
calculation has been updated to reflect the latest NHEA data. Based on
the proposed 2017 premium adjustment percentage, we propose the
following cost-sharing parameters for calendar year 2017.
---------------------------------------------------------------------------

\34\ See https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology2012.pdf
and Table 17 (located in the NHE Projections 2014-2024--Tables link)
found here https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html in https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf for additional
information.
---------------------------------------------------------------------------

Maximum Annual Limitation on Cost Sharing for Calendar Year 2017.
Under Sec. 156.130(a)(2), for the 2017 calendar year, cost sharing for
self-only coverage may not exceed the dollar limit for calendar year
2014 increased by an amount equal to the product of that amount and the
premium adjustment percentage for 2017, 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 down to the next
lowest multiple of 50. Using the premium adjustment percentage of
13.25256291 percent for 2017 we established above, 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,\35\ we propose that the
2017 maximum annual limitation on cost sharing would be $7,150 for
self-only coverage and $14,300 for other than self-only coverage.
---------------------------------------------------------------------------

\35\ See https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

c. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
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
established 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 Affordable Care
Act 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 section 1402(c)(1)(B)(i) of the
Affordable Care Act (that is, 73 percent, 87 percent, or 94 percent,
depending on the income of the enrollee). Accordingly, we propose to
use a method we established in the 2014 Payment Notice for determining
the appropriate reductions in the maximum annual limitation on cost
sharing for cost-sharing plan variations. As we proposed above, the
2017 maximum annual limitation on cost sharing would be $7,150 for
self-only coverage and $14,300 for other than self-only group coverage.
We analyzed the effect on AV of the reductions in the maximum annual
limitation on cost sharing described in the statute to determine
whether to adjust the reductions so that the AV of a silver plan
variation will not exceed the AV specified in the statute. Below, we
describe our analysis for the 2017 benefit year and our proposed
results.
Consistent with our analysis in the 2014, 2015, and 2016 Payment
Notices, we developed three test silver level QHPs, and analyzed the
impact on AV of the reductions described in the Affordable Care Act to
the estimated 2017 maximum annual limitation on cost sharing for self-
only coverage ($7,150). The test plan designs are based on data
collected for 2016 plan year QHP certification to ensure that they
represent a range of plan designs that we expect issuers to offer at
the silver level of coverage through the Exchanges. For 2017, the test
silver level QHPs included a PPO with typical cost-sharing structure
($7,150 annual limitation on cost sharing, $2,175 deductible, and 20
percent in-network coinsurance rate), a PPO with a lower annual
limitation on cost sharing ($4,800 annual limitation on cost sharing,
$2,775 deductible, and 20 percent in-network coinsurance rate), and an
HMO ($7,150 annual limitation on cost sharing, $3,000 deductible, 20
percent in-network coinsurance rate, and the following services with
copayments 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 test
QHPs meet the AV requirements for silver level health plans.
We then entered these test plans into the proposed 2017 AV
Calculator developed by HHS and observed how 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 test 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
2017 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 approximately \2/3\, as specified in the statute, and
as shown in Table 10. These proposed reductions in the maximum annual
limitation on cost sharing should adequately account for unique plan
designs that may not be captured by our three model QHPs. We also note
that 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 2017.
We note that for 2017, as described in Sec. 156.135(d), States are
permitted to

[[Page 75548]]

submit for approval by HHS State-specific data sets for use as the
standard population to calculate AV. No State submitted a data set by
the September 1 deadline.

Table 10--Reductions in Maximum Annual Limitation on Cost Sharing for
2017
------------------------------------------------------------------------
Reduced maximum
Reduced maximum annual
annual limitation on
Eligibility category limitation on cost sharing for
cost sharing for other than self-
self-only only coverage for
coverage for 2017 2017
------------------------------------------------------------------------
Individuals eligible for cost- $2,350 $4,700
sharing reductions under Sec.
155.305(g)(2)(i) (that is, 100-
150 percent of FPL)..............
Individuals eligible for cost- 2,350 4,700
sharing reductions under Sec.
155.305(g)(2)(ii) (that is, 150-
200 percent of FPL)..............
Individuals eligible for cost- 5,700 11,400
sharing reductions under Sec.
155.305(g)(2)(iii) (that is, 200-
250 percent of FPL)..............
------------------------------------------------------------------------

d. AV Calculation for Determining Level of Coverage (Sec. 156.135)
Section 2707(a) of the PHS Act and section 1302 of the Affordable
Care Act direct issuers of non-grandfathered health insurance 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 (78 FR 12833) implementing section
1302(d) of the Affordable Care Act that required 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 generally to be calculated using the
AV Calculator developed and made available by HHS for a given benefit
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.
156.135(g) provisions for updating the AV Calculator in future plan
years and provided an overview of how we would consider each of these
updates and our approach towards making these updates.
As discussed in the 2015 Payment Notice, we recognize the
importance of balancing the interests of ensuring that the AV
Calculator accurately reflects the current market and that changes to
the AV Calculator minimize disruption to current plan designs through
keeping AVs stable. In considering updates to the AV Calculator under
the factors established under Sec. 156.135(g), we found the need for
greater flexibility than provided for under current regulations to
better ensure updates to the AV Calculator achieve these objectives.
For example, in the preamble of the 2015 Payment Notice, we
established our methodology for developing the trend factor. We stated
that ``when updating the trending factor in the AV Calculator, we will
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.'' \36\ However, in
considering options for updating the trend factor annually under this
policy, we found that this policy unduly limits our options. For
instance, costs for specific services, such as specialty drugs, are
currently increasing at a significantly different rate than other
medical services. Trending costs based on each service type could
capture those different rates of cost growth more accurately and better
ensure that the trend adjustments in the AV Calculator reflect the
actual market.
---------------------------------------------------------------------------

\36\ 79 FR 13811. Col 1. [March 11, 2014].
---------------------------------------------------------------------------

We propose to revise Sec. 156.135(g) to allow for additional
flexibility in our approach and options for updating of the AV
Calculator in the future. We propose that HHS will update the AV
Calculator annually for material changes that may include costs, plan
designs, the standard population, developments in the function and
operation of the AV Calculator and other actuarially relevant factors.
Specifically, we would not be required to make each of these changes
each year, but we could include these types of material changes in our
annual updating of the AV Calculator. Under this proposed policy, we
will continue to make updates to the AV Calculator, as we have in
previous years, including updates to the trend factor, algorithms
changes and user interface changes. We will also update the claim data
and demographic distribution being used in the AV Calculator as needed
and continue to update the AV Calculator's annual limitation on cost
sharing based on a projected estimate to allow for compliance with
Sec. 156.130(a). The major difference under the proposed Sec.
156.135(g) will be that the methodology, data sources, and trigger for
making updates in the AV Calculator would be more flexible than the
current Sec. 156.135(g). For instance, we propose that specific
timelines and materiality thresholds for updating the continuance
tables to reflect more current enrollment and claims data will no
longer be specified by the regulation. This will allow us more options
in considering approaches to making changes in the AV Calculator,
particularly as the health insurance market and the AV Calculator
evolve, new methodological approaches are developed, and new data
becomes available. In developing the annual updates to the AV
Calculator, we will continue to take into consideration stakeholder
feedback on needed changes to the AV Calculator (through
actuarialvalue@cms.hhs.gov) and to publicly release a draft version of
the AV Calculator and the AV Calculator Methodology for comment before
releasing the final AV Calculator. We also understand the importance
for issuers and States to have time to use the final version of the AV
Calculator to develop and adjust plan designs and we hope that by
providing the additional flexibility under proposed Sec. 156.135(g),
we will have more options that could allow us to release the AV
Calculator sooner. We solicit comments on the proposed Sec.
156.135(g).
e. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.
156.150)
In Sec. 156.150, we propose revisions to increase the annual
limitation on cost sharing for SADPs. In the 2015 Payment Notice, we
established that the annual limitation on cost sharing for an SADP
covering the pediatric dental EHB under

[[Page 75549]]

Sec. 155.1065 in any Exchange may not exceed $350 for one covered
child and $700 for two or more covered children.
To make adjustments to the annual limitation on cost sharing in
subsequent years to keep pace with inflation, we propose in paragraph
(a)(1) that for a plan year beginning after 2016, the dollar limit
applicable to a SADP for one covered child be increased by an amount
equal to the product of that amount and the quotient of consumer price
index for dental services for the year 2 years prior to the benefit
year, divided by the consumer price index for dental services for 2016.
In paragraph (a)(2), we propose that the dollar limit for two or more
covered children be twice the dollar limit for one child described in
paragraph (a)(1) of this section.
We considered using the premium adjustment percentage defined in
Sec. 156.130(e), but ultimately decided that the dental CPI would be a
more appropriate adjuster for the annual limitation on cost sharing as
it is based on dental services. The annual limitation on cost sharing
should increase over time to keep pace with inflation and moderate
potential increases in premium. This is similar to the approach for
medical QHPs. We seek comment on whether the premium adjustment
percentage defined in Sec. 156.130(e) should be used instead. We would
propose and finalize the annual increase to the dental annual
limitation on cost sharing in the annual Payment Notice.
In paragraph (c), we propose to define the dental CPI, which is a
sub-component of the U.S. Department of Labor's Bureau of Labor
Statistics Consumer Price Index specific to dental services. We would
use the annual dental CPI published by the Department of Labor.
In paragraph (d), we propose that increases in the annual dollar
limits for one child that do not result in a multiple of $25 will be
rounded down, to the next lowest multiple of $25. We believe this
provision will result in stability in SADPs, making changes in annual
limits that are based on round figures in moderate increments.
We seek comment on these proposals.
5. Qualified Health Plan Minimum Certification Standards
a. Network Adequacy Standards (Sec. 156.230)
At Sec. 156.230, we established the minimum criteria for network
adequacy that health and dental plan issuers must meet to be certified
as QHPs, including SADPs, in accordance with the Secretary's authority
in section 1311(c)(1)(B) of the Affordable Care Act. Section
156.230(a)(2) requires all issuers to maintain a network that is
sufficient in number and types of providers to assure that all services
will be accessible without unreasonable delay. Section 156.230(b) sets
forth standards for access to provider directories requiring issuers to
publish an up-to-date, accurate, and complete provider directory for
plan years beginning on or after January 1, 2016 and Sec. 156.230(c)
requires QHPs in the FFE to make this provider directory data available
on its Web site in an HHS specified format and also submit this
information to HHS in a format and manner and at times determined by
HHS.
i. State Selection of Minimum Network Adequacy Standards
The National Association of Insurance Commissioners' (NAIC's)
Network Adequacy Model Review Subgroup has been doing significant work
in the area of network adequacy, which includes work towards
development of a Network Adequacy Model Act that States could adopt in
whole or in part. We will continue to monitor the NAIC work and look
forward to partnering with States and the NAIC in developing and
promulgating network adequacy protections. In the interest of
furthering this work, we are proposing standards related to network
adequacy below, but will take into consideration the NAIC's final
recommendation as we assess these policies.
In recognition of the traditional roles States have in developing
and enforcing network adequacy standards, we propose that FFEs would
rely on State reviews for network adequacy in States in which an FFE is
operating, provided that HHS determines that the State uses an
acceptable quantifiable network adequacy metric commonly used in the
health insurance industry to measure network adequacy, approved by HHS.
We anticipate that HHS would determine that a State's network
adequacy assessment methodology meets the standard above if the State
selects one or more standards from a list of metrics provided by HHS
and applies them prospectively to the QHP issuers in the State. HHS
intends to detail the specific criteria and process for meeting the
standard in each annual Letter to Issuers, but we anticipate including
at least the following metrics:
Prospective time and distance standards at least as
stringent as the FFE standard.
Prospective minimum provider-covered person ratios for the
specialties with the highest utilization rate for its State.
HHS would discuss with States their selection in advance of the
start of the certification cycle to determine whether the State's
network adequacy standard would be acceptable under the standard above.
We would thereafter notify issuers via subregulatory guidance whether
the State standards or Federal default standards apply.
If HHS determines that a State's nework adequacy standard is
acceptable under the standard above, the State would certify to the FFE
which plans meet the network adequacy standard, and the FFE in that
State would rely on the State's review for purposes of determining
whether a QHP meets the requirements under Sec. 156.230(a)(2),
although those issuers would still be required to submit to HHS
provider data, attest to the HHS network adequacy certification
requirements, and meet other applicable HHS standards, including the
other standards under Sec. 156.230.
We welcome comments on this proposal, including suggestions for
additional State network adequacy methodologies that the FFEs could
rely on, and other factors we might consider.
In States that do not review for network adequacy, or do not select
a standard as described above, the FFE would conduct an independent
review under a Federal default standard. We propose the Federal default
standard at Sec. 156.230(d) to be a time and distance standard. For
the certification cycle for plan years beginning in 2017, we anticipate
evaluating the QHP issuer networks under this standard based on the
numbers and types of providers, in addition to their general geographic
location. In particular, we propose to calculate a time and distance
standard at the county level. We are considering using standards
similar to those used in Medicare Advantage, utilizing the National
Provider Identifier database, and focusing on the specialties that
enrollees most generally use. HHS is also carefully considering other
network standards, including those of individual States, accrediting
entities, and Federal health care programs, as it develops the time and
distance standards for the FFEs. We solicit comments on whether these
proposed standards are appropriate. We also seek comment specifically
on whether they are appropriate for SADPs, and, if not, what standards
for SADPs would be more appropriate, and the basis for any deviation.
The county-specific time and distance parameters that plans will be
required to meet, including specifications for

[[Page 75550]]

specific provider and facility types, would be detailed annually in
conjunction with the Letter to Issuers.
We also propose that issuers that are unable to meet the specified
standards would be able to submit a justification to account for any
variances, and that the FFE would review the justification to determine
whether the variance is reasonable based on circumstances, such as the
availability of providers and variables reflected in local patterns of
care.
It is not our intent in establishing these default standards to
prohibit certification of plans with narrow networks or otherwise
impede innovation in plan design. Instead, we intend to establish a
minimum floor consistent with the levels generally maintained in the
market today, so that generally a very small number of plans would be
idenfitied as having networks deemed inadequate. The Federal default
standard would provide issuers with more transparency regarding our
certification processes and will be designed and implemented to achieve
results similar to those yielded by the reviews conducted by the FFEs
in prior certification cycles. We believe this will promote
predictability for issuers in the course of certification. We note that
multi-State plan options will be considered to meet the network
adequacy requirements under Sec. 156.230(a)(2) if they meet network
adequacy standards established by OPM.
We seek comments on this proposal, including how we might develop
time and distance standards appropriate for the FFEs, the use of
Medicare Advantage or other standards and other factors we should
examine in measuring network adequacy, and suggestions of other models
we might consider.
ii. Additional Network Adequacy Standards
We also propose other additional network-related standards under
Sec. 156.230(e) and (f).
In the new Sec. 156.230(e)(1), we propose to require QHP issuers
in all FFEs to notify enrollees about a discontinuation in their
network coverage of a contracted provider. We believe that it is
important for enrollees to be notified of changes to the network on a
timely basis. Consumers need accurate information about which providers
are in-network to ensure that they can optimize their health insurance
coverage and make cost effective choices. Therefore, we propose that a
QHP in an FFE be required to make a good faith effort to provide
written notice of a discontinued provider, 30 days prior to the
effective date of the change or otherwise as soon as practicable, to
all enrollees who are patients seen on a regular basis by the provider
or receive primary care from the provider whose contract is being
discontinued, irrespective of whether the contract is being
discontinued due to a termination for cause or without cause, or due to
a non-renewal. We propose that a discontinued provider includes cases
of where the provider is being removed and where the provider is
leaving the network. We solicit comments on this proposed provision,
including the timeframe for notification and whether separate timeframe
requirements are needed for primary care providers versus other types
of providers that a patient sees on a regular basis. We also solicit
comments on an appropriate definition of ``regular basis,'' or whether
the implementation of that phrase should be left to the good faith
interpretation of the issuer. For instance, we considered whether we
should define regular basis if the enrollee has seen the provider
within the last 3 months, 6 months or 12 months. To satisfy this
requirement, we expect the issuer to try to work with the provider to
obtain the list of affected patients or to use their claims data system
to identify enrollees who see the affected providers. As part of the
notice, we encourage issuers to notify the enrollee of other comparable
in-network providers in the enrollee's service area, provide
information on how an enrollee could access the plan's continuity of
care coverage, and encourage the enrollee to contact the plan with any
questions.
In developing the proposed notification standard under Sec.
156.230(e)(1), we considered Medicaid Managed Care and Medicare
Advantage's notification requirements and considered the work by the
NAIC's Network Adequacy Model Review Subgroup. For instance, Medicare
Advantage's notification requirements are similar to the proposed Sec.
156.230(e)(1), and require that the Medicare Advantage organization
make a good faith effort to provide written notice of a termination of
a contracted provider at least 30 calendar days before the termination
effective date to all enrollees who are patients seen on a regular
basis by the provider whose contract is terminating, irrespective of
whether the termination was for cause or without cause. Medicare
Advantage also requires that when a contract termination involves a
primary care professional, all enrollees who are patients of that
primary care professional must be notified.\37\ Medicaid Managed Care,
on the other hand, requires the Managed Care Organization, the Prepaid
Inpatient Health Plan, and, when appropriate, the Prepaid Ambulatory
Health Plan or Primary Care Case Manager, to make a good faith effort
to give written notice of termination of a contracted provider, within
15 days after receipt or issuance of the termination notice, to each
enrollee who received his or her primary care from, or was seen on a
regular basis by the terminated provider.\38\ We seek comments on other
standards for notifying enrollees about their network coverage in cases
of discontinuation, including States' standards and whether exceptions
should be allowed for States' that already require notification to
enrollees when a provider leaves the network.
---------------------------------------------------------------------------

\37\ 42 CFR 422.111(e).
\38\ 42 CFR 438.10(f)(5).
---------------------------------------------------------------------------

We are also proposing in Sec. 156.230(e)(2) a provision for QHP
issuers in all FFEs to ensure continuity of care for enrollees in cases
where a provider is terminated without cause. Specifically, we propose
to require the issuer, in cases where the provider is terminated
without cause, to allow an enrollee in active treatment to continue
treatment until the treatment is complete or for 90 days, whichever is
shorter, at in-network cost-sharing rates. Additionally, in proposed
paragraph (e)(2), we propose a definition of active treatment as
meaning: (1) An ongoing course of treatment for a life-threatening
condition; (2) an ongoing course of treatment for a serious acute
condition; (3) the second or third trimester of pregnancy; or (4) an
ongoing course of treatment for a health condition for which a treating
physician or health care provider attests that discontinuing care by
that physician or health care provider would worsen the condition or
interfere with anticipated outcomes. Under the proposed definition of
active treatment, an ongoing course of treatment would include
treatments for mental health and substance use disorders that fall
within the proposed definition. For the purposes of the active
treatment definition, we propose to interpret a life-threatening
condition as a disease or condition for which likelihood of death is
probable unless the course of the disease or condition is interrupted;
and a serious acute condition as a disease or condition requiring
complex on-going care which the covered person is currently receiving,
such as chemotherapy, post-operative visits, or radiation therapy.
Finally, under paragraph (e)(2)(ii), we

[[Page 75551]]

propose that any decisions made for a request for continuity of care be
subject to the health benefit plan's internal and external grievance
and appeal processes in accordance with applicable State or Federal law
or regulations. We solicit comments on this proposed section of the
regulation, including the definitions of ``active treatment,'' ``life-
threatening condition,'' and ``serious acute condition'' and whether
exceptions should be allowed for States' standards that already require
coverage of continuity of care for enrollees. We also solicit comments
about whether enrollees in their second or third trimester of pregnancy
should be allowed to extend obstetric care through the postpartum
period, which could require the continuity of care standard to extend
beyond 90 days. If these enrollees were allowed to extend obstetric
care through the postpartum period, we solicit comment on the
definition of the postpartum period, such as for 6 weeks after birth,
and whether the allowance of care through the postpartum period should
apply for broader types of care than for obstetric care. We also
solicit comments on proposed Sec. 156.230(e)(1) and (2) on the
distinction between a termination with or without cause versus when a
provider leaves the network because the provider's contract is non-
renewed. Specifically, we solicit comments on whether Sec.
156.230(e)(2) should incorporate cases where the provider's contract is
non-renewed or whether we should consider a non-renewal of the
provider's contract as a termination without cause under Sec.
156.230(e)(1) and (2). Lastly, we seek comments about what other
possible provisions may be needed to protect an enrollee when a
provider contract is terminated and can be implemented with limited
burden on issuers.
In general, our network adequacy rules for QHPs require that a
network plan maintain a network sufficient to assure that all services
will be accessible without unreasonable delay. However, there may be
occasions when an enrollee obtains an EHB outside the QHP's network
because the enrollee unknowingly receives out-of-network care. An
enrollee may have made reasonable efforts to stay within the QHP's
network when obtaining an EHB service, but then unknowingly received
care from an out-of-network provider in an in-network setting (for
example, an anesthesiologist or pathologist). To address these
circumstances, we propose to add a new Sec. 156.230(f).
In that paragraph, we propose to require, notwithstanding Sec.
156.130(c) of the subpart, for a network to be deemed adequate, each
QHP that uses a provider network must count cost sharing paid by an
enrollee for an EHB provided by an out-of-network provider in an in-
network setting under certain circumstances towards the enrollee's
annual limitation on cost sharing. That is, if an enrollee received an
EHB in an in-network setting, such as an in-network hospital, but as
part of the provision of the EHB the enrollee was charged out-of-
network cost-sharing for an EHB provided by an out-of-network provider
(such as anesthesiology or pathology services, for example), that cost-
sharing would apply towards the annual limitation on cost-sharing. The
enrollee could still be responsible for out-of-network cost sharing,
and balance billing, for other benefits received from an out-of-network
provider at any time, but not for cost sharing for a covered EHB
provided in-network or out-of-network in a circumstance described in
this paragraph after the annual limitation is met.
Alternatively, the plan could provide a written notice to the
enrollee at least 10 business days before the provision of the benefit
that additional costs may be incurred for EHB provided by an out-of-
network provider in an in-network setting, including balance billing
charges, unless such costs are prohibited under State law, and that any
additional charges may not count toward the in-network annual
limitation on cost sharing. Such notice could be provided during
preauthorization. If the plan provides such notice, this rule would not
require the plan to apply the out-of-network cost sharing towards the
enrollee's annual limit on cost sharing or to be responsible for
covering out-of-network cost sharing above the annual limit. This
alternative would not be available if fewer than 10 business days'
notice is provided, including in cases where that amount of time is not
available (for example, in urgent but non-emergency care situations).
We believe that this proposal balances financial protection for
consumers against surprise out-of-network cost sharing, while
maintaining the larger part of the QHP's cost-sharing structure. The 10
business days' advance notice provision is intended to allow the
enrollee to arrange for an in-network provider to provide the EHB; we
solicit comments on whether this time frame should be shorter or
longer. We would expect the issuer would provide this notification to
the enrollee at the time it notifies the provider with any pre-
authorization documents. The issuer would also be permitted to send a
``form'' document--that is, one that is not customized to the
particular situation at issue--but it could not rely on a blanket
notification through its Web site or provided at enrollment, for
example. We seek comment on this proposal and if we should instead
require the issuer to provide customized information to the consumer
including information on potential in-network providers.
We acknowledge that some States and issuers may offer consumers in
these scenarios protections which go beyond what we are proposing here
for QHPs. Several States have enacted laws that similarly provide
consumers financial protection from the high out-of-pocket expenditures
associated with receiving out-of-network care. States, relying on their
authority to regulate both providers and issuers, generally impose
requirements on both, whereas our proposal focuses on QHP issuers.
States have generally included in their laws mechanisms to address the
level of reimbursement an issuer must pay an out-of-network provider.
For example, States have required payment of all charges, set the rate
at a percentage of a fee schedule, and set forth a process through
which providers and issuers must resolve disputes about charges. Some
States have also prohibited balance billing consumers for certain out-
of-network services, ranging from only emergency services to any
covered service. This proposal is not intended to preempt any State
laws that would be more consumer protective. We note that this proposal
would apply to QHPs in all Exchanges. We seek comment on these
proposals.
We are also soliciting comments regarding other network adequacy
standards that may be appropriate to apply to QHPs in an FFE in future
years, including standards included in the work being done by the
NAIC's Network Adequacy Model Review Subgroup. One policy we are
considering is whether a QHP in an FFE should have a network resilience
policy for disaster preparedness. Network resilience refers to the
provider network's capacity to withstand and recover from natural or
man-made disasters that may threaten enrollees' continuous access to
quality care. Disasters may negatively impact an issuer's network and
can result in delay in services. Therefore, issuers who have a network
resilience policy will be better prepared to ensure that their network
can provide reasonable access under adverse circumstances. Some
examples of appropriate network resilience policies might include
business continuity planning, consideration of temporary policy changes
in the event of a disaster, and/or disclosure or communication plans.

[[Page 75552]]

We solicit comments on this possible future policy and the examples
provided, including thoughts on what type of policy would be reasonable
and operationally feasible.
In addition, certain States measure network adequacy based on
enrollee wait times for scheduled appointments. As a result, we are
interested in comments on the variation in wait times depending on the
type of provider, such as for primary care or non-primary care
services. Additionally, we also solicit comments as to whether we
should add a wait time standard as an option under the proposed
permissible State standards mentioned in this preamble, or if we should
apply a broad wait time standard across QHPs in the FFEs.
We are also soliciting comments on whether an issuer should be
required to survey all of its contracted providers on a regular basis
to determine if a sufficient number of network providers are accepting
new patients. Additionally, we solicit comments on transparency of
issuers' standards for selecting and tiering of participating providers
for QHPs in an FFE and whether issuers should be required to make
available their selecting and tiering criteria for review and approval
by HHS and the State upon request. We are proposing Sec. 156.230(e) as
a requirement for QHPs in the FFEs and Sec. 156.230(f) as a
requirement for QHPs in all Exchanges. However, we solicit comments on
whether these provisions should apply to all QHPs or only QHPs in the
FFEs. We also solicit comments on applying Sec. 156.230(e) and (f) to
SADPs and whether other standards should be provided for these
provisions for stand-alone dental plans. We note that Sec. 156.230(f)
applies to cost sharing incurred in connection with EHB, and, of dental
benefits, only pediatric dental is EHB.
In addition to the policies above, we are also considering
providing on HealthCare.gov a rating of each QHP's relative network
coverage. This rating or classification could be made available to a
consumer when making a plan selection. We believe that such a rating
would help an enrollee select the plan that best meets his or her
needs, and we anticipate that this analysis would compare the breadth
of the QHP network at the plan level as compared to the breadth of the
other plan networks for plans available in the same geographic area.
We anticipate analyzing the QHP network by calculating the number
of specific providers that are accessible within specified time and
distance standards. We would then classify the QHP networks into three
categories. We are considering performing the calculation based on the
provider information submitted by all QHP issuers in the existing
network adequacy FFE QHP certification template, but comments on
potential additional data collections are welcome.
This network breadth rating would allow an enrollee to better
understand plans' design, and, like other consumer tools, could help
improve plan satisfaction. We anticipate providing additional details
about how we would classify networks in the Letter to Issuers and in
the QHP certification instructions, and solicit comments on what types
of methods should be used to identify each network's breadth, what
specific specialties should be included in the analysis, what sorts of
adjustments should be made to address provider shortages, and other
possible data sources to obtain information about available providers
in the area. We welcome comments on the best way to make this
information available to consumers, and any other comments related to
this topic.
b. Essential Community Providers (Sec. 156.235)
On June 5, 2015, we proposed through a Paperwork Reduction Act
notice a provider petition process to update the ECP list against which
issuer compliance with the ECP standard is measured. We expect that
this data collection for the 2017 benefit year should be completed by
the end of 2015, although HHS will provide additional opportunities for
ECPs to submit provider data to HHS for benefit years beyond 2017. If
the degree of provider participation in this data collection effort
through the ECP petition allows HHS to assemble a more complete listing
of ECPs, we believe the proposals described below would strengthen the
ECP standard.
We propose that, for the 2017 QHP certification cycle, HHS will
continue to credit a health plan seeking certification to be offered
through an FFE with multiple providers at a single location counting as
a single ECP toward both the available ECPs in the plan's service area
and the issuer's satisfaction of the ECP participation standard. For
QHP certification cycles beginning with the 2018 benefit year, we
solicit public comment on crediting issuers for multiple contracted
full-time equivalent (FTE) practitioners at a single location, up to
the number of available FTE practitioners reported to HHS by the ECP
facility through the provider petition process and published on the HHS
ECP list. HHS would apply this credit in the numerator of an issuer's
percentage satisfaction of the general ECP standard described in
paragraphs (a)(1) and (2) of this section. The denominator of an
issuer's percentage satisfaction of the ECP standard would reflect the
number of available FTE practitioners reported to HHS by each ECP
facility that appears on the HHS ECP list located in the issuer's plan
service area. Once we have collected this FTE practitioner data through
the provider petition process, we believe that crediting an issuer for
multiple contracted FTE practitioners at a single location would more
accurately reflect the issuer's ECP participation in its network.
Therefore, we propose for QHP certification cycles beginning with the
2018 benefit year to revise Sec. 156.235(a)(2)(i) to credit an issuer
for multiple contracted FTE practitioners at a single location, up to
the number of available FTE practitioners reported to HHS by the ECP
facility and reflected on the HHS ECP list, toward the issuer's
satisfaction of the ECP participation standard.
In the final 2016 Payment Notice, we stated that we would consider
disaggregating certain ECP categories to ensure better access to a
wider variety of health care services. However, our analysis of the
available ECPs in each of the additional categories considered for
disaggregation (that is, children's hospitals, rural health clinics,
free-standing cancer centers, community mental health centers, and
hemophilia treatment centers) does not support further ECP category
disaggregation at this time. We believe there are too few ECPs within
each of these additional categories appearing on our HHS ECP list to
afford issuers sufficient flexibility in their contracting. We may
revisit this consideration in the future and encourage QHP issuers to
include in their networks these additional providers to best meet the
needs of the populations they serve.
For the same reasons described for our proposal to revise Sec.
156.235(a)(2)(i), we propose in Sec. 156.235(b)(2)(i) that issuers
that qualify for the alternate ECP standard described in Sec.
156.235(a)(5) that seek certification to be offered through an FFE (or
SBE-FP) be credited for multiple contracted FTE practitioners at a
single location toward the issuer's satisfaction of the alternate ECP
standard described in paragraphs (b)(1) and (2) of this section,
beginning with the 2018 benefit year. We propose that for the 2017
benefit year, HHS will continue to credit an issuer that qualifies for
the alternate ECP standard and is seeking certification to be offered
through an FFE with multiple providers at a single location counting as
a single

[[Page 75553]]

ECP toward both the available ECPs in the plan's service area and the
issuer's satisfaction of the ECP participation standard. We seek
comment on these proposals.
c. Enrollment Process for Qualified Individuals (Sec. 156.265)
Under Sec. 156.265(b)(2), if an applicant initiates enrollment
directly with the QHP issuer for enrollment through the Exchange
(direct enrollment through an issuer), the QHP issuer must redirect an
applicant to go directly to the Exchange Web site to complete the
application and receive an eligibility determination. HHS is
considering options under which an applicant could remain on the QHP
issuer's Web site to complete the application and enroll in coverage,
and the QHP issuer's Web site can obtain eligibility information from
the Exchange in order to support the consumer in selecting and
enrolling in a QHP with Exchange financial assistance. The intent is to
have this information exchange occur through an Exchange-approved web
service, as described in Sec. 155.220, enhancing the current direct
enrollment process. This option would provide Exchanges offering direct
enrollment and QHP issuers more operational flexibility to expand
front-end, consumer-facing channels for enrollment through a more
seamless consumer experience.
For a discussion of the options we are considering in the direct
enrollment scenario, see the discussion regarding direct enrollment by
web-brokers in our discussion of changes to Sec. 155.220. We seek
comment on these options, and whether standards should differ for a
web-broker compared to a QHP issuer, and how to maintain privacy and
security.
Accordingly, we propose to revise Sec. 156.265(b)(2)(ii) to ensure
that an applicant who initiates enrollment directly with the QHP issuer
for enrollment through the Exchange receives an eligibility
determination for coverage through the Exchange through the Exchange
Web site or through an Exchange-approved web service via the FFE single
streamline application. This maintains the role of the Exchange in
determining eligibility. We seek comment on this proposal.
d. Termination of Coverage or Enrollment for Qualified Individuals
(Sec. 156.270)
We propose to amend Sec. 156.270(d) to specify that a QHP issuer
must provide a 3-month grace period to an enrollee who, upon failing to
timely pay his or her premiums, is receiving advance payments of the
premium tax credit. Because we believe that changing the length of an
enrollee's grace period during the middle of such a grace period would
be confusing to enrollees and could result in otherwise avoidable
terminations for failure to pay premium, enrollees receiving APTC who
enter a grace period for failing to timely pay premiums and who lose
their eligibility for APTC during the grace period would be able to
complete the remaining portion of the grace period as though the loss
of eligibility for APTC did not occur. The proposed amendment to Sec.
156.270(d) also eliminates language limiting the 3-month grace period
for enrollees who are receiving APTC to only those enrollees who made a
payment during the benefit year. This would permit enrollees renewing
coverage that does not require a binder payment who fail to pay January
premiums in full (or fail to pay within an issuer's premium payment
threshold policy, if applicable) to receive the full grace period of 3
months. This change would align more closely with our interpretation of
the interaction between grace periods, guaranteed availability and
renewability, and the binder payment requirement, that a binder payment
is not necessary when an enrollee enrolls, either actively or
passively, in a plan within the same insurance product, and would
prevent enrollees who re-enroll in the same plan or product from
unfairly losing their right to a grace period because they do not make
a payment for January coverage. Finally, we propose to codify with
regard to the grace period standards our policy described in the
preamble for Sec. 155.400 of this part that if an enrollee receiving
advance payments of the premium tax credit can satisfy the requirement
to pay all outstanding premiums, or if the enrollee satisfies an
issuer's premium payment threshold implemented under Sec. 155.400(g),
if applicable, the QHP issuer must not terminate for non-payment of
premium the enrollee's enrollment through the Exchange. This change to
the rule would reflect the extension of the premium threshold policy to
enrollees who are in a grace period for non-payment of premium.
e. Additional Standards Specific to SHOP (Sec. 156.285)
Sections 155.720(g) and 156.285(c)(5) currently provide that SHOPs
and QHP issuers must reconcile enrollment information on no less than a
monthly basis. We propose to amend Sec. 156.285(c)(5) to specify
additional details about how a QHP issuer offering a QHP through a FF-
SHOP should reconcile enrollment files with the FF-SHOP. Specifically,
the proposed amendments would provide that the issuer must send
enrollment reconciliation files on at least a monthly basis according
to a process and timeline established by the FF-SHOP, and in a file
format specified by the FF-SHOP.
We are also proposing to delete Sec. 156.285(d)(2) consistent with
our interpretation of guaranteed availability and renewability. If a
qualified employer withdraws from a SHOP, the SHOP, not the issuer,
should terminate the group's enrollment through the SHOP, and coverage
might in many circumstances continue outside the SHOP.
f. Meaningful Difference Standard for Qualified Health Plans in the
Federally-Facilitated Exchanges (Sec. 156.298)
At Sec. 156.298, we propose modifications to the meaningful
difference standard for QHPs in the FFEs. We propose to remove the
criterion in paragraph (b)(5) that otherwise identical plans would be
considered meaningfully different on the basis of one QHP being health
savings account eligible. A QHP's health savings account eligibility is
a cost-sharing status that may be assessed by examining the QHP's cost
sharing, which is included at paragraph (b)(1). This criterion is
therefore redundant.
We also propose to delete ``self-only'' and ``non-self-only'' from
paragraph (b)(6). Self-only (that is, individual) plans do not allow
any dependent relationships, while non-self-only (that is, enrollee
group) plans allow at least one dependent relationship type. An
individual can enroll in individual and enrollee group plans. The
allowance of dependents is the only difference between two plans if
they are identified as individual or enrollee group only. We have
determined that these statuses alone are not indicative of meaningful
differences among QHPs. We will maintain the ``child-only'' versus non-
child-only status. We further propose to redesignate paragraph (b)(6)
as paragraph (b)(5) and add the word ``or'' to paragraph (b)(4). We
seek comment on the proposed changes.
g. Other Considerations
We remind issuers that certain other Federal civil rights laws
impose non-discrimination requirements. Issuers that receive Federal
financial assistance, including in connection with offering a QHP on an
Exchange, are subject to Title VI of the Civil Rights Act of 1964, the
Age Discrimination Act of 1975, section 504 of the Rehabilitation Act
of 1973, and section 1557 of the Affordable

[[Page 75554]]

Care Act. The Office for Civil Rights (OCR), which enforces these
statutes, published a notice of proposed rulemaking on September 9,
2015 (80 FR 54172) on the requirements of section 1557. Issuers that
intend to seek certification of one or more QHPs are directed to that
proposed rule and to https://www.hhs.gov/ocr/civilrights for additional
information.
We also seek to foster market-driven programs that can improve the
management of costs and care. We note that innovative issuer, provider,
and local programs or strategies may be successful in promoting and
managing care, potentially resulting in better health outcomes and
lower rates while creating important differentiation opportunities for
market participants. We seek comment on ways in which we can facilitate
such innovation, and in particular on whether there are regulations or
policies in place that we should modify in order to foster this
innovation.
6. Standards for Qualified Health Plan Issuers on Federally-Facilitated
Exchanges and State-Based Exchanges on the Federal Platform
To make it operationally feasible for a State-based Exchange to
rely on the Federal platform for eligibility and enrollment functions,
issuers and plans offered on the SBE-FP must comply with rules, as
interpreted and implemented in policy and guidance related to the
Federal eligibility and enrollment infrastructure. These would be the
same requirements related to eligibility and enrollment that are
applicable to QHP issuers and plans on FFEs. For example, SBE-FP
special enrollment periods must be administered within the guidelines
of the FFE special enrollment periods, as it is not possible at this
time for the FFE to accommodate State customization in policy or
operations, such as State-specific SEPs, application questions, display
elements in plan compare, or data analysis. Additionally, if the FFE is
to perform eligibility and enrollment functions, the FFE would also
need to provide for certain consumer tools (plan compare, premium
estimator, second-lowest cost silver plan tool, etc.) to support those
functions. Thus, the FFE would need SBE-FP QHP plan data by the dates
specified in the annual Letter to Issuers to provide for enough time
for adequate testing and loading of the data into the various consumer
tools the FFE offers. Issuers must also comply with certain FFE
enrollment policies and operations (for example, premium payment and
grace period rules, effective date logic, acceptable transaction codes,
and reconciliation rules) for the FFE to successfully process 834
transactions with issuers and minimize any data discrepancies for
reconciliation.
Therefore, we propose to add Sec. 156.350 to address eligibility
and enrollment standards for QHP issuers participating on an SBE-FP. In
paragraph (a) of new Sec. 156.350, we would require QHP issuers
participating in an SBE-FP to comply with HHS regulations, and guidance
related to the eligibility and enrollment functions for which the
State-based Exchange relies on the Federal platform. For example, those
issuers would be required to comply with operational standards in the
Federally-facilitated Marketplace and Federally-facilitated Small
Business Health Options Program Enrollment Manual. We provide in
paragraph (a) a list of provisions with which QHP issuers participating
in an SBE-FP would be required to comply. These provisions relate to
eligibility and enrollment functions directly, or are critical to
enabling HHS to assess compliance with eligibility and enrollment
functions. For example, we would require QHP issuers to comply with the
requirements regarding compliance reviews of QHP issuers to the extent
relating directly to applicable eligibility and enrollment functions.
Without this requirement, we would be severely limited in our ability
to determine whether an issuer is complying with the requirements
related directly to the Federal platform's eligibility and enrollment
functions. In paragraph (b), we propose to permit these issuers to
directly enroll applicants in a manner that is considered to be through
the Exchange, under Sec. 156.1230, just as QHP issuers on FFEs are
permitted.
In paragraph (c), we propose that if an SBE-FP does not
substantially enforce the eligibility and enrollment standards
described in paragraph (a), then HHS may enforce against the issuer or
plan using the enforcement remedies and processes described in subpart
I of part 156. We also propose that the administrative review process
in subpart J of part 156 would apply to enforcement actions taken
against QHP issuers or plans under proposed Sec. 156.350. Because
timely compliance with paragraph (a) is vital to the smooth functioning
of the Federal platform and because the Federal platform would apply a
uniform compliance and enforcement regime for reasons of efficiency and
speed, we believe it is appropriate that HHS have this authority in
this circumstance.
Because this proposal would insert a section applicable to SBE-FPs
in subpart D, which currently describes only standards for QHP issuers
on the FFEs, we propose to amend the title of subpart D to read
Standards for Qualified Health Plan Issuers on Federally-Facilitated
Exchange and State-Based Exchanges on the Federal Platform.
We seek comment on this proposal.
7. Enforcement Remedies in Federally-Facilitated Exchanges (Sec. Sec.
156.800, 156.805, 156.810, and 156.815)
We propose to revise paragraph Sec. 156.805(d). We believe
paragraph (d) provides insufficient information on the effect of
appealing a CMP. In the interest of aligning our CMP and
decertification regulations, we propose to rename paragraph (d)
``Request for hearing.'' Next, we propose to revise paragraph (d)(1) to
state affirmatively the issuer's right to file a request for hearing on
the assessment of a CMP. Finally, we propose to add paragraph (d)(2),
stating that the request for hearing will suspend the assessment of CMP
until a final administrative decision on the appeal. A similar
provision exists in the decertification regulation at Sec. 156.810.
We propose to amend Sec. 156.810 by revising paragraph (e) to
present the appeal rights of QHP issuers and the impact of an appeal
more clearly. Specifically, we propose to provide for the issuer's
appeal right in paragraph (e). Then in paragraph (e)(1) and its
paragraphs, we propose to explain how an appeal will affect the
effective date of a decertification depending on whether the
decertification is standard or expedited.
Previously, we finalized Sec. 156.800(c), in which we stated that
sanctions will not be imposed on a QHP issuer on an FFE if it has made
good faith efforts to comply with applicable requirements for calendar
years 2014 and 2015. We are not proposing to extend this policy.
Starting in the 2016 calendar year and beyond, sanctions may be imposed
if a QHP issuer on an FFE fails to comply with applicable standards,
even if the QHP issuer has made good faith efforts to comply with these
requirements.
Section 156.810 contains bases for decertification of a QHP. One of
the bases for decertification, Sec. 156.810(a)(5), authorizes
decertification if a QHP issuer is hindering the efficient and
effective operation of a Federally-facilitated Exchange. We interpret
the efficient and effective operation of the FFEs to include displaying
plans that will provide coverage to enrollees who purchase coverage
under that plan. Where an issuer has informed HHS that

[[Page 75555]]

it cannot continue to provide coverage under a QHP, HHS will interpret
this information to mean that the efficient and effective operation of
the FFE will be hindered because it will incorrectly display plans on
the FFE platform. In such a case, HHS may take all necessary steps to
suppress and/or decertify the QHP.
We propose to add new bases for decertification to Sec. 156.810 to
address situations where a QHP issuer is the subject of a pending or
existing State enforcement action, including a consent order, or where
HHS has reasonably determined that an issuer lacks the funds to
continue providing coverage to its consumers for the remainder of the
plan year. Under its obligation to determine that making a plan
available on the FFEs is in the interest of qualified individuals and
employers, HHS is proposing to adopt these decertification bases as a
consumer protection measure.
We welcome comments on these proposals.
8. Quality Standards
a. Patient Safety Standards for QHP Issuers (Sec. 156.1110)
In Sec. 156.1110, we established the first phase of patient safety
standards, beginning on January 1, 2015, for QHP issuers to verify that
certain contracted hospitals meet Medicare Hospital Conditions of
Participation requirements regarding a quality assessment and
performance improvement program and a discharge planning process. We
propose to strengthen QHP patient safety standards in accordance with
section 1311(h) of the Affordable Care Act for plan years beginning on
or after January 1, 2017. In addition to hospital requirements to meet
certain quality and patient safety standards delineated in the Medicare
Conditions of Participation, HHS has engaged with several initiatives
such as the Patient Safety Organization (PSO) program, Hospital
Engagement Networks and the Quality Improvement Organizations, to
broaden the national impact on reducing patient harm. By leveraging the
successful work already being done at national, regional, and local
hospital systems for health care quality improvement and harm
reduction, we believe that alignment of the QHP issuer standards with
effective patient safety interventions will achieve greater impact.
Therefore, we propose amending Sec. 156.1110 to capture the current
patient safety standards that continue to apply for plan years
beginning before January 1, 2017 in new paragraph (a)(1). We also
propose to add new paragraph (a)(2)(i)(A) to specify that for plan
years beginning on or after January 1, 2017, a QHP issuer that
contracts with a hospital with greater than 50 beds must verify that
the hospital uses a patient safety evaluation system as defined in 42
CFR 3.20. The patient safety evaluation system is defined in the PHS
Act as the collection, management, or analysis of information for
reporting to or by a Patient Safety Organization.\39\ We propose in
Sec. 156.1110(a)(2)(i)(B) to require that a QHP issuer that contracts
with a hospital with greater than 50 beds must ensure that the hospital
implemented a comprehensive person-centered discharge program to
improve care coordination and health care quality for each patient. We
believe that use of a data-driven approach, analytic feedback, and
shared learning to advance patient safety, such as working with a PSO,
are essential to implementing meaningful interventions to improve
patient health care quality.
---------------------------------------------------------------------------

\39\ See, 42 U.S.C. 299b-21(6); and https://www.pso.ahrq.gov/regulations/fnlrule01.pdf.
---------------------------------------------------------------------------

In accordance with the flexibility provided to the Secretary under
section 1311(h)(2) of the Affordable Care Act to establish reasonable
exceptions to the QHP issuer patient safety requirements, we propose in
Sec. 156.1110(a)(2)(ii), that the hospital may implement evidence-
based initiatives to reduce all cause preventable harm,\40\ prevent
hospital readmission, improve care coordination and improve health care
quality through the collection, management and analysis of patient
safety events by a means other than reporting of such information to or
by a PSO. For example, a QHP issuer may comply with the proposed
patient safety standards if the applicable QHP issuer-contracted
hospital participates through the Partnership for Patients initiative
as part of a Hospital Engagement Network.\41\ We believe this would
allow for flexibility and promote alignment for hospitals that already
engage in effective national, State, public and private patient safety
programs. Although hospital patient safety programs are diverse, we
believe that promoting a common goal of preventing the risk of patient
harm in an effective, sustainable way is important. We also believe it
is important to recognize the core components of a hospital patient
safety program, including development of comprehensive patient safety
systems to identify, report and analyze data; tracking of process and
outcome measures; encouraging a culture of safety with leadership and
health care provider support and expertise; and engaging patients and
families in quality improvement and action plans. Over time, as PSO
activities continue to expand in scope, maturity and effectiveness to
advance efforts to ensure patient safety, we anticipate continuing to
reassess the reasonable exceptions to the QHP issuer patient safety
requirements outlined in Sec. 156.1110(a)(2)(ii). We expect that QHP-
issuer contracted hospitals with more than 50 beds will contract with a
PSO and implement a comprehensive person-centered discharge program to
improve care coordination and health care quality for each patient. HHS
will continue to monitor the status of the PSO program and other
patient safety initiatives and will develop additional requirements or
guidance, if needed, to support effective patient safety strategies and
harmonization of evidence-based standards and requirements under Sec.
156.1110.
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\40\ All cause preventable harm or all adverse events-any event
during the care process that results in harm to a patient,
regardless of cause (https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf).
\41\ https://partnershipforpatients.cms.gov/about-the-partnership/aboutthepartnershipforpatients.html.
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In addition, HHS strongly supports hospital tracking of patient
safety events using the Agency for Healthcare Research and Quality
Common Formats,\42\ which are a useful tool for a hospital regardless
of what patient safety interventions are implemented for ongoing, data-
driven quality assessment. The Agency for Healthcare Research and
Quality anticipates releasing version 2.0 of the Common Formats for
Event Reporting--Hospitals, which would define a systematic process for
reporting adverse events, near misses and unsafe conditions, and allow
a hospital to report harm from all causes. We believe that use of
Common Formats, and aligning with existing HHS recommendations for
hospitals,\43\ is integral whether a hospital chooses to work with a
PSO to comply with the proposed requirement in Sec. 156.1110(a)(2)(i)
or implements the alternative approach under the reasonable exception
provision as proposed in Sec. 156.1110(a)(2)(ii).
---------------------------------------------------------------------------

\42\ https://www.pso.ahrq.gov/common.
\43\ https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-19.pdf.
---------------------------------------------------------------------------

We believe these proposed amendments to QHP issuer patient safety
requirements would support these common aspects and goal, and also
align with the established

[[Page 75556]]

requirements in Sec. 156.1130 for a QHP quality improvement strategy,
specifically the outlined quality improvement strategy topic areas from
section 1311(g) of the Affordable Care Act, including implementation of
activities to prevent hospital readmissions and implementation of
activities to improve patient safety and reduce medical errors.
We propose in Sec. 156.1110(b) to amend the documentation
requirement to specify that, for plan years beginning on or after
January 1, 2017, a QHP issuer to collect information from each of its
contracted hospitals with greater than 50 beds to demonstrate that
those hospitals meet the patient safety standards required in paragraph
(a)(2) of this section. Such information could include a copy of the
current agreement to partner with a PSO, a Hospital Engagement Network,
or a Quality Improvement Organization. The documentation should reflect
implementation of PSO activities, such as PSOs and hospitals working
together to collect, report and analyze patient safety events, and
implementation of a comprehensive person-centered hospital discharge
program to demonstrate compliance with the proposed requirements in
Sec. 156.1110(a)(2)(i); or implementation of other patient safety
initiatives to reduce all cause preventable harm, prevent hospital
readmission, improve care coordination and improve health care quality
through the collection, management and analysis of patient safety
events to demonstrate compliance with the reasonable exception
provision proposed to be captured in Sec. 156.1110(a)(2)(ii). We also
propose to remove paragraph (d) from section Sec. 156.1110 because it
is no longer needed given the clarifying proposed effective date
language within paragraphs (a) and (b). We clarify that, at this time,
HHS does not intend to amend the number of hospital beds threshold
authorized by section 1311(h)(3) of the Affordable Care Act and does
not intend to begin implementing the provisions in section
1311(h)(1)(B) regarding non-hospital health care providers.
We seek comment on the proposed amendments to paragraphs (a) and
(b), and the proposed deletion of paragraph (d). We seek comment
specifically on the proposals to require that a QHP issuer that
contracts with a hospital with greater than 50 beds must verify that
the hospital uses a patient safety evaluation system and implements a
comprehensive person-centered discharge program to improve care
coordination and health care quality for each patient. We also seek
comment on the reasonable exception provision under which the QHP
issuer-contracted hospital with greater than 50 beds may implement
evidence-based initiatives other than working with a PSO to reduce all
cause preventable harm, prevent hospital readmission, improve care
coordination and improve health care quality through the collection,
management and analysis of patient safety events. We are considering
providing that QHP issuers must ensure that their contracted hospitals
as described in section 1311(h) are standardizing reporting of patient
safety events with the use of the Agency for Healthcare Research and
Quality Common Formats, and we seek comment regarding this potential
requirement. We seek comment on the types of information, such as
hospital agreements with PSOs, HENs or QIOs, that may be submitted to a
QHP issuer to comply with the proposed standard in Sec.
156.1110(b)(2). We also seek comment on the proposed documentation
standard, including the burden and costs, to require a QHP issuer to
track information and demonstrate compliance with meeting the new
patient safety standards described in paragraph (a)(2).
9. Qualified Health Plan Issuer Responsibilities
a. Payment and Collections Processes (Sec. 156.1215)
In the 2015 Payment Notice, HHS established a monthly payment and
collections cycle for insurance affordability programs, user fees, and
premium stabilization programs. In 2017, as discussed elsewhere in this
document, we are proposing to charge issuers in State-based Exchanges
that utilize the Federal platform for eligibility and enrollment
services a user fee for the use of the platform. To streamline our
payment and collections process, we propose that, for 2017 and later
years, for purposes of the netting process, the reference to FFE user
fees in Sec. 156.1215(b) would be interpreted to include any fees for
issuers in State-based Exchanges using the Federal platform, as well as
user fees that HHS collects on behalf of the State-based Exchange using
the Federal platform.
In the 2015 Payment Notice, we established in Sec. 156.1215(c)
that any amount owed to the Federal government by an issuer and its
affiliates is the basis for calculating a debt owed to the Federal
government. Similarly, we propose that, for 2015 and later years, for
purposes of calculating the debt owed to the Federal government, we
would interpret the reference to FFE user fees to include any fees for
issuers in State-based Exchanges using the Federal platform, as well as
user fees that HHS collects on behalf of the State-based Exchange using
the Federal platform.
We solicit comments on these proposals, including whether the
current regulations should be amended to reflect this interpretation.
b. Administrative Appeals (Sec. 156.1220)
In the 2015 Payment Notice (79 FR 13818), we established an
administrative appeals process for issuers. We established a three-
tiered appeals process: a request for reconsideration under Sec.
156.1220(a); a request for an informal hearing before a CMS hearing
officer under Sec. 156.1220(b); and a request for review by the
Administrator of CMS under Sec. 156.1220(c). We note that should we
finalize our proposal around SBE-FPs, we would interpret this
administrative appeals process to apply to user fee payments that we
collect from SBE-FP QHP issuers that offer plans on an SBE-FP.
Under Sec. 156.1220(a), an issuer may only file a request for
reconsideration based on the following: a processing error by HHS,
HHS's incorrect application of the relevant methodology, or HHS's
mathematical error. For example, an issuer may file a request for
reconsideration that challenges the assessment of a default risk
adjustment charge if the issuer believes the default charge was
assessed because HHS incorrectly applied its methodology regarding data
quantity and data sufficiency standards; however, the issuer may not
file a request for reconsideration to challenge the methodology itself.
We note that we are seeking comment on the proposed requirements
related to the data quantity and data sufficiency methodology for the
reinsurance and risk adjustments programs elsewhere in this proposed
rule. We also clarify that an issuer may not file a request for
reconsideration regarding issues arising from the issuer's failure to
load complete and accurate data to its dedicated distributed data
environment within the data submission window. Errors by the issuer are
not appealable.
We seek to clarify these grounds for appeal for the risk adjustment
and reinsurance programs, as follows. In line with our proposal to
delete Sec. 153.710(d), we propose to make conforming amendments to
modify Sec. 156.1220 to remove cross-references to the interim
discrepancy reporting process. Under Sec. 156.1220(a)(4)(ii), a
reconsideration relating to risk adjustment or

[[Page 75557]]

reinsurance may only be requested if, to the extent the issue could
have been previously identified by the issuer to HHS under the final
discrepancy reporting process proposed to be redesignated at Sec.
153.710(d)(2), it was so identified and remains unresolved. As proposed
to be redesignated, Sec. 153.710(d)(2) states that an issuer must
identify to HHS any discrepancies it identified in the final
distributed data environment reports. We clarify that issuers may
identify issues during the discrepancy reporting process under newly
designated Sec. 153.710(d)(2) that are not subject to appeal; issuers
may identify issues that are not processing errors by HHS, HHS's
incorrect application of the relevant methodology, or HHS's
mathematical errors. We clarify that, in contrast, an issuer may only
request a reconsideration of unresolved issues that were identified
under the final discrepancy reporting process proposed to be
redesignated at Sec. 153.710(d)(2), if contesting a processing error
by HHS, HHS's incorrect application of the relevant methodology, or
HHS's mathematical error. The existence of an unresolved discrepancy is
not alone a sufficient basis on which to request a reconsideration.
We also seek to clarify the grounds for appeal for the risk
corridors program. An issuer may not file a request for reconsideration
to challenge the standards for the risk corridors program, including
those established in Sec. Sec. 153.500 through 153.540 and in guidance
issued by HHS. In addition, appeals related to data for programs other
than risk corridors covered in Sec. 156.1220(a) cannot be grounds for
risk corridors appeals.
We also propose to shorten the deadline for filing a request for
reconsideration in Sec. 156.1220(a)(3) from 60 to 30 calendar days.
This proposal will permit HHS to resolve administrative appeals,
calculate final payments and charges, and make payments in a more
expedited manner. Additionally, we propose to clarify that an issuer
must pay the full amount owed to HHS as set forth in the applicable
notification, even if the issuer files a request for reconsideration
under Sec. 156.1220. Failure to pay an amount owed will result in
interest accruing after the applicable payment deadline. Therefore, if
an appeal is unsuccessful, and the issuer has not already remitted the
charge amount owed, the issuer would owe the debt plus the interest,
and administrative fees which accrue from delayed payment. If an appeal
is successful, HHS will refund the amount paid in accordance with the
final appeal decision.
Therefore, we propose that the request for reconsideration must be
filed in accordance with the following timeframes: (i) For the premium
tax credit and cost-sharing reduction portions of the advance payments,
or FFE user fee charges, within 30 calendar days after the date of the
final reconsideration notification specifying the aggregate amount of
such advance payments or 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 the date of
the notification under Sec. 153.310(e); (iii) for a reinsurance
payment, within 30 calendar days of the date of the notification
provided under Sec. 153.240(b)(1)(ii); (iv) for a default risk
adjustment charge, within 30 calendar days of the date of the
notification of such charge; (v) for reconciliation of the cost-sharing
reduction portion of the advance payments, within 30 calendar days of
the date of the notification of such payment or charge; and (vi) for a
risk corridors payment or charge, within 30 calendar days of the date
of the notification of such payment or charge for the purposes of Sec.
153.510(d). We propose to clarify that the last submission of data to
which the issuer has attested serves as the notification for purposes
of Sec. 153.510(d). We seek comment on this proposal.
c. Third Party Payment of Qualified Health Plan Premiums (Sec.
156.1250)
On March 19, 2014, we published in the Federal Register an interim
final rule (IFR) with comment period titled, Patient Protection and
Affordable Care Act; Third Party Payment of Qualified Health Plan
Premiums (79 FR 15240). The IFR requires individual market QHP issuers,
including SADP issuers, to accept premium and cost-sharing payments
made on behalf of enrollees by: The Ryan White HIV/AIDS Program; other
Federal and State government programs that provide premium and cost
sharing support for specific individuals; and Indian tribes, tribal
organizations, and urban Indian organizations. The IFR applies the
requirements at Sec. 156.1250 to all individual market QHPs and SADPs,
regardless of whether they are offered through an FFE, an SBE, or
outside of an Exchange.
The IFR also amended Sec. 156.805 to ensure that Sec. 156.1250
could be enforced. Specifically, the IFR amended Sec. 156.805(a)(1)
to: Provide that Sec. 156.805 targets violations of issuer standards
and requirements of part 153 that are applicable to issuers; clarify
that substantial non-compliance with any Exchange standard or
requirement applicable to issuers in the FFE is grounds for imposing
CMPs; and explicitly reference part 156 to clarify that substantial
non-compliance with the Exchange standards applicable to issuers
offering QHPs in the FFEs under part 156, including new Sec. 156.1250,
may be a basis for the imposition of CMPs under Sec. 156.805.
Prior to publishing the IFR, HHS issued two ``Frequently Asked
Questions'' documents regarding premium and cost-sharing payments made
by third parties on behalf of QHP enrollees. In an FAQ issued on
November 4, 2013 (the November FAQ), HHS encouraged QHP issuers not to
accept third-party payments made on behalf of enrollees by hospitals,
other healthcare providers, and other commercial entities due to
concerns that such practices could skew the insurance risk pool and
create an uneven field in the Exchanges.\44\ On February 7, 2014, HHS
issued another FAQ (the February FAQ) clarifying that the November FAQ
did not apply to third party premium and cost-sharing payments made on
behalf of enrollees by Indian tribes, tribal organizations, and urban
Indian organizations; State and Federal government programs (such as
the Ryan White HIV/AIDS Program); or private, not-for-profit
foundations that base eligibility on financial status, do not consider
enrollees' health status, and provide assistance for an entire
year.\45\ In the February FAQ, HHS affirmatively encouraged QHP issuers
to accept such payments given that Federal or State law or policy
specifically envisions third party payment of premium and cost-sharing
amounts by these entities.
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\44\ https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-qa-11-04-2013.pdf.
\45\ https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/third-party-payments-of-premiums-for-qualified-health-plans-in-the-marketplaces-2-7-14.pdf.
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We received 174 comments in response to the March 19, 2014 IFR. The
comments ranged from general support of or opposition to the IFR's
provisions to very specific questions or comments. Based on these
comments, we propose to make some modifications to the policy finalized
in the IFR.
Several commenters requested that final regulations clarify that
``Federal and State government programs'' include programs administered
by a State's political sub-divisions (for example, counties and
municipalities). Several other commenters expressed confusion regarding
the definition of

[[Page 75558]]

``State and Federal government programs,'' particularly in the case
where an entity is both a (Federal or State) government program as well
as a health care provider. These commenters expressed concern that
Sec. 156.1250 does not make a distinction between government programs
(such as Ryan White HIV/AIDS programs) and programs that involve
Federal grantees receiving considerable public funding. Other
commenters expressed concern that the category of Federal and State
government programs is too broad, and does not provide adequate notice
of which payments must be accepted.
We propose to amend Sec. 156.1250 to clarify that a Federal or
State government program includes programs of the political
subdivisions of the State, namely counties and municipalities, which we
refer to as ``local governments.'' Including this clarification in
regulations will ensure that States have the flexibility to distribute
care and Exchange financial assistance to their vulnerable populations
through local governments, consistent with their statutory and
regulatory authority.
In terms of the distinction between programs sponsored and operated
by the government (such as the Ryan White HIV/AIDS programs) and
programs that involve Federal grantees that receive considerable public
funding, we acknowledge that programs such as the Ryan White HIV/AIDS
program operate by working with cities, States, and local community-
based organizations to provide services in line with their statutory
authority. Sections 2604(c)(3)(F), 2612(c)(3)(F), and 2651(c)(3)(F) of
the PHS Act authorize Ryan White HIV/AIDS program grantees and sub-
grantees to use program funds for premium and cost-sharing assistance.
These grantees and sub-grantees must provide the assistance through
third-party payments as they are prohibited from making payments
directly to patients. Though many Ryan White HIV/AIDS program grantees
are State and local governments, not all are; similarly, many of the
State and local government grantees administer funds through sub-
grantees that are not government entities. We propose to distinguish
government programs from government grantees such that the requirement
at Sec. 156.1250 applies to government programs, but not necessarily
to entities that are government grantees, unless specifically
authorized and funded by the Federal, State, or local government
program to make the payments on behalf of the program, consistent with
the government programs' statutory and regulatory authority to provide
premium and cost-sharing assistance through grants and grantees. In
other words, if such Federal, State, and local governments are
authorized to administer their premium and cost-sharing assistance
through grantees or sub-grantees, the payments may not be rejected on
the grounds that they did not come directly from the government
programs. In such cases, the source of the Exchange financial
assistance is the government program, and administration or
distribution of that assistance through grants and grantees is
authorized under statute or regulation. We seek comment on this
proposal and also on whether final regulations should list out the
specific entities that qualify as government programs for purposes of
this provision.
We also propose to require entities that make third party payments
of premiums under this section to notify HHS, in a format and timeline
specified in guidance. We propose that the notification must reflect
the entity's intent to make payments of premiums under this section and
the number of consumers for whom it intends to make payments. We seek
comment on this requirement, and on what information entities should
provide as part of this notification.
We also propose to clarify that while issuers offering individual
market QHPs, including SADPs, generally do not collect cost-sharing
payments, they are required to accept third party cost-sharing payments
on behalf of enrollees in circumstances where the issuer or the
issuer's downstream entity accepts cost-sharing payments from plan
enrollees. Although generally cost-sharing payments are made to
providers, rather than to issuers, there are certain contractual
circumstances where an issuer's non-provider downstream entity engages
in activities on behalf of the issuer, including the collection of
cost-sharing payments. For example, an issuer's pharmacy benefits
manager may collect cost-sharing payments from the issuer's plan
enrollees for prescription drugs. We propose to clarify that in such
situations, the rules at Sec. 156.1250 regarding third-party payments
would apply to cost sharing. We seek comment on these proposals.
We received a number of comments requesting that final regulations
require issuers to accept third-party payments from not-for-profit,
charitable organizations. Several comments stated that requiring QHP
issuers to accept third party payments from Ryan White HIV/AIDS
programs but not from other disease-specific programs is unfair to
those individuals with other diseases or conditions. Several other
commenters expressed that many not-for-profit foundations and
charitable organizations offer premium and cost-sharing assistance to
individuals based on both financial status and diagnosis of a
particular condition or disease.
We are considering whether we should expand the list of entities
from whom issuers are required to accept payment under Sec. 156.1250
to include not-for-profit charitable organizations organizations in
future years. If we did include not-for-profit charitable
organizations, we would intend to include guardrails intended to
minimize risk pool impacts, such as limiting assistance to individuals
not eligible for other MEC and requiring assistance until the end of
the calendar year. In making this determination, we intend to carefully
review data provided by entities currently making third party premium
payments and data related to the overall risk pool to better understand
the impact of these payments.
d. Other Notices (Sec. 156.1256)
We propose to add a new Sec. 156.1256, which would add a
requirement for issuers, in the case of a plan or benefit display error
included in Sec. 155.420(d)(4), to notify their enrollees within 30
calendar days after the error is identified, if directed to do so by
the FFE. We believe that enrollees should be made aware of any error
that may have impacted their QHP selection and enrollment and any
associated monthly or annual costs. Therefore, we are proposing a
requirement for issuers to notify their enrollees of such error, should
such error occur, as well as the availability of a special enrollment
period, under Sec. 155.420(d)(4), for the enrollee to select a
different QHP, if desired. We seek comment on this proposal.

H. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements

1. Definitions (Sec. 158.103)
To ensure consistency in the definitions of ``large employer'' and
``small employer'' between the MLR regulation and the market reform
requirements, and to reflect the recent amendments to section 2791(e)
of the PHS Act and section 1304(b) of the Affordable Care Act that were
made by the Protecting Affordable Coverage for Employees Act (Pub. L.
114-60), we propose to revise the regulatory definitions of ``large
employer'' and ``small employer'' in Sec. 158.103 to cross-

[[Page 75559]]

reference the definitions of those terms in Sec. 144.103.
2. Reporting of Incurred Claims (Sec. Sec. 158.103 and 158.140(a))
The MLR December 1, 2010 interim final rule (75 FR 74864) and the
May 16, 2012 technical corrections thereto (77 FR 28788) direct issuers
to report incurred claims with a 3-month run-out period, and define
unpaid claim reserves to mean reserves and liabilities established to
account for claims that were incurred during the MLR reporting year but
had not been paid within 3 months of the end of the MLR reporting year.
The run-out period improves the accuracy of reported incurred claims by
using the actual claims payments that take place during the run-out
period, instead of the estimated claims liabilities and reserves, in
the calculation of claims incurred in the reporting year.
Prior to the 2014 MLR reporting year, the deadline for submitting
MLR reports to the Secretary was June 1 of the year following the
reporting year. The 2014 Payment Notice (78 FR 15410) moved the
reporting deadline from June 1 to July 31 of the year following the
reporting year to accommodate inclusion of the transitional reinsurance
and risk adjustment amounts, which HHS generally publishes by June 30,
in the MLR and risk corridors calculations.
Because the MLR reporting deadline applicable to the 2014 and later
reporting years occurs later in the year, the incurred claims valuation
can also occur later in the year. Therefore, we propose to amend the
definition of unpaid claims reserves in Sec. 158.103 and the
requirements for reporting incurred claims in Sec. 158.140(a) to
utilize a 6-month, rather than a 3-month run-out period beginning with
the 2015 reporting year. This proposed amendment would require incurred
claims to be calculated as of June 30, rather than March 31, of the
year following the reporting year. We note that this approach is
consistent with the proposal outlined in section III.D.3.a. of this
preamble regarding the treatment of incurred but not received claims
for the risk corridors program. We seek comment on this proposal.
Finally, we are inviting comment on whether we should modify the
treatment of a health insurance issuer's investments in fraud
prevention activities for MLR reporting purposes in the final rule. We
are considering amending the MLR regulation to permit the counting of a
health insurance issuer's investments in fraud prevention activities
among those expenses attributable to incurred claims. We solicit
comments on this approach, including whether safeguards against
potential abuse should be included (for example, an upper limit on this
allowance, such as a percentage based on the ratio of issuers' fraud
reduction expenses reported under Sec. 158.140(b)(iv) and issuers'
earned premium as defined in Sec. 158.130); whether we should collect
fraud prevention activity expense data as an informational item on the
MLR Annual Reporting Form before amending the regulation; as well as on
potential alternative treatment of these expenses for MLR reporting or
rebate calculation purposes. We seek comment on this issue from all
stakeholders, and specific actual data, if available, including with
respect to the additional incentives that would result for health plan
investments of this sort.

IV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. 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 11. To fairly evaluate whether an
information collection should be approved by OMB, section 3506(c)(2)(A)
of the Paperwork Reduction Act of 1995 (PRA) 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 a 35 percent increase for fringe
benefits and overhead) for estimating the burden associated with the
ICRs.\46\
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\46\ See May 2014 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates at https://www.bls.gov/oes/current/oes_nat.htm.
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A. ICRs Regarding Submission of Risk Corridors Data (Sec. 153.530)

We are proposing to amend the risk corridors program requirements
at Sec. 153.530 to require issuers to true-up claims liabilities and
reserves used to determine the allowable costs reported for the
preceding benefit year to reflect the actual claims payments made
through June 30 of the year following the benefit year. Although this
proposal would require issuers to submit data indicating the difference
between their incurred liability estimated as of March 31 and June 30,
we believe that issuers will be recording these amounts as part of
their normal business practices, and that there will be no new data
elements and no additional burden as a result of this proposal.
Therefore, in accordance with the implementing regulations of the PRA
at 5 CFR 1320.3(b)(2), we believe the burden associated with this
requirement would be exempt as it associated with a usual and customary
business practice.

B. ICRs Regarding Submission of Rate Filing Justification (Sec.
154.215)

This proposed rule would require health insurance issuers to submit
a Unified Rate Review Template for all single risk pool coverage
regardless of whether there is a plan within a product that experiences
a rate increase. The existing information collection requirement is
approved under OMB Control Number 0938-1141. This includes the unified
rate review template and instructions for rate filing documentation
that issuers currently use to submit rate information to HHS for rate
increases of any size for single risk pool coverage and rate increases
that meet or exceed the subject to review threshold for non-single risk
pool coverage. As detailed in the accompanying preamble discussion, we
believe most issuers already report this information. Therefore, we do
not expect issuers to incur a burden associated with this proposed
regulation. Prior to the deadline for the submission of rate
information to CMS for rates for single risk pool coverage effective on
or after January 1, 2017, HHS intends to solicit public comment on and
seek OMB approval for revisions to the information collection template
and instructions approved under OMB Control Number 0938-1141.

C. ICRs Regarding Election To Operate an Exchange After 2014 (Sec.
155.106)

This proposed rule would modify the dates for application
submission and approval for States seeking to operate an SBE, and have
an approved or

[[Page 75560]]

conditionally-approved Exchange Blueprint application and operational
readiness assessment. HHS does not propose modifying the documents that
States already must submit as part of the required Exchange Blueprint
application. Therefore, HHS does not anticipate any additional impact
to the administrative burden associated with the proposed regulatory
changes to Sec. 155.106. HHS proposes utilizing the existing PRA
package approved under OMB Control Number 0938-1172 for the Exchange
Blueprint application.

D. ICRs Regarding Standards for Certified Application Counselors (Sec.
155.225(b)(1)(iii))

Section 155.225(b)(1)(ii) requires certified application counselor
designated organizations to maintain a registration process and
methodology to track the performance of certified application
counselors. This proposed rule would add a new Sec. 155.225(b)(1)(iii)
requiring certified application counselor designated organizations to
provide the Exchange with information and data regarding the
performance of the organization's certified application counselors, and
the consumer assistance they provide. Although the current requirement
at Sec. 155.225(b)(1)(ii) does not specify the type of performance
information that must be tracked, or require that the information be
provided to the Exchange, we expect that certified application
counselor designated organizations already have a tracking process in
place to collect performance information from individual certified
application counselors, and that individual certified application
counselors are already recording and submitting this required
information to their organization. Therefore, we expect this proposal
to have minimal impact on individual certified application counselors
and on certified application counselor designated organizations.
The proposed Sec. 155.225(b)(1)(iii) would add a new burden of
compiling the performance information and submitting it to the
Exchanges. In States with FFEs, HHS anticipates that, beginning in
January 2017, it would collect three performance data points each month
from certified application counselor designated organizations: The
number of individuals who have been certified by the organization; the
total number of consumers who received application and enrollment
assistance from the organization; and of that number, the number of
consumers who received assistance applying for and selecting a QHP,
enrolling in a QHP, or applying for Medicaid or CHIP. We anticipate
that this data would be reported to FFEs electronically, through HIOS
or another electronic submission vehicle. For the purpose of estimating
costs and burdens, we assume that State Exchanges will collect the same
information with the same frequency, although our proposal gives
Exchanges the flexibility to determine which data to collect and the
form and manner of the collection. We estimate that certified
application counselor designated organizations will have a mid-level
health policy analyst prepare the reports and a senior manager will
review each monthly report. HHS expects that a mid-level health policy
analyst (at an hourly wage rate of $40.64) will spend 2 hours each
month to provide the required monthly submissions and a senior manager
(at an hourly wage rate of $91.31) will spend \3/8\ hour to review the
submissions. Therefore, we estimate each monthly report will require
2.375 hours and a cost burden of $115.52 per month per organization, or
28.50 hours with a cost (12 monthly reports) of $1,386.25 annually per
certified application counselor designated organization. Nationwide, we
estimate there are 5,000 certified application counselor designated
organizations, resulting in an annual cost burden of $6,931,200 and
142,500 hours for certified application counselor designated
organizations.
Under proposed Sec. 155.225(b)(1)(iii), if an Exchange requests
these certified application counselor reports, the Exchange would also
need to review the reports. We assume that all Exchanges will require
monthly reports and will utilize in-house staff to review them. We
assume that an employee earning a wage that is equivalent to a mid-
level GS-11 employee would review monthly report submissions from
certified application counselor designated organizations.\47\ We
estimate that a mid-level employee (at an hourly wage rate of $43.13)
will spend 10 minutes reviewing each monthly report for a cost burden
of approximately $7.19 per monthly report per certified application
counselor designated organization. For State Exchanges, we estimate
that there are 1,500 certified application counselor designated
organizations resulting in a cost burden of 3,000 hours and
approximately $129,390 annually. Costs to the FFEs are estimated
separately in the Regulatory Impact Analysis section of this proposed
rule.
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\47\ Federal wage rates are available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2015/GS_h.pdf.
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E. ICRs Regarding Network Adequacy Standards (Sec. 156.230(e) and (f))

Proposed Sec. 156.230(e) would require that QHP issuers make a
good faith effort to provide written notice of discontinuation of a
provider 30 days prior to the effective date of the change or otherwise
as soon as practicable, to enrollees who are patients seen on a regular
basis by the provider or who receive primary care from the provider
whose contract is being discontinued, irrespective of whether the
contract is being discontinued due to a termination for cause or
without cause, or due to a non-renewal. This is a third-party
disclosure requirement. We estimate that a total of 475 issuers
participate in the FFE and would be required to comply with the
proposed standard. We propose an estimate of 5 percent of providers
discontinue contracts per year and that an issuer in the FFE covers
7,500 National Provider Identifiers, which means that we estimate an
issuer would have 375 provider discontinuations in a year. For each
provider discontinuation, we propose an estimate that it will take a
database administrator 30 minutes for data analysis to produce the list
of affected enrollees at $55.37 an hour and an administrative assistant
30 minutes to develop the notification and send the notification to the
affected enrollees, at $29.93 an hour. The total costs per an issuer
would be $15,993.75. The total annual costs estimate would be
$7,597,031. Because we are already collecting information regarding
network classifications as part of the existing QHP certification
process, we do not believe that this proposal described in the preamble
will result in additional information collection requirements for
issuers.
Proposed Sec. 156.230(f) would require QHP issuers to provide a
notice to enrollees of the possibility of out-of-network charges from
an out-of-network provider in an in-network setting at least 10
business days prior to the benefit being provided to avoid counting the
out-of-network costs against to the annual limitation on cost sharing.
This provision would apply to all QHPs, which includes 575 issuers. We
estimate it would take an issuer's mid-level health policy analyst (at
an hourly wage rate of $54.87) approximately 6 minutes to create a
notification and send the proposed information. We estimate that
approximately 2 notices would be sent for every 100 enrollees. Assuming
approximately 9 million enrollees in QHPs 2017, we estimate QHPs would
send approximately 180,000 total

[[Page 75561]]

notices, for a total hours of 18,000, with a total cost of $987,660.

F. ICR Regarding Monthly SHOP Enrollment Reconciliation Files Submitted
by Issuers (156.285(c)(5))

Proposed amendments to Sec. 156.285(c)(5) would specify that
issuers in a Federally-facilitated SHOP would send monthly enrollment
reconciliation files to the SHOP according to a process, timeline and
file format established by the FF-SHOP. CMS anticipates that it would
require FF-SHOP issuers to submit a standard file with specific data
elements and submit their files in a process set out by the SHOP, no
less frequently than on a monthly basis.
Issuers of QHPs available through the SHOP are already required
under the current version of Sec. 156.285(c)(5) ``to reconcile
enrollment files with the SHOP at least monthly.'' Therefore, we expect
this proposal to have minimal impact on SHOP issuers.

G. ICR Regarding Patient Safety Standards (Sec. 156.1110)

In Sec. 156.1110(a)(2), we propose that for plan years beginning
on or after January 1, 2017, a QHP issuer that contracts with a
hospital with greater than 50 beds must verify that the hospital uses a
patient safety evaluation system and implements a mechanism for
comprehensive person-centered hospital discharge to improve care
coordination and health care quality for each patient. We also propose
in Sec. 156.1100(a)(2)(ii) to establish reasonable exceptions to these
new QHP issuer patient safety requirements such that the hospital may
implement evidence-based initiatives to reduce all cause preventable
harm, prevent hospital readmission, improve care coordination and
improve health care quality through the collection, management and
analysis of patient safety events (rather than requiring reporting of
such information to or by a Patient Safety Organization). The burden
estimate associated with the information collection, recordkeeping, and
disclosure requirements to demonstrate compliance with these standards
includes the time and effort required for QHP issuers to maintain and
submit to the applicable Exchanges, documentation including but not
limited to, hospital agreements to partner with a Patient Safety
Organization, a Hospital Engagement Network, or a Quality Improvement
Organization that demonstrate that each of its contracted hospitals
with greater than 50 beds meets the patient safety standards required
in Sec. 156.1110(a)(2) for plan years beginning on or after January 1,
2017. QHP issuers may not already be collecting such network provider
information; therefore, we estimate the cost and burden to collect this
administrative information as follows: For a total of 600 QHP issuers,
offering 15 plans as potential QHPs, we estimate each issuer would
require one senior manager an average of 3 hours to collect and
maintain the hospital agreements or other information necessary to
demonstrate compliance as required in Sec. 156.1110(a)(2) for their
QHPs offered on Exchanges for plan years beginning on or after January
1, 2017. For a senior manager (at an hourly wage rate of $91.31), we
estimate the total annual cost for a QHP issuer to be $273.93.
Therefore, we estimate a total annual burden of 1,800 hours, resulting
in an annual cost of $164,358.

H. ICR Regarding Third Party Payment of Qualified Health Plan Premiums
(Sec. 156.1250)

We are proposing to require entities that make third party payments
of premiums under this section to notify HHS, in a format and timeline
specified in guidance. We expect that the notification would reflect
the entity's intent to make payments of premiums under this section and
the number of consumers for whom it intends to make payments. We
estimate it would take approximately four hours to analyze the number
of consumers the entity intends to make payments of premiums on behalf
of, draft a notification and send the proposed information by a mid-
level health policy analyst (at an hourly wage rate of $54.87).
Assuming 500 entities exist that make third party payments and each
would send one notice, we estimate a total burden of 2,000 hours
resulting in an annual cost of $109,740.

I. ICRs Regarding Other Notices (Sec. 156.1256)

We are proposing to add a new section at Sec. 156.1256 to require
that, in the event of a plan or benefit display error, QHP issuers
notify their enrollees within 30 calendar days after the error is
identified, both of the plan or benefit display error and of the
opportunity to enroll in a new QHP under a special enrollment period at
Sec. 155.420(d)(4), if directed to do so by the FFE. This provision
would apply to all QHPs in the FFEs, which includes 475 issuers. We
estimate it would take approximately 30 minutes to amend a form notice,
add SEP language provided by the FFE, and send the proposed information
by an issuer's mid-level health policy analyst (at an hourly wage rate
of $54.87). We estimate that approximately 4 percent of enrollees would
receive such a notice. Assuming approximately 7 million FFE enrollees,
we estimate QHPs in the FFEs would send approximately 280,000 total
notices, for a total hours of 140,000, with a total cost of $7,681,800.
However, although this proposal would require issuers to send
notices for the specified situation, sending these notices is already
part of normal issuer business practices and issuers are already
working with the FFE to include language in their notices about special
enrollment periods, as applicable and appropriate. Therefore, there
will be no additional information required by issuers and no new
administrative burden as a result of this proposal. In accordance with
the implementing regulations of the PRA at 5 CFR 1320.3(b)(2), we
believe the burden associated with this requirement would be exempt as
it associated with a usual and customary business practice.

Table 11--Annual Reporting, Recordkeeping and Disclosure Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per Hourly labor Total labor
Regulation section OMB Control number Number of Responses response Total annual cost of cost of Total cost ($)
respondents (hours) burden (hours) reporting ($) reporting ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 155.225(b)(1)(iii)--certified 0938-1172.......................... 5,000 60,000 2.375 142,500 48.64 6,931,200 6,931,200
application counselor organizations.
Sec. 155.225(b)(1)(iii)--State Exchange.. 0938-1172.......................... 1,500 1,500 0.167 3,000 43.13 129,390 129,390
Sec. 156.230(e).......................... 0938-NEW........................... 475 178,125 1 375 42.65 7,597,031 7,597,031
Sec. 156.230(f).......................... 0938-NEW........................... 575 180,000 0.1 18,000 54.87 987,660 987,660
Sec. 156.1110............................ 0938-1249.......................... 600 9,000 0.2 1,800 91.31 164,358 164,358
Sec. 156.1250............................ 0938-NEW........................... 500 500 4 2,000 54.87 109,740 109,740
Sec. 156.1256............................ 0938-NEW........................... 475 280,000 0.5 140,000 54.87 7,681,800 7,681,800
---------------------------------------------------------------------------------------------------------------

[[Page 75562]]

Total.................................. ................................... 6,100 .............. .............. 334,675 .............. 23,601,179 23,601,179
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: There are no capital/maintenance costs associated with the information collection requirements contained in this rule; therefore, we have removed the associated column from Table 11.

Submission of PRA-Related Comments
We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection requirements. These
requirements are not effective until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced above, access CMS'
Web site at https://www.cms.hhs.gov/PaperworkReductionActof1995; email
your request, including your address, phone number, OMB control number,
and CMS document identifier, to Paperwork@cms.hhs.gov; or call the
Reports Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you comment on these information collection and
recordkeeping requirements, please submit your comments electronically
as specified in the ADDRESSES section of this proposed rule. Please
include ``CMS-9937-P,'' the ICR's OMB control number, and the CMS
document ID number in your comment.
PRA-specific comments must be received by February 1, 2016.

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 proposed
rule, and, when we proceed with a subsequent document, we will respond
to the comments in the preamble to that document.

VI. Regulatory Impact Analysis

A. Statement of Need

This rule proposes standards related to the premium stabilization
programs (risk adjustment, reinsurance, and risk corridors) for the
2017 benefit year, as well as certain modifications to these programs
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 previous Payment
Notices provided detail on the implementation of these programs,
including the specific parameters for the 2014, 2015, and 2016 benefit
years applicable to these programs. This rule proposes additional
standards related to essential health benefits, meaningful access in
the Exchange, consumer assistance tools and programs of an Exchange,
Navigators, non-Navigator assistance personnel, agents and brokers
registered with the Federally-facilitated Exchange, certified
application counselors, cost-sharing parameters and cost-sharing
reduction notices, essential community providers, qualified health
plans, network adequacy, stand-alone dental plans, acceptance of third-
party payments by QHP issuers, patient safety standards for issuers of
qualified health plans participating in Exchanges, guaranteed
availability and guaranteed renewability, minimum essential coverage,
the rate review program, the medical loss ratio program, the Small
Business Health Options Program, 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 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 an 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, market standards, 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 help prevent risk selection and decrease
the risk of financial loss that health insurance issuers might
otherwise expect in 2017 and Exchange financial assistance assists low-
and moderate-income consumers and American Indians/Alaska Natives 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 the next phase 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 affordable health coverage.
HHS anticipates that the provisions of this proposed rule will help
further the Department's goal of ensuring that all consumers have
access to quality and affordable health care and are able to make
informed choices, that Exchanges operate smoothly, that premium
stabilization programs work as intended, that SHOPs are provided
flexibility, and that employers and consumers are protected from
fraudulent and criminal activities.

[[Page 75563]]

Affected entities such as QHP issuers would incur costs to comply with
the proposed provisions, including administrative costs related to
notices, new patient safety requirements, training and recertification
requirements, and establishing a larger provider network. In accordance
with Executive Order 12866, HHS believes that the benefits of this
regulatory action justify the costs.

C. Impact Estimates of the Payment Notice Provisions and Accounting
Table

In accordance with OMB Circular A-4, Table 12 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 improved health outcomes and longevity
due to continuous quality improvement, improved patient safety and
increased insurance enrollment--and certain costs--such as the cost of
providing additional medical services to newly-enrolled individuals.
The effects in Table 12 reflect qualitative impacts and estimated
direct monetary costs and transfers resulting from the provisions of
this proposed rule for health insurance issuers. The annualized
monetized costs described in Table 12 reflect direct administrative
costs to health insurance issuers as a result of the proposed
provisions, and include administrative costs related to notices, new
patient safety requirements, and training and recertification
requirements that are estimated in the Collection of Information
section of this proposed rule. The annual monetized transfers described
in Table 12 include costs associated with FFE user fees, the risk
adjustment user fee paid to HHS by issuers, changes in the overall
transfer amount for the risk corridors program for fiscal years 2017
through 2018, and an increase in MLR rebates to consumers. We are
proposing to collect a total of $52 million in risk adjustment user
fees or $1.80 per enrollee per year from risk adjustment issuers, which
is slightly more than the $50 million generated in benefit year 2016
when we established a $1.75 per-enrollee-per-year risk adjustment user
fee amount. As in 2016, the risk adjustment user fee contract costs for
2017 include additional costs for risk adjustment data validation;
however, we expect increased enrollment in 2017 HHS risk adjustment
covered plans, which decreases the per enrollee amount. Also, the
increase in FFE user fee collections is the result of expected growth
in enrollment in the FFEs rather than an increase in the user fee rate,
which at 3.5 percent remains the same from 2016 to 2017. Beginning in
2017, we are also proposing to charge a user fee for SBEs that utilize
the Federal platform for eligibility and enrollment services. This user
fee rate would be set at 3.0 percent for benefit year 2017.

Table 12--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..........................................
Continuous quality improvement among QHP issuers to reduce patient harm and improve health outcomes
at lower costs.............................................................................................
More informed Exchanges QHP certification decisions................................................
Increased coverage options for small businesses and employees with minimal adverse selection.......
----------------------------------------------------------------------------------------------------------------
Costs: Estimate Year dollar Discount rate Period covered
(percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year).................. $23.91 2015 7 2016-2020
23.91 2015 3 2016-2020
----------------------------------------------------------------------------------------------------------------
Quantitative:
Costs incurred by issuers to comply with provisions in the proposed rule...........................
----------------------------------------------------------------------------------------------------------------
Transfers: Estimate Year dollar Discount rate Period covered
(percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year).................. $21.73 2015 7 2016-2020
21.84 2015 3 2016-2020
----------------------------------------------------------------------------------------------------------------
Transfers reflect an additional $2 million annual cost of risk adjustment user fees (the total risk
adjustment user fee amount for 2015 was $50 million), which are transfers from health insurance issuers to the
Federal government. Transfers also reflect an additional $31 million in rebates from entities subject to
medical loss ratio (MLR) requirements to consumers, an increase of $105 million in the amount of user fees
collected from State-based Exchanges that use the Federal platform for eligibility and enrollment, which are
transfers from issuers to the Federal government, and a total decrease of $112 million in the amount of risk
corridors transfers between issuers of qualified health plans (QHPs).
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 Affordable Care Act ends the temporary
risk corridors program and, in this rulemaking, we propose to end the
transitional reinsurance program after the benefit year 2016.
Therefore, the costs associated with those programs are not included in
Tables 12 or 13 for fiscal years 2019-2020. Table 13 summarizes the
effects of the risk adjustment program on the Federal budget from
fiscal years 2016 through 2020, with the additional, societal effects
of this proposed rule discussed in this RIA. We do not expect the
provisions of this proposed rule to

[[Page 75564]]

significantly alter CBO's estimates of the budget impact of the premium
stabilization programs that are described in Table 13. We estimate that
the proposal to true up claims liabilities and reserves used to
determine allowable costs for the risk corridors program will reduce
the overall risk corridors transfer amount by $112 million in each of
fiscal years 2017 and 2018. 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 12).
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 2016 Payment Notice for the impacts
associated with the advance payments of cost-sharing reductions and
premium tax credits, the premium stabilization programs, and FFE user
fee requirements.

Table 13--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk
Corridors Programs From Fiscal Year 2016-2020
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
Year 2016 2017 2018 2019 2020 2016-2020
----------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and 16.5 19.5 13 15 16 80
Risk Corridors Program Payments..
Risk Adjustment, Reinsurance, and 15.5 18.5 13 15 16 78
Risk Corridors Program
Collections\*\...................
----------------------------------------------------------------------------------------------------------------
Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments
over time.
Note 2: The CBO score reflects an additional $2 million in collections in FY 2015 that are outlayed in the FY
2016-FY 2020 timeframe. CBO does not expect a shortfall in these programs.

Source: Congressional Budget Office. Insurance Coverage Provisions of the Affordable Care Act--CBO's March 2015
Baseline Table https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf.

1. Fair Health Insurance Premiums
The proposed regulations would permit an additional principal
business address to be identified for a small employer that is within
the service area of an issuer's network plan, in instances where the
issuer is rating based on geography and the employer's principal
business address is not within that service area. This would ensure
that the network plan can be appropriately rated for sale to the group
policyholder, benefitting both issuers and employers.
2. Guaranteed Availability
This proposed rule would codify certain exceptions to guaranteed
availability. Because we believe this codification is consistent with
current industry practice under current standards, we do not believe
this change will have a material impact on issuers or enrollees.
2. Student Health Insurance Coverage
This proposed rule would subject student health insurance coverage
to the index rating methodology under the single risk pool regulation,
but specify that issuers may establish one or more separate risk pools
for each institution of higher education, provided they are based on a
bona fide school-related classification and not related to health
status. The proposed rule would also eliminate the requirement that
issuers of student health insurance coverage provide coverage comprised
of the specific metal levels, and instead require such issuers to
provide insurance policies that provide at least 60 percent AV. This
would provide flexibility for colleges and universities to offer
student health insurance plans that are more generous than the standard
metal levels. This would affect an estimated 41 issuers that offer
student health insurance coverage nationwide and approximately 1.3
million students and dependents enrolled in such plans.\48\
---------------------------------------------------------------------------

\48\ Source: Data from Medical Loss Ratio submissions for 2013
reporting year.
---------------------------------------------------------------------------

3. 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.
We established standards for the administration of the risk adjustment
program, in subparts D and G of part 45 of the CFR.
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, 2015, and 2016
Payment Notices, 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 2017 benefit year, we estimate that the total cost for HHS to
operate the risk adjustment program on behalf of States for 2017 will
be approximately $52 million, slightly more than in 2016, and that the
risk adjustment user fee would be approximately $1.80 per enrollee per
year. This user fee reflects both increased contract costs to support
the risk adjustment data validation process in 2017 and an expected
increase in enrollment in risk adjustment covered QHPs.
4. Risk Corridors
The Federally operated temporary risk corridors program ends in
benefit year 2016 as required by statute. Because risk corridors
charges are collected in the year following the applicable benefit
year, and risk corridors payments lag receipt of collections by one
quarter, we estimate that risk corridors transfers will continue
through fiscal year 2018. We are proposing that for the 2015 and later
benefit years, the issuer must true up claims liabilities and reserves
used to determine the allowable costs reported for the preceding
benefit year to reflect the actual claims payments made through June 30
of the year following the benefit year. This proposed amendment would
provide for a more accurate risk corridors calculation by substituting
actual experience in place of estimates. Some issuers overestimate
their claims and liabilities, while others underestimate them. Based on
the 2014 MLR and risk corridors data, we estimate that this proposed
amendment will result in a combined total reduction of approximately
$315 million in risk corridors payments or increase in risk

[[Page 75565]]

corridors charges for some issuers; and a combined total increase of
approximately $203 million in risk corridors payments or decrease in
risk corridors charges for other issuers. The estimated net impact of
the proposed amendment would thus be a reduction of approximately $112
million in total transfers between issuers.
5. Rate Review
In Sec. 154.215, we propose to amend the criteria for submission
of the Unified Rate Review Template for single risk pool coverage to
HHS. We estimated the burden associated with the rate filing process in
the Supporting Statement approved under OMB Control Number 0938-1141.
We intend to revise the information collection currently approved under
OMB Control Number 0938-1141 to clarify instructions related to
completing the template for single risk pool coverage that has a rate
decrease, no rate change and for new plans.
6. Additional Required Benefits
In Sec. 155.170, we propose to amend the requirement for coverage
of benefits in addition to the essential health benefits. Specifically,
we propose to reword Sec. 155.170(a)(2) to make clear that a benefit
required by the State through action taking place on or before December
31, 2011 is considered an EHB and one required by the State through
action taking place after December 31, 2011 is considered in addition
to EHB. As we see this as a clarification, we do not anticipate an
additional burden on States or issuers. At Sec. 155.170(a)(3), we
currently require the Exchange to identify which additional State-
required benefits, if any, are in excess of EHB. We propose to amend
paragraph (a)(3) to designate the State, rather than the Exchange, as
the entity that identifies which State-required benefits are not EHB.
Because Exchanges have generally been relying upon State Departments of
Insurance in determining what constitutes an essential health benefit,
we do not anticipate any additional burden to States because of this
modification.
7. Standards for Navigators and Certain Non-Navigator Assistance
Personnel
This proposed rule would amend some of the standards for consumer
assistance functions under Sec. 155.205(d) and (e), as well as for the
activities of Navigators and non-Navigator assistance personnel subject
to Sec. 155.215. The proposed changes include ensuring consumers have
access to skilled assistance with Exchange-related issues beyond
applying for and enrolling in coverage. Such post enrollment and other
assistance would include assisting consumers with applying for
exemptions from the individual shared responsibility payment that are
granted through the Exchange, with the process of filing Exchange
appeals, and with understanding basic concepts related to health
coverage and how to use it. The proposed rule would also require
Navigators to provide targeted assistance to serve underserved and/or
vulnerable populations, as identified by each Exchange. Our proposals
would also specify that any individual or entity carrying out consumer
assistance functions under Sec. 155.205(d) and (e) or Sec. 155.210
must complete training prior to performing any assister duties,
including conducting outreach and education activities.
Our proposal to amend Sec. Sec. 155.205(d) and 155.215(b)(1)(i)
related to completing training for Navigators and certain non-Navigator
assistance personnel only applies to the timing of the training and
does not have any impact on the training itself. Therefore, it would
not affect the burden or cost for entities already subject to training
requirements. Because under existing Sec. 155.215(b)(2), Navigators in
FFEs must already be trained on the tax implications of enrollment
decisions, the individual responsibility to have health coverage,
eligibility appeals, and rights and processes for QHP appeals and
grievances, we expect our amendments to Sec. 155.210(b)(2)(v) through
(viii) to have minimal impact on FFE training. If any SBEs do not
already provide training on these topics, we expect they would incur
minimal costs in developing and implementing this training. Our
proposal requiring Navigators to serve underserved and vulnerable
populations will have an increased benefit for consumers, especially
hard to reach populations. All costs associated with reaching these
consumers in FFEs would be considered allowable costs that would be
covered by the Navigator grants for the FFEs and that may be drawn down
as the grantee incurs such costs. Additionally, Sec. 155.210(b)(2)(i)
already requires Navigators in all States to receive training on
serving underserved and vulnerable populations.
8. Certified Application Counselors
This proposed rule would require certified application counselor
organizations to submit data and information to the Exchanges regarding
the performance of their certified application counselors and the
consumer assistance they provide, upon request, in a form and manner
specified by the Exchange. Under proposed Sec. 155.225(b)(1)(iii), if
an Exchange requests these certified application counselor reports, the
Exchange would also need to review them. We assume that all Exchanges
will require monthly reports and will utilize in-house staff to review
them. We assume that an employee earning a wage that is equivalent to a
mid-level GS-11 employee would review monthly report submissions from
certified application counselor designated organizations.\49\ We
estimate that a mid-level employee (at an hourly wage rate of $43.13)
will spend 10 minutes reviewing each monthly report for a cost burden
of approximately $7.19 per monthly report per certified application
counselor designated organization. We estimate the costs of this
proposal for State Exchanges in the Collection of Information
Requirements section of this proposed rule. For the FFEs, we estimate
there are 3,500 certified application counselor designated
organizations, resulting in a total annual burden for FFEs of 7,000
hours, at a cost of $301,910.
---------------------------------------------------------------------------

\49\ Federal wage rates are available at https://www.opm.gov/policy-data-oversight/pay-leave/salries-wages/salary-tables/pdf/2015/GS_h.pdf.
---------------------------------------------------------------------------

9. SHOP
The SHOP facilitates 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.\50\
---------------------------------------------------------------------------

\50\ Available at: https://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
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The proposed Sec. 155.735(d)(2)(iii) would require the FF-SHOPs to
send qualified employees a notice notifying them that their child
dependent(s) are no longer eligible for dependent child coverage under
their plan because of age. The notice would be sent 90 days in advance
of the date when the dependent enrollee loses eligibility for dependent
coverage. We estimate the Federally-facilitated SHOPs will spend
roughly 35 hours annually, per State, to prepare the notice, for a
total cost of $1,775, per State, to design and implement the notices
proposed under Sec. 155.735(d)(2)(iii). We estimate that there will be
approximately 32 States operating under the Federally-facilitated SHOPs
and all will be subject to this requirement. Therefore, we estimate a
total annual cost of $58,575 for the FF-SHOPs as a result of this
requirement.

[[Page 75566]]

10. Standardized Options
In assessing the burden associated with implementing standardized
options, as described in Sec. 156.20, we assessed the potential impact
on premiums established by QHP issuers in the FFEs. Due to the many
complex factors that issuers consider when setting premiums, it is
impossible to fully predict how each QHP issuer would price a
standardized option prior to HHS sharing the standardized option with
stakeholders and soliciting feedback. We anticipate that an issuer will
price a standardized option based on how similar or different the
standardized option is to the issuer's current shelf (plan offerings).
Because of the large variation across the country, we expect that how
standardized options will be priced will vary by issuer and by State.
We do not anticipate that it will significantly affect 2017 plan
premiums. We expect that issuers will offer standardized options at a
given metal level if the standardized options are similar to their
existing plans and can be priced competitively.
The premium impact on issuers' non-standard plan offerings is
difficult to estimate.
Among the six State Exchanges that standardized plans and required
standardized options to be offered by QHP issuers in 2014, two
(California and New York) that attempted to conduct premium impact
analysis found that introduction of the requirement on issuers to offer
standardized options was associated with a negligible or downward
impact on premiums. However, these SBEs found it was difficult to
isolate the effects of plan standardization on premiums given the many
changes that occurred in the insurance market in 2014 (including the
uptake in individual market enrollment, the movement to narrow
networks, and active purchasing and rate negotiation in California).
Again, we note that there is a great deal of uncertainty in how
this policy will affect Exchanges due to several considerations:
While we propose to standardize cost-sharing on key
essential health benefits, there are a wide range of other benefit
design parameters that we will not standardize. It is not clear how
this differentiation will manifest among plans or affect consumer
choice.
There is also wide geographic variation in health care
markets, including with respect to prices, plan designs, and provider
networks. As such, we anticipate that the take-up of standardized
options and their impacts on consumers will vary in different locations
across the country.
11. 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. In this proposed rule, for the 2017 benefit year, we
propose a monthly FFE user fee rate equal to 3.5 percent and, for a
State-based Exchange that relies on the Federal platform, 3.0 percent
of the monthly premium. For the user fee charges assessed on issuers in
the FFE and State-based Exchanges using the Federal platform, we intend
to seek an exception to OMB Circular No. A-25R, which requires that the
user fee charge be sufficient to recover the full cost to the Federal
government of providing the special benefit. We seek this exception to
ensure that the FFE can support many of the goals of the Affordable
Care Act, including improving the health of the population, reducing
health care costs, and providing access to health coverage as advanced
by Sec. 156.50(d).
12. Actuarial Value
The proposed Sec. 156.135(g) changes current Sec. 156.135(g) to
allow for additional flexibility in our approach and options for
updating of the AV Calculator in the future. 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. 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.
13. Network Adequacy
In Sec. 156.230(f), we propose to require QHPs in the FFEs to
count certain out-of-network cost sharing towards the in-network annual
limitation on cost sharing for enrollees who receive EHB from an out-
of-network provider at an in-network setting. The premium impact will
vary based on existing State laws. It is difficult to estimate a
nationwide effect with precision. We seek comment on the impact of this
policy.
14. 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.\51\
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\51\ 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.
---------------------------------------------------------------------------

We set forth in this proposed rule the reductions in the maximum
annual limitation on cost sharing for silver plan variations.
Consistent with our analysis in previous Payment Notices, 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
2017 maximum annual limitation on cost sharing for self only coverage
($7,150). 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 2015 and 2016 Payment
Notices.
We also proposed the premium adjustment percentage for the 2017
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.
The annual premium adjustment percentage sets the rate of increase for
three parameters detailed in the Affordable Care Act: The annual
limitation on cost sharing (defined at Sec. 156.130(a)), the required
contribution percentage by individuals for minimum essential coverage
the Secretary may use to determine eligibility for hardship exemptions
under section 5000A of the Code, and the assessable payments under
sections 4980H(a) and 4980H(b). We believe that the proposed 2017
premium adjustment percentage of 13.25256291 percent is well within the
parameters used in the modeling of the Affordable Care Act, and we do
not expect that these

[[Page 75567]]

proposed provisions will alter CBO's March 2015 baseline estimates of
the budget impact.
15. Stand-Alone Dental Plans
In Sec. 156.150, we propose increasing the annual limitation on
cost sharing for stand-alone dental plans being certified by the
Exchanges. We believe that the benefit of increasing the annual limit
on cost sharing is that issuers would be able to offer consumers SADPs
that provide preventive care without any cost sharing, similar to what
is generally offered by SADPs in the large group market. This proposal
may also decrease the likelihood of premium increases.
16. Meaningful Difference
In Sec. 156.298, we propose to remove health savings account
eligibility and the individual coverage or enrollment group coverage
criteria as options for meeting the meaningful difference standard. As
we believe the health savings account eligibility criterion to overlap
with cost-sharing criterion (that is, we believe that a plan that meets
the meaningful difference standard for health savings account
eligibility would also meet the standard under the cost-sharing
criterion), we do not believe that removing this criterion will have
any impact on issuers. Additionally, our records indicate that no self-
only coverage plans were reviewed for meaningful difference in 2015 and
none are offered for 2016 Open Enrollment. As such, we estimate that
the impact of this proposed change is negligible.
17. Patient Safety Standards
The proposed next phase of patient safety standards requires QHP
issuers participating in Exchanges to track hospital participation
agreements with PSOs or other evidence-based patient safety
initiatives. We believe this proposed requirement to verify that
hospitals with greater than 50 beds use a patient safety evaluation
tool and implement a comprehensive person-centered hospital discharge
program would encourage continuous quality improvement among QHP
issuers by strengthening system-wide efforts to reduce patient harm in
a measurable way, improve health outcomes at lower costs, allow for
flexibility and innovation in patient safety interventions and
practices, and encourage meaningful health care quality improvements.
We discuss the administrative costs associated with submitting this
information in the Collection of Information section of this proposed
rule.
18. Acceptance of Certain Third Party Payments
On March 19, 2014, we published in the Federal Register an interim
final rule (IFR) with comment period titled, Patient Protection and
Affordable Care Act; Third Party Payment of Qualified Health Plan
Premiums (79 FR 15240). In Sec. 156.1250, we propose to refine this
rule to require individual market QHPs and SADPs to accept premium
payments made by certain third parties. This rule proposes to clarify
the circumstances in which individual market QHPs and SADPs must accept
payments made by Ryan White HIV/AIDS program; Federal and State
government programs that provide premium and cost sharing support for
specific individuals; and Indian tribes, tribal organizations, and
urban Indian organizations. We do not believe these actions would
impose any significant new costs on issuers because we assume that most
issuers already accept such payments under our interim final rule.
19. Medical Loss Ratio
In this proposed rule, we propose to amend the definition of unpaid
claims reserves in Sec. 158.103 and the requirements for reporting
incurred claims in Sec. 158.140(a) to utilize a 6-month, rather than a
3-month, run-out period beginning with the 2015 reporting year. This
proposed amendment would require incurred claims to be calculated as of
June 30, rather than March 31, of the year following the reporting
year. This proposed amendment would provide for a more accurate MLR and
risk corridors calculation by reducing reliance on estimates. Some
issuers overestimate their claims and liabilities, while others
underestimate them. We estimate that this proposed provision would
increase rebate payments from issuers to consumers by a net total of
approximately $12 million.
In addition, we are proposing to amend the risk corridors program
requirements at Sec. 153.530 to require issuers to true-up claims
liabilities and reserves used to determine the allowable costs reported
for the preceding benefit year to reflect the actual claims payments
made through June 30 of the year following the benefit year. We
estimate the impact of this proposal on the risk corridors program
elsewhere in this RIA. Because risk corridors payments and charges are
a component of the MLR and rebate calculation, the impact of this
proposed provision on risk corridors payments and charges will affect
MLR rebates to consumers. We estimate that this proposed provision
would increase rebate payments from issuers to consumers by an
estimated net total of $19 million for the 2015 MLR reporting year.

D. Regulatory Alternatives Considered

In developing the policies contained in this proposed rule, we
considered numerous alternatives to the presented proposals. Below we
discuss the key regulatory alternatives that we considered.
Regarding the 2017 required contribution percentage, which
establishes the threshold for spending on minimum essential health care
required for an affordability exemption from the individual
responsibility requirement, we considered continuing to use the per
capita gross domestic product as the measure of income growth. However,
a new measure of income growth, per capita personal income, became
available for the first time last year as part of the National Health
Expenditure's projections, and includes not only participation in
production but also transfer payments. We believe that this broader
measure of personal income more accurately reflects individual income
than GDP per capita.
For proposed Sec. 155.200(f), we considered a number of
alternatives. We considered not codifying the SBE-FP model, and winding
down use of the Federal platform by SBEs. This would have forced SBEs
to find a way to perform all required Exchange eligibility and
enrollment functions themselves, including the implementation of an
Exchange technology platform, or else convert to FFEs. We made the
proposal we did because we believe that it is technically feasible and
will permit a number of SBEs to access the Federal government's greater
economies of scale. We also considered a more customized option, under
which an SBE would be permitted to select from a menu of Federal
services. While we are considering providing more flexibility to SBE-
FPs in the future, at this point we do not have the operational ability
to permit that level of customization. Finally, we considered
alternatives under which issuers and other delegated and downstream
entities in States with SBE-FPs would not be required to meet FFE
standards, or HHS would not participate in enforcement against issuers
violating those FFE rules. As discussed in this proposed rule, we
believe that applying Federal standards to issuers and their downstream
entities for SBE-FPs helps promote consistent minimum standards
associated with HealthCare.gov.

[[Page 75568]]

Regarding the exemptions program, we considered maintaining the
option under which individuals can receive certification of certain
exemptions from the Exchange, rather than transitioning the process for
obtaining those exemption types fully to the IRS. However, we believe
that this approach contributes to confusion and unnecessarily creates
additional hurdles for individuals claiming these exemptions. We also
considered whether to cede other exemption types to the IRS, in
addition to the exemptions for Indian status, members of health care
sharing ministries, and incarceration. However, to minimize potential
consumer confusion, we opted only to streamline the exemptions process
and not to expand the scope of exemptions that the IRS may grant.
We propose issuing hardship exemptions when a consumer shows their
hardship is ongoing at the time of application. Hardship exemptions are
issued for months within the current calendar year plus the next, plus
the months before and after the hardship ends. When consumers approach
the Exchange near the end of the calendar year, we typically can only
grant them a hardship exemption for a few months. We believe the
current approach may not give consumers sufficient time to seek
coverage before their hardship exemption expires, and therefore
proposed extending the length of the hardship exemption. Many enrollees
eligible for a hardship exemption are currently facing significant life
disruptions, and may need more time to find coverage.
For employer choice in the FF-SHOPs, we considered offering an
additional employer choice option that would permit an employer to
select an actuarial value level of coverage, after which employees
could choose from plans available at that level and at the level above
it. Recognizing that small group market dynamics differ by State, we
decided to seek comment on, but not propose this option at this time.
We also considered requiring all SHOPs to offer these additional
employer choice options, but instead opted to maintain State-based
SHOPs' flexibility under the current regulations, so that States can
decide whether implementing additional employer choice options would be
in the best interest of small group market consumers in their State.
We considered requiring QHP issuers to offer standardized options
as a condition of participation in the FFEs. However, we believe that
markets and Exchanges may be at different stages of readiness for
standardized options, and that the cost-sharing structure that HHS
specifies may not be well tailored for all States. Similarly, we
believe that some issuers may have difficulty offering standardized
options in the short run because of operational constraints.
In developing proposed Sec. 156.230, we considered waiting for the
NAIC's workgroup to complete its work on drafting a revised model act
on network adequacy and not proposing changes to the network adequacy
standard for 2017. As discussed in the preamble of the final rule for
the HHS Notice of Benefit and Payment Parameters for 2016 (80 FR
10750), HHS had planned to await the results of the NAIC's workgroup to
develop a revised model act before proposing significant changes to
network adequacy policy. However, since the NAIC workgroup has not
completed its work, we have decided to proceed with proposing some
concepts from the draft versions of the NAIC model act to strengthen
network adequacy requirements, particularly for QHPs being offered in
the FFEs. We propose these requirements to ensure certain consumer
protections and standards are being provided to enrollees in 2017. As
an alternative, we also considered proposing more concepts from the
NAIC's drafts of the model act in the area of network adequacy, such as
requiring issuers to submit for review and approval an access plan and
establishing requirements for what the access plan must include.
However, we are cognizant of the burden on issuers to implement many
policy changes in one year, especially when these changes affect
issuers' QHP certification applications. Therefore, we will continue to
monitor the NAIC's workgroup efforts to develop a model act on network
adequacy, and will consider whether additional standards will be needed
in future years.
In Sec. 156.230(f), regarding QHP enrollees in the FFE who receive
an EHB from an out-of-network provider in an in-network setting, we
considered an alternative under which all cost sharing, regardless of
notification, would count towards the in-network annual limitation on
cost sharing, or to accrue at in-network rates. However, we recognize
that the issuer often has a limited ability to control the use of out-
of-network providers, and are wary of the impact of such a policy on
premiums.
In Sec. 156.1110, we considered maintaining the current approach
of aligning with Medicare hospital Conditions of Participation
standards and not establishing further regulations at this time for QHP
issuers to collect information, such as hospital participation
agreements with PSOs, to comply with new patient safety standards for
plan years beginning on or after January 1, 2017. However, we decided
to propose the policy in this proposed rule because we believe that
strengthening patient safety standards and aligning with current,
effective patient safety interventions will achieve greater impact for
consumers, in terms of health care quality improvement and harm
reduction, resulting in higher quality QHPs being offered in the
Exchanges. Additionally, we considered proposing an approach that did
not include establishing reasonable exceptions to the requirements for
a QHP issuer that contracts with a hospital with greater than 50 beds
to utilize a patient safety evaluation system and implement a mechanism
for comprehensive person-centered hospital discharges, as described in
section 1311(h)(1) of the Affordable Care Act. However, we determined
that it is important to support national patient safety efforts,
promote evidence-based patient safety interventions and allow for
flexibility, innovation, and minimal burden for issuers and hospitals.

E. Regulatory Flexibility Act

The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), 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 standards 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

[[Page 75569]]

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.
Group health plans.
We believe that health insurance issuers and group health plans
would be classified under the North American Industry Classification
System code 524114 (Direct Health and Medical Insurance Carriers).
According to SBA size standards, entities with average annual receipts
of $38.5 million or less would be considered small entities for these
North American Industry Classification System codes. Issuers could
possibly be classified in 621491 (HMO Medical Centers) and, if this is
the case, the SBA size standard would be $32.5 million or less.
In this proposed rule, we proposed standards for 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 50 employees,
unless a State opts to provide that employers with from 1 to 100
employees are ``small employers.'' 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 a
SHOP that are more restrictive than the current requirements on small
businesses offering employer sponsored insurance. 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.
Some of the entities that voluntarily act as Navigators and non-
Navigator assistance personnel subject to Sec. 155.215, or as
designated certified application counselor organizations, might be
small entities and could incur costs to comply with the provisions of
this proposed rule. It should be noted that HHS, in its role as the
operator of the FFEs, does not impose any fees on these entities for
participating in their respective programs, nor are there fees for
taking the Federally required training or completing continuing
education or recertification in FFEs. The cost burden related to our
proposals about reaching vulnerable and underserved populations and
providing post-enrollment and other assistance would apply to
Navigators in all Exchanges. The costs associated with these proposals
would generally be considered an allowable cost that would be covered
by the Navigator grants for the FFEs, and these grant funds may be
drawn down as the grantee incurs such costs. Depending upon applicable
State law and how States with State Exchanges implement their Navigator
grant programs, the same might be true in those States. Though it is
very likely that many costs associated with these proposals would be
covered by affected entities' and individuals' funding sources, HHS
cannot guarantee that all such costs would be covered because of the
possibility of budget limitations applicable to the FFEs in any given
period, and because there may be variations in how State Exchanges
implement their Navigator grant programs.
The costs related to the proposed reporting requirement for
designated certified application counselor organizations would be borne
by those organizations, which do not receive funding from Exchanges for
these services. The costs incurred by designated certified application
counselor organizations for the reporting of performance metrics are
expected to be low.
Based on data from MLR annual report submissions for the 2014 MLR
reporting year, approximately 118 out of 525 issuers of health
insurance coverage nationwide had total premium revenue of $38.5
million or less. This estimate may overstate the actual number of small
health insurance companies that may be affected, since almost 80
percent of these small companies belong to larger holding groups, and
many if not all of these small companies are likely to have non-health
lines of business that would result in their revenues exceeding $38.5
million. Only seven of these 118 potentially small entities, all of
them part of larger holding groups, are estimated to experience an
increase or decrease in the rebate amount under the proposed amendments
to the MLR provisions of this proposed rule in part 158, including one
entity that did not owe a rebate for the 2014 reporting year. Two
additional entities may experience a small (less than 2.5 percent)
change in their risk corridors payments and charges under the MLR
provisions of this proposed rule. Based on data from the 2014 MLR and
risk corridors annual report submissions, 20 of these 118 potentially
small entities had risk corridors payments or charges for the 2014
benefit year. Only one of these entities is estimated to experience a
decrease in its risk corridors payment under the proposed provisions in
Sec. 153.530(b)(2)(iv), with no impact on its rebate liability.
Therefore, we do not expect the proposed provisions of this rule to
affect a substantial number of small entities.

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 2015, that threshold is approximately $144 million.
Although we have not been able to quantify all costs, 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 would 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

[[Page 75570]]

determining standards relating to health insurance that is offered in
the individual and small group markets. For example, our proposal
permitting a State to elect to utilize the Federal platform for
enrollment and eligibility services may make certain SBEs more
economically feasible, providing more options for States seeking to
exercise the right to establish and operate n Exchange. 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.
While 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.
States will continue to license, monitor, and regulate agents and
brokers, both inside and outside of Exchanges. All State laws related
to agents and brokers, including State laws related to appointments,
contractual relationships with issuers, licensing, marketing, conduct,
and fraud will continue to apply.

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 for review.

List of Subjects

45 CFR Parts 144, 146, and 147

Health care, Health insurance, Reporting and recordkeeping
requirements.

45 CFR Part 153

Administrative practice and procedure, Health care, Health
insurance, Health records, Organization and functions (Government
agencies), Reporting and recordkeeping requirements.

45 CFR Part 154

Administrative practice and procedure, Claims, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.

45 CFR Part 155

Administrative practice and procedure, Health care, Health
insurance, Reporting and recordkeeping requirements, State and local
governments.

45 CFR Part 156

Administrative practice and procedure, Advertising, American
Indian/Alaska Natives, Conflict of interest, Consumer protection, Cost-
sharing reductions, Grant programs-health, Grants administration,
Health care, Health insurance, Health maintenance organization (HMO),
Health records, Hospitals, Individuals with disabilities, Loan
programs-health, Medicaid, Organization and functions (Government
agencies), Public assistance programs, Reporting and recordkeeping
requirements, State and local governments, Sunshine Act, Technical
assistance, Women, Youth.

45 CFR Part 158

Administrative practice and procedure, Claims, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.

For the reasons set forth in the preamble, the Department of Health
and Human Services proposes to amend 45 CFR parts 144, 146, 147, 150,
153, 154, 155, 156, and 158 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 paragraph (1) of the
definition of ``Excepted benefits'' and revising the definitions of
``Large employer'' and ``Small employer'' to read as follows:

Sec. 144.103 Definitions.

* * * * *
Excepted benefits * * *
(1) Group market provisions in 45 CFR part 146, subpart D, is
defined in 45 CFR 146.145(b); and
* * * * *
Large employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 51 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year. A State may elect to define large employer by
substituting ``101 employees'' for ``51 employees.'' In the case of an
employer that was not in existence throughout the preceding calendar
year, the determination of whether the employer is a large employer is
based on the average number of employees that it is reasonably expected
the employer will employ on business days in the current calendar year.
* * * * *
Small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 1 but not more than 50 employees on business days
during the preceding calendar year and who employs at least 1 employee
on the first day of the plan year. A State may elect to define small
employer by substituting ``100 employees'' for ``50 employees.'' In the
case of an employer that was not in existence throughout the preceding
calendar year, the determination of whether the employer is a small
employer is based on the average number of employees that it is
reasonably expected the employer will employ on business days in the
current calendar year.
* * * * *

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
3. The authority citation for part 146 continues to read as follows:

Authority: Secs. 2702 through 2705, 2711 through 2723, 2791,
and 2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92).

0
4. Section 146.150 is amended by--
0
a. In paragraph (a) introductory text, removing the reference
``paragraphs (c)

[[Page 75571]]

through (f)'' and adding in its place the reference ``paragraphs (c)
through (g)''.
0
b. Adding paragraph (g).
The addition reads as follows:

Sec. 146.150 Guaranteed availability of coverage for employers in the
small group market.

* * * * *
(g) Exception for discontinuing a particular product or all
coverage. (1) If an issuer decides to discontinue offering a particular
product or all coverage in the small group market in accordance with
Sec. 146.152, the issuer may between the time of providing the
relevant notice and discontinuing the coverage --
(i) Deny health insurance coverage in that product when the
exception to guaranteed renewability of coverage related to
discontinuing the particular product under Sec. 146.152(c) applies.
(ii) Deny health insurance coverage in the small group market when
the exception to guaranteed renewability of coverage related to
discontinuing all coverage under Sec. 146.152(d) applies.
(2) An issuer that denies coverage under this paragraph (g) must
apply paragraph (g)(1) of this section uniformly to all small employers
in the State consistent with applicable State law and without regard to
the claims experience or any health-status related factor relating to
those employers and their employees (or their respective dependents).
(3) Nothing in this paragraph (g) relieves an issuer of its
obligations with respect to existing policyholders, such as enrolling
dependents under an applicable special enrollment period.
* * * * *

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS

0
5. 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
6. Section 147.102 is amended by revising paragraph (a)(1)(ii) to read
as follows:

Sec. 147.102 Fair health insurance premiums.

(a) * * *
(1) * * *
(ii) Rating area, as established in accordance with paragraph (b)
of this section. For purposes of this paragraph (a), rating area is
determined--
(A) In the individual market, using the primary policyholder's
address.
(B) In the small group market, using the group policyholder's
principal business address. For purposes of this paragraph, principal
business address means the principal business address registered with
the State or, if a principal business address is not registered with
the State, or is registered solely for purposes of service of process
and is not a substantial worksite for the employer's business, the
business address within the State where the greatest number of
employees of such employer works. If, for a network plan, the group
policyholder's principal business address is not within the service
area of such plan, and the policyholder has employees who live, reside,
or work within the service area, the principal business address for
purposes of the network plan is deemed to be the business address
within the plan's service area where the greatest number of employees
work as of the beginning of the plan year. If there is no such business
address, the principal business address for purposes of the network
plan is deemed to be an address within the rating area selected by the
employer that reasonably reflects where the greatest number of
employees within the plan's service area live or reside as of the
beginning of the plan year.
* * * * *
0
7. Section 147.104 is amended by--
0
a. In paragraph (a), removing the reference ``paragraphs (b) through
(d)'' and adding in its place the reference ``paragraphs (b) thorugh
(e)''.
0
b. Redesignating paragraphs (e) through (i) as paragraphs (f) through
(j), respectively.
0
c. Adding paragraph (e).
The addition reads as follows:

Sec. 147.104 Guaranteed availability of coverage.

* * * * *
(e) Exception for discontinuing a particular product or all
coverage. (1) If an issuer decides to discontinue offering a particular
product or all coverage in the large group, small group, or individual
market in accordance with Sec. 147.106, the issuer may between the
time of providing the relevant notice and discontinuing the coverage--
(i) Deny health insurance coverage in that product when the
exception to guaranteed renewability of coverage related to
discontinuing the particular product under Sec. 147.106(c) applies.
(ii) Deny health insurance coverage in that market when the
exception to guaranteed renewability of coverage related to
discontinuing all coverage under Sec. 147.106(d) applies.
(2) An issuer that denies coverage under this paragraph (e) must
apply paragraph (e)(1) of this section uniformly to all employers or
individuals in the large group, small group, or individual market, as
applicable, in the State consistent with applicable State law and
without regard to the claims experience or any health-status related
factor relating to those individuals or employers and their employees
(or their respective dependents).
(3) Nothing in this paragraph (e) relieves an issuer from any of
its obligations with respect to existing policyholders, such as
enrolling dependents under an applicable special enrollment period.
* * * * *
0
8. Section 147.145 is amended by revising paragraph (b)(3) and adding
paragraph (b)(4) to read as follows:

Sec. 147.145 Student health insurance coverage.

* * * * *
(b) * * *
(3) Single risk pool. For plan years beginning on or after January
1, 2017, student health insurance coverage is subject to the index
rating provisions of Sec. 156.80(d) of this subchapter. For purposes
of the preceding sentence, a health insurance issuer that offers
student health insurance coverage may establish one or more separate
risk pools for each institution of higher education, if the distinction
between or among groups of students (or dependents of students) who
form the risk pool is based on a bona fide school-related
classification and not based on a health factor as described in Sec.
146.121 of this subchapter.
(4) Levels of coverage. The requirement to provide a specific level
of coverage described in section 1302(d) of the Affordable Care Act
does not apply to student health insurance coverage for plan years
beginning on or after January 1, 2017. However, the benefits provided
by such coverage must provide at least 60 percent actuarial value, as
certified by a member of the American Academy of Actuaries using
generally accepted actuarial principles.
* * * * *

PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT

0
9. 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
10. Section 153.405 is amended by revising paragraph (i) to read as
follows:

[[Page 75572]]

Sec. 153.405 Calculation of reinsurance contributions.

* * * * *
(i) Audits. HHS or its designee may audit a contributing entity to
assess its compliance with the requirements of this subpart. HHS or its
designee may audit a third party administrator, administrative
services-only contractor, or other third party who assists a
contributing entity with its obligations under this subpart to assess
compliance with the requirements of this subpart. A contributing entity
that chooses to use a third party administrator, administrative
services-only contractor, or other third party to assist with its
obligations under this subpart must ensure that the third party
administrator, administrative services-only contractor, or other third
party cooperate with any audit under this section.
0
11. Section 153.510 is amended by adding paragraph (g) to read as
follows:

Sec. 153.510 Risk corridors establishment and payment methodology.

* * * * *
(g) Adjustment to risk corridors payments and charges. If an issuer
reported a certified estimate of 2014 cost-sharing reductions on its
2014 MLR and Risk Corridors Annual Reporting Form that is lower than
the actual value of cost-sharing reductions calculated under Sec.
156.430(c) of this subchapter for the 2014 benefit year, HHS will make
an adjustment to the amount of the issuer's 2015 benefit year risk
corridors payment or charge measured by the full difference between the
certified estimate of 2014 cost-sharing reductions reported and the
actual value of cost-sharing reductions provided as calculated under
Sec. 156.430(c) for the 2014 benefit year.
0
12. Section 153.530 is amended by revising paragraphs (b)(2)(ii) and
(iii) and adding paragraph (b)(2)(iv) to read as follows:

Sec. 153.530 Risk corridors data requirements.

* * * * *
(b) * * *
(2) * * *
(ii) Any reinsurance payments received by the issuer for the non-
grandfathered health plans under the transitional reinsurance program
established under subpart C of this part;
(iii) A cost-sharing reduction amount equal to the amount of cost-
sharing reductions for the benefit year as calculated under Sec.
156.430(c) of this subchapter, to the extent not reimbursed to the
provider furnishing the item or service.
(iv) For the 2015 and later benefit years, any difference between--
(A) The sum of unpaid claims reserves and claims incurred but not
reported, as set forth in Sec. Sec. 158.103 and 158.140(a)(2) and (3)
of this subchapter, that were reported on the MLR and Risk Corridors
Annual Reporting Form for the year preceding the benefit year; and
(B) The actual claims incurred during the year preceding the
benefit year and paid between the valuation date of the unpaid claims
reserves and liabilities described above and June 30 of the year
following the benefit year.
* * * * *
0
13. Section 153.710 is amended by--
0
a. Removing paragraph (d).
0
b. Redesignating paragraphs (e) and (f) as paragraphs (d) and (e),
respectively.
0
c. Revising newly redesignated paragraph (e).
0
d. Adding paragraph (f).
0
e. Revising paragraphs (g) introductory text, (g)(1) introductory text,
(g)(1)(iii) and (iv), and (g)(2).
0
f. Adding paragraph (g)(3).
The revisions and additions read as follows:

Sec. 153.710 Data requirements.

* * * * *
(e) Unresolved discrepancies. If a discrepancy first identified in
a final dedicated distributed data environment report in accordance
with paragraph (d)(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) of this subchapter.
(f) Data sufficiency. If an issuer of a risk adjustment covered
plan fails to provide sufficient required data, such that HHS cannot
apply the applicable methodology to calculate the risk adjustment
payment transfer amount for the risk adjustment covered plan in a
timely or appropriate fashion, then HHS will assess a default risk
adjustment charge under Sec. 153.740(b). A default charge will be
assessed under this paragraph no later than the date of the
notification provided by HHS under Sec. 153.310(e). If an issuer of a
reinsurance eligible plan fails to provide data sufficient for HHS to
calculate reinsurance payments, the issuer will forfeit reinsurance
payments for claims it fails to submit.
(1) Data quantity. An issuer of a risk adjustment covered plan or a
reinsurance-eligible plan must provide, in a format and on a timeline
specified by HHS, data on its total enrollment and claims counts by
market, which HHS may use in evaluating whether the issuer provided
access in the dedicated distributed data environment to a sufficient
quantity of data to meet reinsurance and risk adjustment data
requirements.
(2) Data quality. If, following the deadline for submission of data
specified in Sec. 153.730, HHS identifies an anomaly that would cause
the data that a risk adjustment covered plan or a reinsurance-eligible
plan made available through a dedicated data environment to fail HHS's
data quality thresholds, the issuer may, within 10 calendar days of
receiving notification of the anomaly, submit an explanation of the
anomaly for HHS to consider in determining whether the issuer met the
reinsurance and risk adjustment data requirements.
(g) Risk corridors and MLR reporting. Except as provided in
paragraph (g)(3) of this section:
(1) Notwithstanding any discrepancy report made under paragraph
(d)(2) of this section, or any request for reconsideration under Sec.
156.1220(a) of this subchapter with respect to any risk adjustment
payment or charge, including an assessment of risk adjustment user
fees; reinsurance payment; cost-sharing reduction 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 MLR
programs:
* * * * *
(iii) A cost-sharing reduction amount equal to the actual amount of
cost-sharing reductions for the benefit year as calculated under Sec.
156.430(c) of this subchapter, to the extent not reimbursed to the
provider furnishing the item or service; and
(iv) For medical loss ratio reporting only, the risk corridors
payment to be made or charge assessed by HHS under Sec. 153.510.
(2) An issuer must report any adjustment made or approved by HHS
for any risk adjustment payment or charge, including an assessment of
risk adjustment user fees; any reinsurance payment; any cost-sharing
reduction payment or charge; or any risk corridors payment or charge;
where such adjustment has not be accounted for in a prior MLR and Risk
Corridor Annual Reporting Form, in the MLR and Risk Corridors Annual
Reporting Form for the following reporting year.
(3) In cases where HHS reasonably determines that the reporting
instructions in paragraph (g)(1) or (2) of this section would lead to
unfair or

[[Page 75573]]

misleading financial reporting, issuers must mitigate or correct their
data submissions in a form and manner to be specified by HHS.

PART 154--HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND
REVIEW REQUIREMENTS

0
14. The authority citation for part 154 continues to read as follows:

Authority: Section 2794 of the Public Health Service Act (42
U.S.C. 300gg-94).

0
15. Section 154.200 is amended by revising paragraph (c)(2) to read as
follows:

Sec. 154.200 Rate increases subject to review.

* * * * *
(c) * * *
(2) For rates filed for single risk pool coverage beginning on or
after January 1, 2017, the average increase, including premium rating
factors described in Sec. 147.102 of this subchapter, for all
enrollees weighted by premium volume for any plan within the product
meets or exceeds the applicable threshold.
* * * * *
0
16. Section 154.215 is amended by revising paragraphs (a) and (b)
introductory text and removing and reserving paragraph (c) to read as
follows:

Sec. 154.215 Submission of rate filing justification.

(a) A health insurance issuer must submit to CMS and to the
applicable State (if the State accepts such submissions) the
information specified below on a form and in a manner prescribed by the
Secretary.
(1) For all single risk pool coverage products, including new and
discontinuing products, the Unified Rate Review Template, as described
in paragraph (d) of this section;
(2) For each single risk pool coverage product that includes a plan
that is subject to a rate increase, regardless of the size of the
increase, the Unified Rate Review Template and Actuarial Memorandum, as
described in paragraph (f) of this section;
(3) For each single risk pool coverage product that includes a plan
with a rate increase that is subject to review under Sec. 154.210, all
parts of the Rate Filing Justification, as described in paragraph (b)
of this section
(b) A Rate Filing Justification includes one or more of the
following:
* * * * *
(c) [Reserved]
* * * * *
0
17. Section 154.220 is amended by revising the introductory text and
paragraphs (b) introductory text and (b)(1) to read as follows:

Sec. 154.220 Timing of providing the rate filing justification.

A health insurance issuer must submit applicable sections of the
Rate Filing Justification for all single risk pool coverage in the
individual or small group market, as follows:
* * * * *
(b) For coverage effective on or after January 1, 2017, by the
earlier of the following:
(1) The date by which the State requires submission of a rate
filing; or
* * * * *
0
18. Section 154.230 is amended by revising paragraph (c)(2)(i) to read
as follows:

Sec. 154.230 Submission and posting of Final Justifications for
unreasonable rate increases.

* * * * *
(c) * * *
(2) * * *
(i) The information made available to the public by CMS and
described in Sec. 154.215(h).
* * * * *

PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT

0
19. The authority citation for part 155 continues 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 155.20 is amended by--
0
a. In the definition of ``Applicant'', revising paragraph (2).
0
b. Adding the definition of ``Federal platform agreement'' in
alphabetical order.
0
c. Revising the definitions of ``Large employer'' and ``Small
employer''.
The addition and revisions read as follows:

Sec. 155.20 Definitions.

* * * * *
Applicant * * *
(2) For SHOP:
(i) An employer seeking eligibility to purchase coverage through
the SHOP; or
(ii) An employer, employee, or a former employee seeking
eligibility for enrollment in a QHP through the SHOP for himself or
herself and, if the qualified employer offers dependent coverage
through the SHOP, seeking eligibility to enroll his or her dependents
in a QHP through the SHOP.
* * * * *
Federal platform agreement means an agreement between a State
Exchange and HHS under which a State Exchange elects to rely on the
Federal platform to carry out select Exchange functions.
* * * * *
Large employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 51 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year. In the case of an employer that was not in existence
throughout the preceding calendar year, the determination of whether
the employer is a large employer is based on the average number of
employees that it is reasonably expected the employer will employ on
business days in the current calendar year. A State may elect to define
large employer by substituting ``101 employees'' for ``51 employees.''
The number of employees must be determined using the method set forth
in section 4980H(c)(2) of the Code.
* * * * *
Small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least one but not more than 50 employees on business days
during the preceding calendar year and who employs at least one
employee on the first day of the plan year. In the case of an employer
that was not in existence throughout the preceding calendar year, the
determination of whether the employer is a small employer is based on
the average number of employees that it is reasonably expected the
employer will employ on business days in the current calendar year. A
State may elect to define small employer by substituting ``100
employees'' for ``50 employees.'' The number of employees must be
determined using the method set forth in section 4980H(c)(2) of the
Code.
* * * * *
0
21. Section 155.106 is amended by--
0
a. Revising paragraphs (a) introductory text, (a)(2) and (3), and (b)
introductory text.
0
b. Adding paragraphs (a)(4), (a)(5), and (c).
The revisions and additions read as follows:

[[Page 75574]]

Sec. 155.106 Election to operate an Exchange after 2014.

(a) Election to operate an Exchange. Except as provided in
paragraph (c) of this section, a State electing to seek approval of its
Exchange must:
* * * * *
(2) Submit an Exchange Blueprint application for HHS approval at
least 15 months prior to the date on which the Exchange proposes to
begin open enrollment as a State Exchange;
(3) Have in effect an approved, or conditionally approved, Exchange
Blueprint and operational readiness assessment at least 14 months prior
to the date on which the Exchange proposes to begin open enrollment as
a State Exchange;
(4) Develop a plan jointly with HHS to facilitate the transition to
a State Exchange; and
(5) If the open enrollment period for the year the State intends to
begin operating an SBE has not been established, this deadline must be
calculated based on the date open enrollment began or will begin in the
year in which the State is submitting the Blueprint application.
(b) Transition process for State Exchanges that cease operations.
If a State intends to cease operation of its Exchange, HHS will operate
the Exchange on behalf of the State. Therefore, a State that intends to
cease operations of its Exchange must:
* * * * *
(c) Process for State Exchanges that seek to utilize the Federal
platform for select functions. A State seeking approval as a State
Exchange utilizing the Federal platform to support select functions
through a Federal platform agreement under Sec. 155.200(f) must:
(1) If the State Exchange does not have a conditionally approved
Exchange Blueprint application, submit one for HHS approval at least 3
months prior to the date on which the Exchange proposes to begin open
enrollment as an SBE-FP;
(2) If the State Exchange has a conditionally approved Exchange
Blueprint application, submit any significant changes to that
application for HHS approval, in accordance with Sec. 155.105(e), at
least 3 months prior to the date on which the Exchange proposes to
begin open enrollment as an SBE-FP;
(3) Have in effect an approved, or conditionally approved, Exchange
Blueprint and operational readiness assessment at least 2 months prior
to the date on which the Exchange proposes to begin open enrollment as
an SBE-FP, in accordance with HHS rules, as a State Exchange utilizing
the Federal platform;
(4) Upon approval, or conditional approval, of the Exchange
Blueprint, execute a Federal platform agreement prior to the start of
the open enrollment period for which the State Exchange desires to
begin utilizing the Federal platform; and
(5) Coordinate with HHS on a transition plan to be developed
jointly between HHS and the State.
0
22. Section 155.170 is amended by revising paragraphs (a)(2), (a)(3),
and (c)(2)(iii) to read as follows:

Sec. 155.170 Additional required benefits.

(a) * * *
(2) A benefit required by State action taking place on or before
December 31, 2011 is considered an EHB. A benefit required by State
action taking place on or after January 1, 2012, other than for
purposes of compliance with Federal requirements, is considered in
addition to the essential health benefits.
(3) The State will identify which State-required benefits are in
addition to the EHB.
* * * * *
(c) * * *
(2) * * *
(iii) Reported to the State.
0
23. Section 155.200 is amended by revising paragraph (a) and adding
paragraph (f) to read as follows:

Sec. 155.200 Functions of an Exchange.

(a) General requirements. An Exchange must perform the functions
described in this subpart and in subparts D, E, F, G, H, K, M, and O of
this part unless the State is approved to operate only a SHOP by HHS
under Sec. 155.100(a)(2), in which case the Exchange operated by the
State must perform the functions described in subpart H of this part
and all applicable provisions of other subparts referenced in that
subpart. In a State that is approved to operate only a SHOP, the
individual market Exchange operated by HHS in that State will perform
the functions described in this subpart and in subparts D, E, F, G, K,
M, and O of this part.
* * * * *
(f) Requirements for State Exchanges on the Federal platform. (1) A
State that receives approval or conditional approval to operate a State
Exchange on the Federal platform under Sec. 155.106(c) may meet its
obligations under paragraph (a) of this section by relying on Federal
services that the Federal government agrees to provide under a Federal
platform agreement.
(2) A State Exchange on the Federal platform must establish and
oversee requirements for its issuers that are no less strict than the
following requirements that are applied to Federally-facilitated
Exchange issuers:
(i) Data submission requirements under Sec. 156.122(d)(2) of this
subchapter;
(ii) Network adequacy standards under Sec. 156.230 of this
subchapter;
(iii) Essential community providers standards under Sec. 156.235
of this subchapter;
(iv) Meaningful difference standards under Sec. 156.298 of this
subchapter;
(v) Changes of ownership of issuers requirements under Sec.
156.330 of this subchapter;
(vi) QHP issuer compliance and compliance of delegated or
downstream entities requirements under Sec. 156.340(a)(4) of this
subchapter; and
(vii) Casework requirements under Sec. 156.1010 of this
subchapter.
(3) If a State is not substantially enforcing any requirement
listed under Sec. 155.200(f)(2) of this subchapter with respect to a
QHP issuer or plan in a State-based Exchange on the Federal platform,
HHS may enforce that requirement directly against the issuer or plan by
means of plan suppression under Sec. 156.815 of this subchapter.
0
24. Section 155.205 is amended by--
0
a. Revising paragraphs (a) and (d)(1).
0
b. Adding paragraph (b)(7).
The addition and revisions read as follows:

Sec. 155.205 Consumer assistance tools and programs of an Exchange.

(a) Call center. The Exchange must provide for operation of a toll-
free call center that addresses the needs of consumers requesting
assistance and meets the requirements outlined in paragraphs (c)(1),
(c)(2)(i), and (c)(3) of this section, unless it enters into a Federal
platform agreement through which it relies on HHS to carry out call
center functions, in which case the Exchange must provide at a minimum
a toll-free telephone hotline to respond to requests for assistance.
(b) * * *
(7) A State-based Exchange on the Federal platform must at a
minimum maintain an informational Internet Web site.
* * * * *
(d) * * *
(1) The Exchange must have a consumer assistance function that
meets the standards in paragraph (c) of this section, including the
Navigator program described in Sec. 155.210. Any individual providing
such consumer assistance must be trained regarding QHP options,
insurance affordability programs, eligibility, and benefits rules and
regulations governing all insurance affordability programs operated in
the State, as implemented in the State, prior

[[Page 75575]]

to providing such assistance or the outreach and education activities
specified in paragraph (e) of this section.
* * * * *
0
25. Section 155.210 is amended by--
0
a. Revising paragraphs (b)(2)(iii) and (iv).
0
b. Adding paragraphs (b)(2)(v), (vi), (vii), and (viii).
0
c. Revising paragraph (d)(6).
0
d. In paragraph (e)(7), removing the period at the end of the paragraph
and adding a semicolon in its place.
0
e. Adding paragraphs (e)(8) and (9).
The revisions and additions read as follows:

Sec. 155.210 Navigator program standards.

* * * * *
(b) * * *
(2) * * *
(iii) The range of QHP options and insurance affordability
programs;
(iv) The privacy and security standards applicable under Sec.
155.260;
(v) The process of filing Exchange eligibility appeals;
(vi) General concepts regarding exemptions from the requirement to
maintain minimum essential coverage and from the individual shared
responsibility payment, including the application process for
exemptions granted through the Exchange, and IRS resources on
exemptions;
(vii) The Exchange-related components of the premium tax credit
reconciliation process and IRS resources on this process; and
(viii) Basic concepts related to health coverage and how to use it.
* * * * *
(d) * * *
(6) Provide to an applicant or potential enrollee gifts of any
value as an inducement for enrollment. The value of gifts provided to
applicants and potential enrollees for purposes other than as an
inducement for enrollment must not exceed nominal value, either
individually or in the aggregate, when provided to that individual
during a single encounter. For purposes of this paragraph (d)(6), the
term gifts includes gift items, gift cards, cash cards, cash, and
promotional items that market or promote the products or services of a
third party, but does not include the reimbursement of legitimate
expenses incurred by a consumer in an effort to receive Exchange
application assistance, such as travel or postage expenses.
* * * * *
(e) * * *
(8) Provide targeted assistance to serve underserved or vulnerable
populations, as identified by the Exchange, within the Exchange service
area.
(i) In a Federally-facilitated Exchange, this paragraph (e)(8) will
apply beginning with the Navigator grant application process for
Navigator grants awarded in 2018. The Federally-facilitated Exchange
will identify populations as vulnerable or underserved that are
disproportionately without access to coverage or care, or that are at a
greater risk for poor health outcomes, in the funding opportunity
announcement for its Navigator grants, and applicants for those grants
will have an opportunity to propose additional vulnerable or
underserved populations in their applications for the Federally-
facilitated Exchange's approval.
(ii) [Reserved]
(9) Provide information and assistance with--
(i) The process of filing Exchange eligibility appeals;
(ii) Understanding and applying for exemptions from the individual
shared responsibility requirement that are granted through the
Exchange, understanding the availability of exemptions from the
requirement to maintain minimum essential coverage and from the
individual shared responsibility payment that are claimed through the
tax filing process and how to apply for them, and understanding the
availability of IRS resources on this topic;
(iii) Understanding the Exchange-related components of the premium
tax credit reconciliation process, and the availability of IRS
resources on this process;
(iv) Understanding basic concepts related to health coverage and
how to use it; and
(v) Referrals to licensed tax advisers, tax preparers, or other
resources for assistance with tax preparation and tax advice related to
consumer questions about the Exchange application and enrollment
process, exemptions from the requirement to maintain minimum essential
coverage and from the individual shared responsibility requirement, and
premium tax credit reconciliations.
* * * * *
0
26. Section 155.215 is amended by revising paragraph (b)(1)(i) to read
as follows:

Sec. 155.215 Standards applicable to Navigators and Non-Navigator
Assistance Personnel carrying out consumer assistance functions under
Sec. Sec. 155.205(d) and (e) and 155.210 in a Federally-facilitated
Exchange and to Non-Navigator Assistance Personnel funded through an
Exchange Establishment Grant.

* * * * *
(b) * * *
(1) * * *
(i) Obtain certification by the Exchange prior to carrying out any
consumer assistance functions or outreach and education activities
under Sec. 155.205(d) and (e) or Sec. 155.210;
* * * * *
0
27. Section 155.220 is amended by--
0
a. Revising paragraph (c)(1), (f)(4), (g)(2)(ii), (g)(3), and (g)(4);
0
b. Adding paragraphs (g)(5), (j), (k), and (l).
The revisions and additions read 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.

* * * * *
(c) * * *
(1) The agent or broker ensures the applicant's completion of an
eligibility verification and enrollment application through the
Exchange Internet Web site or an Exchange approved web service using
the FFE single streamline application;
* * * * *
(f) * * *
(4) When termination of the agreement between the agent or broker
and the Exchange under paragraph (d) of this section becomes effective
under paragraph (f) of this section, the agent or broker will no longer
be registered with the Federally-facilitated Exchanges, or be permitted
to assist with or facilitate enrollment of qualified individuals,
qualified employers or qualified employees in coverage in a manner that
constitutes enrollment through a Federally-facilitated Exchange, or be
permitted to assist individuals in applying for advance payments of the
premium tax credit and cost-sharing reductions for QHPs. The agent's or
broker's agreement with the Exchange under Sec. 155.260(b) will also
be terminated through the termination for cause process set forth in
that agreement. The agent or broker must continue to protect any
personally identifiable information accessed during the term of either
of these agreements with the Federally-facilitated Exchange.
(g) * * *
(2) * * *
(ii) Any term or condition of the agreement with the Federally-
facilitated

[[Page 75576]]

Exchange required under paragraph (d) of this section, or any term or
condition of the agreement with the Federally-facilitated Exchange
required under Sec. 155.260(b);
* * * * *
(3) HHS will notify the agent or broker of the specific finding of
noncompliance or pattern of noncompliance made under paragraph (g)(1)
of this section, and after 30 days from the date of the notice, may
terminate the agreement for cause if the matter is not resolved to the
satisfaction of HHS.
(4) After the period in paragraph (g)(3) of this section has
elapsed and the agreement under paragraph (d) of this section is
terminated, the agent or broker will no longer be registered with the
Federally-facilitated Exchanges, or be permitted to assist with or
facilitate enrollment of a qualified individual, qualified employer, or
qualified employee in coverage in a manner that constitutes enrollment
through a Federally-facilitated Exchange, or be permitted to assist
individuals in applying for advance payments of the premium tax credit
and cost-sharing reductions for QHPs. The agent's or broker's agreement
with the Exchange under Sec. 155.260(b) will also be terminated
through the process set forth in that agreement. The agent or broker
must continue to protect any personally identifiable information
accessed during the term of either of these agreements with a
Federally-facilitated Exchange.
(5) In cases involving potential fraud or abusive conduct--
(i)(A) If HHS reasonably suspects that an agent or broker may have
engaged in fraud or abusive conduct using personally identifiable
information of an Exchange enrollee or applicant, or in connection with
an Exchange enrollment or application, HHS may temporarily suspend the
agent's or broker's agreements required under paragraph (d) of this
section and under Sec. 155.260(b) for up to 90 calendar days. The
suspension will be effective starting on the date of the notice that
HHS sends to the agent or broker advising of the suspension under this
paragraph (g)(5)(i).
(B) The agent or broker may submit evidence in a form and manner to
be specified by HHS, to rebut the allegation during this 90-day period.
If the agent or broker fails to submit such evidence during the
suspension period, HHS may terminate the agent's or broker's agreements
required under paragraph (d) of this section and under Sec. 155.260(b)
for cause under paragraph (g)(5)(ii) of this section.
(ii) If HHS reasonably confirms the credibility of an allegation
that an agent or broker engaged in fraud or abusive conduct (or is
notified by a State or law enforcement authority of the State or law
enforcement authority's finding or determination of fraud or behavior
that would constitute abusive conduct) using personally identifiable
information of Exchange enrollees or applicants, or in connection with
an Exchange enrollment or application, HHS will terminate the agent's
or broker's agreements required under paragraph (d) of this section and
under Sec. 155.260(b) for cause. The termination will be effective
starting on the date of the notice that HHS sends to the agent or
broker advising of the termination of the agreements under this
paragraph (g)(5)(ii).
(iii) During the suspension period under paragraph (g)(5)(i) of
this section and following termination of the agreements under
paragraph (g)(5)(ii) of this section, the agent or broker will not be
registered with the Federally-facilitated Exchanges, or be permitted to
assist with or facilitate enrollment of qualified individuals,
qualified employers, or qualified employees in coverage in a manner
that constitutes enrollment through a Federally-facilitated Exchange,
or be permitted to assist individuals in applying for advance payments
of the premium tax credit and cost-sharing reductions for QHPs. In the
case of termination under paragraph (g)(5)(ii) of this section, the
agent's or broker's agreement with the Exchange under Sec. 155.260(b)
will also be terminated as of the date of the notice. The agent or
broker must continue to protect any personally identifiable information
accessed during the term of either of these agreements with a
Federally-facilitated Exchange.
* * * * *
(j) Federally-facilitated Exchange standards of conduct. (1) An
agent or broker that assists with or facilitates enrollment of
qualified individuals, qualified employers, or qualified employees, in
coverage in a manner that constitutes enrollment through a Federally-
facilitated Exchange, or assists individuals in applying for advance
payments of the premium tax credit and cost-sharing reductions for QHPs
sold through a Federally-facilitated Exchange, must--
(i) Have executed the required agreement under paragraph Sec.
155.260(b);
(ii) Be registered with the Federally-facilitated Exchanges under
paragraph (d)(1) of this section; and
(iii) Comply with the standards of conduct in paragraph (j)(2) of
this section.
(2) Standards of conduct. An individual or entity described in
paragraph (j)(1) of this section must--
(i) Provide consumers with correct information, without omission of
material fact, regarding the Federally-facilitated Exchanges, QHPs
offered through the Federally-facilitated Exchanges, and insurance
affordability programs, and refrain from marketing or conduct that is
misleading or coercive, or discriminates based on race, color, national
origin, disability, age, sex, gender identity, or sexual orientation;
(ii) Provide the Federally-facilitated Exchanges with correct
information under section 1411(b) of the Affordable Care Act;
(iii) Obtain the consent of the individual, employer, or employee
prior to assisting with or facilitating enrollment through a Federally-
facilitated Exchange, or assisting the individual in applying for
advance payments of the premium tax credit and cost-sharing reductions
for QHPs;
(iv) Protect consumer personally identifiable information according
to Sec. 155.260(b)(3) and the agreement described in Sec.
155.260(b)(2); and
(v) Comply with all applicable Federal and State laws and
regulations.
(3) An agent or broker will be considered to be in compliance with
paragraphs (j)(2)(i) and (ii) of this section if HHS determines that
there was a reasonable cause for the failure to provide correct
information and that the agent or broker acted in good faith.
(k) Penalties other than termination of the agreement with the
Federally-facilitated Exchanges. (1) If HHS determines that an agent or
broker has failed to comply with the requirements of this section, in
addition to any other available remedies, that agent or broker--
(i) May be denied the right to enter into agreements with the
Federally-facilitated Exchanges in future years; and
(ii) May be subject to civil money penalties as described in Sec.
155.285.
(2) HHS will notify the agent or broker of the proposed imposition
of penalties under paragraph (k)(1)(i) of this section and, after 30
calendar days from the date of the notice, may impose the penalty if
the agent or broker has not requested a reconsideration under paragraph
(h) of this section. The proposed imposition of penalties under
paragraph (k)(1)(ii) of this section will follow the process outlined
under Sec. 155.285.
(l) Application to State-Based Exchanges using a Federal platform.
An agent or broker who enrolls qualified individuals, qualified
employers, or

[[Page 75577]]

qualified employees in coverage in a manner that constitutes enrollment
through an State-Based Exchange using a Federal platform, or assists
individual market consumers with submission of applications for advance
payments of the premium tax credit and cost-sharing reductions through
an State-Based Exchange using a Federal platform must comply with all
applicable Federally-facilitated Exchange standards in this section.
0
28. Section 155.222 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraphs (a)(1), (a)(2), (b)(1) through (5), and (d).
0
c. Adding paragraph (b)(6).
The revisions and addition read as follows:

Sec. 155.222 Standards for HHS-approved vendors of Federally-
facilitated Exchange training for agents and brokers.

(a) * * *
(1) A vendor must be approved by HHS, in a form and manner to be
determined by HHS, to have its training program recognized for agents
and brokers assisting with or facilitating enrollment in individual
market or SHOP coverage through the Federally-facilitated Exchanges
consistent with Sec. 155.220.
(2) As part of the training program, the vendor must require agents
and brokers to provide identifying information and successfully
complete the required curriculum.
* * * * *
(b) * * *
(1) Submit a complete and accurate application by the deadline
established by HHS, which includes demonstration of prior experience
with successfully conducting online training, as well as providing
technical support to a large customer base.
(2) Adhere to HHS specifications for content, format, and delivery
of training, which includes offering continuing education units (CEUs)
for at least five States in which a Federally-facilitated Exchange or
State-Based Exchange using a Federal platform is operating.
(3) Collect, store, and share with HHS training completion data
from agent and broker users of the vendor's training in a manner,
format, and frequency specified by HHS, and protect all data from agent
and broker users of the vendor's training in accordance with applicable
privacy and security requirements.
(4) Execute an agreement with HHS, in a form and manner to be
determined by HHS, which requires the vendor to comply with applicable
HHS guidelines for implementing the training and interfacing with HHS
data systems, and the use of all data collected.
(5) Permit any individual who holds a valid State license or
equivalent State authority to sell health insurance products to access
the vendor's training.
(6) Provide technical support to agent and broker users of the
vendor's training as specified by HHS.
* * * * *
(d) Monitoring. HHS may periodically monitor and audit vendors
approved under this subpart, and their records related to the training
functions described in this section, to ensure ongoing compliance with
the standards in paragraph (b) of this section. If HHS determines that
an HHS-approved vendor is not in compliance with the standards required
in paragraph (b) of this section, the vendor may be removed from the
approved list described in paragraph (c) of this section and may be
required by HHS to cease performing the training functions described
under this subpart.
* * * * *
0
29. Section 155.225 is amended by adding paragraph (b)(1)(iii) and
revising paragraph (g)(4) to read as follows:

Sec. 155.225 Certified application counselors.

* * * * *
(b) * * *
(1) * * *
(iii) Provides data and information to the Exchange regarding the
number and performance of its certified application counselors and
regarding the consumer assistance provided by its certified application
counselors, upon request, in the form and manner specified by the
Exchange. Beginning in January 2017, in a Federally-facilitated
Exchange, organizations designated by the Exchange must submit monthly
reports that include, at a minimum, data regarding the number of
individuals who have been certified by the organization; the total
number of consumers who received application and enrollment assistance
from the organization; and of that number, the number of consumers who
received assistance in applying for and selecting a QHP, enrolling in a
QHP, or applying for Medicaid or CHIP.
* * * * *
(g) * * *
(4) Provide to an applicant or potential enrollee gifts of any
value as an inducement for enrollment. The value of gifts provided to
applicants and potential enrollees for purposes other than as an
inducement for enrollment must not exceed nominal value, either
individually or in the aggregate, when provided to that individual
during a single encounter. For purposes of this paragraph (g)(4), the
term gifts includes gift items, gift cards, cash cards, cash, and
promotional items that market or promote the products or services of a
third party, but does not include the reimbursement of legitimate
expenses incurred by a consumer in an effort to receive Exchange
application assistance, such as travel or postage expenses.
* * * * *
0
30. Section 155.260 is amended by revising paragraph (a)(1)
introductory text 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. 155.300; 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:
* * * * *
0
31. Section 155.280 is amended by revising paragraph (a) to read as
follows:

Sec. 155.280 Oversight and monitoring of privacy and security
requirements.

(a) General. HHS will oversee and monitor the Federally-facilitated
Exchanges, State-based Exchanges on the Federal platform, and non-
Exchange entities required to comply with the privacy and security
standards established and implemented by a Federally-facilitated
Exchange pursuant to Sec. 155.260 for compliance with those standards.
HHS will oversee and monitor State Exchanges for compliance with the
standards State Exchanges establish and implement pursuant to Sec.
155.260. State Exchanges will oversee and monitor non-Exchange entities
required to comply with the privacy and security standards established
and implemented by a State Exchange in accordance to Sec. 155.260.
* * * * *
0
32. Section 155.302 is amended by revising paragraph (a)(1) to read as
follows:

Sec. 155.302 Options for conducting eligibility determinations.

(a) * * *
(1) Directly, through contracting arrangements in accordance with
Sec. 155.110(a), or as a State-based Exchange on the Federal platform
through a Federal platform agreement under which HHS carries out
eligibility

[[Page 75578]]

determinations and other requirements contained within this subpart; or
* * * * *
0
33. Section 155.310 is amended by revising paragraphs (h) introductory
text and (h)(2) to read as follows:

Sec. 155.310 Eligibility process.

* * * * *
(h) Notice of an employee's receipt of advance payments of the
premium tax credit and cost-sharing reductions to an employer. The
Exchange must notify an employer that an employee has been determined
eligible for advance payments of the premium tax credit and cost-
sharing reductions and has enrolled in a qualified health plan through
the Exchange within a reasonable timeframe following a determination
that the employee is eligible for advance payments of the premium tax
credit and cost-sharing reductions in accordance with Sec. 155.305(g)
or Sec. 155.350(a) and enrollment by the employee in a qualified
health plan through the Exchange. Such notice must:
* * * * *
(2) Indicate that the employee has been determined eligible advance
payments of the premium tax credit and cost-sharing reductions and has
enrolled in a qualified health plan through the Exchange;
* * * * *
0
34. Section 155.320 is amended by--
0
a. Revising paragraphs (c)(3)(vi) and (d)(3).
0
b. Adding paragraph (d)(4).
The revisions and addition read as follows:

Sec. 155.320 Verification process related to eligibility for
insurance affordability programs.

* * * * *
(c) * * *
(3) * * *
(vi) Alternate verification process for decreases in annual
household income estimates and for situations in which tax return data
is unavailable. If a tax filer qualifies for an alternate verification
process based on the requirements specified in paragraph (c)(3)(iv) of
this section and the applicant's attestation to projected annual
household income, as described in paragraph (c)(3)(ii)(B) of this
section, is more than a reasonable threshold below the annual household
income computed in accordance with paragraph (c)(3)(ii)(A) of this
section, or if data described in paragraph (c)(1)(i) of this section is
unavailable, the Exchange must attempt to verify the applicant's
attestation of the tax filer's projected annual household income by
following the procedures specified in paragraph (c)(3)(vi)(A) through
(G) of this section. For the purposes of this paragraph (c)(3)(vi), a
reasonable threshold is established by the Exchange in guidance and
approved by HHS, but must not be less than10 percent, and can also
include a threshold dollar amount. The Exchange's threshold is subject
to approval by HHS.
* * * * *
(d) * * *
(3) Verification procedures. (i) If an applicant's attestation is
not reasonably compatible with the information obtained by the Exchange
as specified in paragraphs (d)(2)(i) through (iii) of this section,
other information provided by the application filer, or other
information in the records of the Exchange, the Exchange must follow
the procedures specified in Sec. 155.315(f).
(ii) Except as specified in paragraph (d)(3)(i) or (d)(4)(i) of
this section, the Exchange must accept an applicant's attestation
regarding the verification specified in paragraph (d) of this section
without further verification.
(4) Alternate procedures. For any benefit year for which it does
not reasonably expect to obtain sufficient verification data as
described in paragraphs (d)(2)(i) through (iii) of this section, the
Exchange must follow the procedures specified in paragraph (d)(4)(i) of
this section or, for benefit years 2016 and 2017, the Exchange may
follow the procedures specified in paragraph (d)(4)(ii) of this
section. For purposes of this paragraph (d)(4), the Exchange reasonably
expects to obtain sufficient verification data for any benefit year
when, for the benefit year, the Exchange is able to obtain data about
enrollment in and eligibility for qualifying coverage in an eligible
employer-sponsored plan from at least one electronic data source that
is available to the Exchange and that has been approved by HHS, based
on evidence showing that the data source is sufficiently current,
accurate, and minimizes administrative burden, as described under
paragraph (d)(2)(i) of this section.
(i) Select a statistically significant random sample of applicants
for whom the Exchange does not have any of the information specified in
paragraphs (d)(2)(i) through (iii) of this section and--
(A) Provide notice to the applicant indicating that the Exchange
will be contacting any employer identified on the application for the
applicant and the members of his or her household, as defined in 26 CFR
1.36B-1(d), to verify whether the applicant is enrolled in an eligible
employer-sponsored plan or is eligible for qualifying coverage in an
eligible employer-sponsored plan for the benefit year for which
coverage is requested;
(B) Proceed with all other elements of the eligibility
determination using the applicant's attestation, and provide
eligibility for enrollment in a QHP to the extent that an applicant is
otherwise qualified;
(C) Ensure that advance payments of the premium tax credit and
cost-sharing reductions are provided on behalf of an applicant who is
otherwise qualified for such payments and reductions, as described in
Sec. 155.305, if the tax filer attests to the Exchange that he or she
understands that any advance payments of the premium tax credit paid on
his or her behalf are subject to reconciliation;
(D) Make reasonable attempts to contact any employer identified on
the application for the applicant and the members of his or her
household, as defined in 26 CFR 1.36B-1(d), to verify whether the
applicant is enrolled in an eligible employer-sponsored plan or is
eligible for qualifying coverage in an eligible employer-sponsored plan
for the benefit year for which coverage is requested;
(E) If the Exchange receives any information from an employer
relevant to the applicant's enrollment in an eligible employer-
sponsored plan or eligibility for qualifying coverage in an eligible
employer-sponsored plan, the Exchange must determine the applicant's
eligibility based on such information and in accordance with the
effective dates specified in Sec. 155.330(f), and if such information
changes his or her eligibility determination, notify the applicant and
his or her employer or employers of such determination in accordance
with the notice requirements specified in Sec. 155.310(g) and (h);
(F) If, after a period of 90 days from the date on which the notice
described in paragraph (d)(4)(i)(A) of this section is sent to the
applicant, the Exchange is unable to obtain the necessary information
from an employer, the Exchange must determine the applicant's
eligibility based on his or her attestation regarding coverage provided
by that employer.
(G) To carry out the process described in paragraph (d)(4)(i) of
this section, the Exchange must only disclose an individual's
information to an employer to the extent necessary for the employer to
identify the employee.
(ii) Establish an alternative process approved by HHS.
* * * * *
0
35. Section 155.335 is amended by revising paragraph (j) to read as
follows:

[[Page 75579]]

Sec. 155.335 Annual eligibility redetermination.

* * * * *
(j) Re-enrollment. If an enrollee remains eligible for enrollment
in a QHP through the Exchange upon annual redetermination and--
(1) QHPs under the product under which the QHP in which he or she
is enrolled remain available through the Exchange for renewal,
consistent with Sec. 147.106 of this subchapter, such enrollee will
have his or her enrollment through the Exchange in a QHP under that
product renewed, unless he or she terminates coverage, including
termination of coverage in connection with voluntarily selecting a
different QHP, in accordance with Sec. 155.430. The Exchange will
ensure that re-enrollment in coverage under this paragraph (j)(1)
occurs under the same product (except as provided in paragraph
(j)(1)(iii)(A) of this section) in which the enrollee was enrolled, as
follows:
(i) The enrollee's coverage will be renewed in the same plan as the
enrollee's current QHP, unless the current QHP is not available through
the Exchange.
(ii) If the enrollee's current QHP is not available through the
Exchange, the enrollee's coverage will be renewed in a QHP at the same
metal level as the enrollee's current QHP within the same product.
(iii) If the enrollee's current QHP is not available through the
Exchange and the enrollee's product no longer includes a QHP at the
same metal level as the enrollee's current QHP and--
(A) The enrollee's current QHP is a silver level plan, the enrollee
will be re-enrolled in a silver level QHP under a different product
offered by the same QHP issuer that is most similar to the enrollee's
current product. If no such silver level QHP is available for
enrollment through the Exchange, the enrollee's coverage will be
renewed in a QHP that is one metal level higher or lower than the
enrollee's current QHP under the same product;
(B) The enrollee's current QHP is not a silver level plan, the
enrollee's coverage will be renewed in a QHP that is one metal level
higher or lower than the enrollee's current QHP under the same product;
or
(iv) If the enrollee's current QHP is not available through the
Exchange and the enrollee's product no longer includes a QHP that is at
the same metal level as, or one metal level higher or lower than the
enrollee's current QHP, the enrollee's coverage will be renewed in any
other QHP offered under the product in which the enrollee's current QHP
is offered in which the enrollee is eligible to enroll.
(2) No plans under the product under which the QHP in which he or
she is enrolled are available through the Exchange for renewal,
consistent with Sec. 147.106 of this subchapter, such enrollee may be
enrolled in a QHP under a different product offered by the same QHP
issuer, to the extent permitted by applicable State law, unless he or
she terminates coverage, including termination of coverage in
connection with voluntarily selecting a different QHP, in accordance
with Sec. 155.430. The Exchange will ensure that re-enrollment in
coverage under this paragraph (j)(2) occurs as follows:
(i) The enrollee will be re-enrolled in a QHP at the same metal
level as the enrollee's current QHP in the product offered by the same
issuer that is the most similar to the enrollee's current product;
(ii) If the issuer does not offer another QHP at the same metal
level as the enrollee's current QHP, the enrollee will be re-enrolled
in a QHP that is one metal level higher or lower than the enrollee's
current QHP in the product offered by the same issuer through the
Exchange that is the most similar to the enrollee's current product; or
(iii) If the issuer does not offer another QHP through the Exchange
at the same metal level as, or one metal level higher or lower than the
enrollee's current QHP, the enrollee will be re-enrolled in any other
QHP offered by the same issuer in which the enrollee is eligible to
enroll.
* * * * *
0
36. Section 155.400 is amended by revising paragraph (e) and adding
paragraphs (g) and (h) to read as follows:

Sec. 155.400 Enrollment of qualified individuals into QHPs.

* * * * *
(e) Premium payment. Exchanges may, and the Federally-facilitated
Exchange will, require payment of a binder payment to effectuate an
enrollment or to add coverage retroactively to an already effectuated
enrollment. Exchanges may, and the Federally-facilitated Exchange will,
establish a standard policy for setting premium payment deadlines:
(1) In a Federally-facilitated Exchange:
(i) For prospective coverage to be effectuated under regular
coverage effective dates, as provided for in Sec. Sec. 155.410(f) and
155.420(b)(1), the binder payment must consist of the first month's
premium, and the deadline for making the binder payment must be no
earlier than the coverage effective date, and no later than 30 calendar
days from the coverage effective date;
(ii) For prospective coverage to be effectuated under special
effective dates, as provided for in Sec. 155.420(b)(2), the binder
payment must consist of the first month's premium, and the deadline for
making the binder payment must be no earlier than the coverage
effective date and no later than 30 calendar days from the date the
issuer receives the enrollment transaction or the coverage effective
date, whichever is later.
(iii) For coverage to be effectuated under retroactive effective
dates, as provided for in Sec. 155.420(b)(2), the binder payment must
consist of the premium due for all months of retroactive coverage
through the first prospective month of coverage, and, the deadline for
making the binder payment must be no earlier than 30 calendar days from
the date the issuer receives the enrollment transaction. If only the
premium for one month of coverage is paid, only prospective coverage
should be effectuated, in accordance with regular effective dates.
(2) [Reserved]
* * * * *
(g) Premium payment threshold. Exchanges may, and the Federally-
facilitated Exchange will, allow issuers to implement, a premium
payment threshold policy under which issuers can consider enrollees to
have paid all amounts due if the enrollees pay an amount sufficient to
maintain a percentage of total premium paid out of the total premium
owed equal to or greater than a level prescribed by the issuer,
provided that the level is reasonable and that the level and the policy
are applied in a uniform manner to all enrollees. If an applicant or
enrollee satisfies the premium payment threshold policy, the issuer
may:
(1) Effectuate an enrollment based on payment of the binder payment
under paragraph (e) of this section.
(2) Avoid triggering a grace period for non-payment of premium, as
described by Sec. 156.270(d) of this subchapter or a grace period
governed by State rules.
(3) Avoid terminating the enrollment for non-payment of premium as,
described by Sec. Sec. 156.270(g) of this subchapter and
155.430(b)(2)(ii)(A) and(B).
(h) Requirements. A State Exchange may rely on HHS to carry out the
requirements of this section and other requirements contained within
this subpart E through a Federal platform agreement.
0
37. Section 155.410 is amended by revising paragraphs (e)(2) and (f)(2)
to read as follows:

[[Page 75580]]

Sec. 155.410 Initial and annual open enrollment periods.

* * * * *
(e) * * *
(2) For the benefit years beginning on January 1, 2016 and on
January 1, 2017, the annual open enrollment period begins on November 1
of the calendar year preceding the benefit year, and extends through
January 31 of the benefit year.
(f) * * *
(2) For the benefit years beginning on January 1, 2016 and on
January 1, 2017, the Exchange must ensure that coverage is effective--
(i) January 1 for QHP selections received by the Exchange on or
before December 15 of the calendar year preceding the benefit year.
(ii) February 1 for QHP selections received by the Exchange from
December 16 of the calendar year preceding the benefit year through
January 15 of the benefit year.
(iii) March 1 for QHP selections received by the Exchange from
January 16 through January 31 of the benefit year.
* * * * *
0
38. Section 155.430 is amended by--
0
a. Adding paragraph (b)(1)(iv).
0
b. Revising paragraphs (b)(2)(ii)(A).
0
c. Redesignating paragraph (b)(2)(vi) as paragraph (b)(2)(vii).
0
d. Adding paragraphs (b)(2)(vi) and (d)(9), (10), and (11)
The additions and revision read as follows:

Sec. 155.430 Termination of Exchange enrollment or coverage.

* * * * *
(b) * * *
(1) * * *
(iv) The Exchange must permit an enrollee to retroactively
terminate or cancel his or her coverage or enrollment in a QHP in the
following circumstances:
(A) The enrollee demonstrates to the Exchange that he or she
attempted to terminate his or her coverage or enrollment in a QHP and
experienced a technical error that did not allow the enrollee to
terminate his or her coverage or enrollment through the Exchange, and
requests retroactive termination within 60 days after he or she
discovered the technical error.
(B) The enrollee demonstrates to the Exchange that his or her
enrollment in a QHP through the Exchange was unintentional,
inadvertent, or erroneous and was the result of the error or misconduct
of an officer, employee, or agent of the Exchange or HHS, its
instrumentalities, or a non-Exchange entity providing enrollment
assistance or conducting enrollment activities. Such enrollee must
request cancellation within 60 days of discovering the unintentional,
inadvertent, or erroneous enrollment. For purposes of this paragraph
(b)(1)(iv)(B), misconduct includes the failure to comply with
applicable standards under this part, part 156 of this subchapter, or
other applicable Federal or State requirements as determined by the
Exchange.
(C) The enrollee was enrolled in a QHP without his or her knowledge
or consent due to the fraudulent activity of any third party, including
third parties who have no connection with the Exchange, and requests
cancellation within 60 days of discovering of the fraudulent
enrollment.
(2) * * *
(ii) * * *
(A) The exhaustion of the 3-month grace period, as described in
Sec. 156.270(d) and (g) of this subchapter, required for enrollees,
who when first failing to timely pay premiums, are receiving advance
payments of the premium tax credit;
* * * * *
(vi) The enrollee was enrolled in a QHP due to fraudulent activity,
including fraudulent activity by a third party with no connection with
the Exchange.
* * * * *
(d) * * *
(9) In case of a retroactive termination in accordance with
paragraph (b)(1)(iv)(A) of this section, the termination date will be
no sooner than 14 days after the date that the enrollee can demonstrate
he or she contacted the Exchange to terminate his or her coverage or
enrollment through the Exchange, unless the issuer agrees to an earlier
effective date as set forth in paragraph (d)(2)(iii) of this section.
(10) In case of a retroactive cancellation or termination in
accordance with paragraph (b)(1)(iv)(B) or (C) of this section, the
cancellation date or termination date will be the original coverage
effective date or a later date, as determined appropriate by the
Exchange, based on the circumstances of the cancellation or
termination.
(11) In the case of cancellation in accordance with paragraph
(b)(2)(vi) of this section, the Exchange may cancel the enrollee's
enrollment upon its determination that the enrollment was performed
fraudulently and following reasonable notice to the enrollee (where
possible). The termination date will be the original coverage effective
date.
* * * * *
0
39. Section 155.505 is amended by adding paragraphs (b)(1)(iii) and
(b)(5) and revising paragraph (b)(4) to read as follows:

Sec. 155.505 General eligibility appeals requirements.

* * * * *
(b) * * *
(1) * * *
(iii) A determination of eligibility for an enrollment period, made
in accordance with Sec. 155.305(b);
* * * * *
(4) A denial of a request to vacate dismissal made by a State
Exchange appeals entity in accordance with Sec. 155.530(d)(2), made
under paragraph (c)(2)(i) of this section; and
(5) An appeal decision issued by a State Exchange appeals entity in
accordance with Sec. 155.545(b), consistent with Sec. 155.520(c).
* * * * *
0
40. Section 155.510 is amended by revising paragraph (a)(1) to read as
follows:

Sec. 155.510 Appeals coordination.

(a) * * *
(1) Minimize burden on appellants, including not asking the
appellant to provide duplicative information or documentation that he
or she already provided to an agency administering an insurance
affordability program or eligibility appeals process, unless the
appeals entity, Exchange, or agency does not have access to the
information or documentation and cannot reasonably obtain it;
* * * * *
0
41. Section 155.520 is amended by adding paragraph (d)(2)(i)(D) to read
as follows:

Sec. 155.520 Appeal requests.

* * * * *
(d) * * *
(2) * * *
(i) * * *
(D) That, in the event the appeal request is not valid due to
failure to submit by the date determined under paragraph (b) or (c) of
this section, as applicable, the appeal request may be considered valid
if the applicant or enrollee sufficiently demonstrates within a
reasonable timeframe determined by the appeals entity that failure to
timely submit was due to exceptional circumstances and should not
preclude the appeal.
* * * * *
0
42. Section 155.530 is amended by revising paragraph (a)(4) to read as
follows:

Sec. 155.530 Dismissals.

(a) * * *
(4) Dies while the appeal is pending, except if the executor,
administrator, or

[[Page 75581]]

other duly authorized representative of the estate requests to continue
the appeal.
* * * * *
0
43. Section 155.535 is amended by revising paragraphs (a) introductory
text and (b) to read as follows:

Sec. 155.535 Informal resolution and hearing requirements.

(a) Informal resolution. The HHS appeals process will provide an
opportunity for informal resolution and a hearing in accordance with
the requirements of this section. A State Exchange appeals entity may
also provide an informal resolution process prior to a hearing. Any
information resolution process must meet the following requirements:
* * * * *
(b) Notice of hearing. When a hearing is scheduled, the appeals
entity must send written notice to the appellant of the date, time, and
location or format of the hearing no later than 15 days prior to the
hearing date unless--
(1) The appellant requests an earlier hearing date; or
(2) A hearing date sooner than 15 days is necessary to process an
expedited appeal, as described in Sec. 155.540(a), and the appeals
entity has contacted the appellant to schedule a hearing on a mutually
agreed upon date, time, and location or format.
* * * * *
0
44. Section 155.545 is amended by revising paragraphs (b)(1) and
(c)(1)(i) and (ii) to read as follows:

Sec. 155.545 Appeal decisions.

* * * * *
(b) * * *
(1) Must issue written notice of the appeal decision to the
appellant within 90 days of the date an appeal request under Sec.
155.520(b) or (c) is received, as administratively feasible.
* * * * *
(c) * * *
(1) * * *
(i) Prospectively, on the first day of the month following the date
of the notice of appeal decision, or consistent with Sec.
155.330(f)(2), (3), (4), or (5), if applicable; or
(ii) Retroactively, to the coverage effective date the appellant
did receive or would have received if the appellant had enrolled in
coverage under the incorrect eligibility determination that is the
subject of the appeal, at the option of the appellant.
* * * * *
0
45. Section 155.555 is amended by revising paragraphs (e)(1)
introductory text and (l) to read as follows:

Sec. 155.555 Employer appeals process.

* * * * *
(e) * * *
(1) Upon receipt of a valid appeal request under this section, or
upon receipt of the notice under paragraph (d)(1)(iii) of this section,
the Exchange must promptly transmit via secure electronic interface to
the appeals entity--
* * * * *
(l) Implementation of the appeal decision. After receipt of the
notice under paragraph (k)(3) of this section, if the appeal decision
affects the employee's eligibility, the Exchange must promptly:
(1) Redetermine the employee's eligibility and the eligibility of
the employee's household members, if applicable, in accordance with the
standards specified in Sec. 155.305; or
(2) Notify the employee of the requirement to report changes in
eligibility as described in Sec. 155.330(b)(1).
* * * * *
0
46. Section 155.605 is amended by:
0
a. In paragraph (b), removing the reference ``paragraphs (c)(2),
(f)(2), and (g) of this section'' and adding in its place the reference
``paragraphs (c)(2) and (d) of this section'';
0
b. Removing paragraphs (d), (e) and (f);
0
c. Redesignating paragraph (g) as paragraph (d);
0
d. Revising newly redesignated paragraph (d); and
0
c. Adding paragraph (e).
The revision and addition read as follows:

Sec. 155.605 Eligibility standards for exemptions.

* * * * *
(d) Hardship--(1) General. The Exchange must grant a hardship
exemption to an applicant eligible for an exemption for at least the
month before, the month or months during which, and the month after a
specific event or circumstance, if the Exchange determines that the
applicant has suffered a hardship in relation to his or her ability to
obtain coverage because they experienced one or more of the events or
circumstances listed in paragraph (d)(1)(i) through (iii) or (d)(2) of
this section. Notwithstanding the length of the hardship, any hardship
exemption granted pursuant to this paragraph (d) may be granted for a
maximum period that is not to exceed the month before the event or
circumstance and the remainder of the calendar year during which the
hardship commenced, plus the next calendar year.
(i) He or she experienced financial or domestic circumstances,
including an unexpected natural or human-caused event, such that he or
she had a significant, unexpected increase in essential expenses that
prevented him or her from obtaining coverage under a qualified health
plan;
(ii) The expense of purchasing a qualified health plan would have
caused him or her to experience serious deprivation of food, shelter,
clothing or other necessities; or
(iii) He or she has experienced other circumstances that prevented
him or her from obtaining coverage under a qualified health plan.
(2) Examples of events and circumstances for which the Exchange
must grant a hardship exemption to an applicant based on paragraph
(d)(1) of this section include:
(i) Individuals that the Exchange determines are homeless.
(ii) Individuals who have been evicted or facing eviction or
foreclosure.
(iii) Individuals who have received a shut-off notice from a
utility company.
(iv) Individuals who have experienced domestic violence.
(v) Individuals who have experienced the death of a family member.
(vi) Individuals who have experienced a fire, flood or other nature
or human-caused disaster that caused substantial damage to your
property.
(vii) Individuals who have filed for bankruptcy.
(viii) Individuals who had medical bills which resulted in
substantial debt
(ix) Individuals who experienced unexpected increases in necessary
expenses due to caring for an ill, disabled or aging family member.
(x) Individuals who are seeking categorical Medicaid eligibility
under section 1902(f) of the Act for ``209(b)'' States (codified at 42
CFR 435.121).
(xi) Individuals who are seeking Medicaid coverage provided to
medically needy individuals under section 1902(a)(10)(C) of the Social
Security Act 42 U.S.C. 1396(a)(10)(C) that is not recognized as
government-sponsored minimum essential coverage (MEC) under IRS
regulations or HHS regulations or guidance.
(xii) Individuals who are enrolled in Medicaid coverage provided to
a pregnant women that is not recognized as government-sponsored MEC
under IRS regulations or HHS regulations or guidance.
(xiii) Individuals who are enrolled in CHIP coverage provided to an
unborn child that includes comprehensive prenatal care for the pregnant
mother.
(xiv) Individuals who are eligible for enrollment in a qualified
health plan

[[Page 75582]]

(QHP) through the Exchange, lower costs on the individual's monthly
premiums or cost-sharing reductions for a time period when the
individual was not enrolled in a QHP through the Exchange as a result
of an eligibility appeals decision.
(3) The hardship event or circumstance described under paragraph
(d)(1) or (2) of this section must have occurred within 3 years of the
date the applicant submits an application to the Exchange under Sec.
155.610, except in the case of applicants who are or who were homeless
or experienced domestic violence.
(i) The date of submission of an application means the date of
receipt of the application by the Exchange via the channels available
for the submission of an application, as described in Sec. 155.610(d)
or the date the application was signed by the submitter.
(ii) [Reserved]
(4) Lack of affordable coverage based on projected income. The
Exchange must determine an applicant eligible for an exemption for a
month or months during which he or she, or another individual the
applicant attests will be included in the applicant's family, as
defined in 26 CFR 1.36B-1(d), is unable to afford coverage in
accordance with the standards specified in section 5000A(e)(1) of the
Code, provided that--
(i) Eligibility for this exemption is based on projected annual
household income;
(ii) An eligible employer-sponsored plan is only considered under
paragraphs (d)(4)(iii) and (iv) of this section if it meets the minimum
value standard described in Sec. 156.145 of this subchapter.
(iii) For an individual who is eligible to purchase coverage under
an eligible employer-sponsored plan, the Exchange determines the
required contribution for coverage such that--
(A) An individual who uses tobacco is treated as not earning any
premium incentive related to participation in a wellness program
designed to prevent or reduce tobacco use that is offered by an
eligible employer-sponsored plan;
(B) Wellness incentives offered by an eligible employer-sponsored
plan that do not relate to tobacco use are treated as not earned;
(C) In the case of an employee who is eligible to purchase coverage
under an eligible employer-sponsored plan sponsored by the employee's
employer, the required contribution is the portion of the annual
premium that the employee would pay (whether through salary reduction
or otherwise) for the lowest cost self-only coverage.
(D) In the case of an individual who is eligible to purchase
coverage under an eligible employer-sponsored plan as a member of the
employee's family, as defined in 26 CFR 1.36B-1(d), the required
contribution is the portion of the annual premium that the employee
would pay (whether through salary reduction or otherwise) for the
lowest cost family coverage that would cover the employee and all other
individuals who are included in the employee's family who have not
otherwise been granted an exemption through the Exchange.
(iv) For an individual who is ineligible to purchase coverage under
an eligible employer-sponsored plan, the Exchange determines the
required contribution for coverage in accordance with section
5000A(e)(1)(B)(ii) of the Code, inclusive of all members of the family,
as defined in 26 CFR 1.36B-1(d), who have not otherwise been granted an
exemption through the Exchange and who are not treated as eligible to
purchase coverage under an eligible employer-sponsored plan, in
accordance with paragraph (d)(4)(ii) of this section; and
(v) The applicant applies for this exemption prior to the last date
on which he or she could enroll in a QHP through the Exchange for the
month or months of a calendar year for which the exemption is
requested.
(vi) The Exchange must make an exemption in this category available
prospectively, and provide it for all remaining months in a coverage
year, notwithstanding any change in an individual's circumstances.
(5) Ineligible for Medicaid based on a State's decision not to
expand. The Exchange must determine an applicant eligible for an
exemption for a calendar year if he or she would be determined
ineligible for Medicaid for one or more months during the benefit year
solely as a result of a State not implementing section 2001(a) of the
Affordable Care Act.
(e) Eligibility for an exemption through the IRS. Hardship
exemptions in this paragraph can be claimed on a Federal income tax
return without obtaining an exemption certificate number. The IRS may
allow an individual to claim the hardship exemptions described in this
paragraph (e) without requiring an exemption certificate number from
the Exchange.
(1) Filing threshold. The IRS may allow an applicant to claim an
exemption specified in HHS Guidance published September 18, 2014,
entitled, Shared Responsibility Guidance--Filing Threshold Hardship
Exemption,'' and in IRS Notice 2014-76, section B.
(2) Self-only coverage in an eligible employer-sponsored plan. The
IRS may allow an applicant to claim an exemption specified in HHS
Guidance published November 21, 2014, entitled, ``Guidance on Hardship
Exemptions for Persons Meeting Certain Criteria,'' and in IRS Notice
2014-76, section A.
(3) Eligible for services through an Indian health care provider.
The IRS may allow an applicant to claim the exemption specified in HHS
Guidance published September 18, 2014, entitled, ``Shared
Responsibility Guidance--Exemption for Individuals Eligible for
Services through an Indian Health Care Provider,'' and in IRS Notice
2014-76, section E.
(4) Ineligible for Medicaid based on a State's decision not to
expand. The IRS may allow an applicant to claim the exemption specified
in HHS Guidance published November 21, 2014, entitled, ``Guidance on
Hardship Exemptions for Persons Meeting Certain Criteria,'' and in IRS
Notice 2014-76, section F.
0
47. Section 155.610 is amended by revising paragraph (h)(1) and adding
paragraph (k) to read as follows:

Sec. 155.610 Eligibility process for exemptions.

* * * * *
(h) * * *
(1) Except for the exemptions described in Sec. 155.605(c) and
(d), after December 31 of a given calendar year, the Exchange may
decline to accept an application for an exemption that is available
retrospectively for months for such calendar year, and must provide
information to individuals regarding how to claim an exemption through
the tax filing process.
* * * * *
(k) Incomplete application. (1) If an applicant submits an
application that does not include sufficient information for the
Exchange to conduct a determination for eligibility of an exemption the
Exchange must--
(i) Provide notice to the applicant indicating that information
necessary to complete an eligibility determination is missing,
specifying the missing information, and providing instructions on how
to provide the missing information; and
(ii) Provide the applicant with a period of no less than 10 and no
more than 90 days, in the reasonable discretion of the Exchange, from
the date on which the notice described in paragraph (k)(1) of this
section is sent to the applicant to provide the information needed to
complete the application to the Exchange; and
(iii) Not proceed with the applicant's eligibility determination
during the

[[Page 75583]]

period described in paragraph (k)(2) of this section.
(2) If the Exchange does not receive the requested information
within the time allotted in paragraph (k)(1)(ii) of this section, the
Exchange must notify the applicant in writing that the Exchange cannot
process the application and provide appeal rights to the applicant.
0
48. Section 155.615 is amended by-
0
a. Removing paragraphs (c), (d), and (e).
0
b. Redesignating paragraphs (f), (g), (h), (i), (j), and (k) as
paragraphs (c), (d), (e), (f), (g), and (h), respectively.
0
c. Revising newly redesignated paragraph (c)(1).
0
d. Removing newly redesignated paragraph (c)(3).
0
e. Further redesignating newly redesignated paragraph (c)(2) as
paragraph (c)(3).
0
f. Adding paragraph (c)(2).
The revision and addition read as follows:

Sec. 155.615 Verification process related to eligibility for
exemptions.

* * * * *
(c) Verification related to exemption for hardship--(1) In general.
For any applicant who requests an exemption based on hardship, except
for the hardship exemptions described in Sec. 155.605(d)(3), the
Exchange must verify whether he or she has experienced the hardship to
which he or she is attesting.
(2) Hardship. If the hardship-qualifying event or circumstance in
Sec. 155.605(d)(1) began more than 3 years prior to the date the
exemption application was submitted, as specified in Sec.
155.605(d)(3)(i), and the event or circumstance continued beyond the
initial 3-year period, the Exchange must verify the applicant continued
to experience the hardship to which he or she is attesting during a
period that is within 3 years from the date of the exemption
application submitted under Sec. 155.605(d)(1).
* * * * *
0
49. Section 155.625 is amended by revising paragraphs (a)(2) and (b) to
read as follows:

Sec. 155.625 Options for conducting eligibility determinations for
exemptions.

(a) * * *
(2) By use of the HHS service under paragraph (b) of this section.
(b) Use of HHS service. Notwithstanding the requirements of this
subpart, the Exchange may adopt an exemption eligibility determination
made by HHS.
0
50. Section 155.705 is amended by:
0
a. Adding paragraphs (b)(3)(viii), (ix), and (x).
0
b. In paragraph (b)(4)(ii)(B), removing the semicolon and adding a
colon in its place.
0
c. Adding paragraph (b)(4)(ii)(B)(1) and adding and reserving paragraph
(b)(4)(ii)(B)(2).
0
d. Revising paragraphs (b)(4)(ii)(C)(2) and (b)(11)(ii)(A), (B), and
(C).
0
e. Removing paragraphs (b)(11)(ii)(D) and (E).
The revisions and additions read as follows:

Sec. 155.705 Functions of a SHOP.

* * * * *
(b) * * *
(3) * * *
(viii) For plan years beginning on or after January 1, 2017, a
Federally-facilitated SHOP will provide a qualified employer a choice
of three methods to make QHPs available to qualified employees and
their dependents:
(A) The employer may choose a level of coverage as described in
paragraph (b)(2) of this section;
(B) The employer may choose a single QHP; or
(C) The employer may offer its qualified employees a choice of all
QHPs offered through a Federally-facilitated SHOP by a single issuer
across all available levels of coverage, as described in section
1302(d)(1) of the Affordable Care Act and implemented in Sec.
156.140(b) of this subchapter.
(ix) For plan years beginning on or after January 1, 2017, a
Federally-facilitated SHOP will provide a qualified employer a choice
of three 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 a Federally-facilitated SHOP at a level of
coverage as described in Sec. 156.150(b)(2) of this subchapter; or
(C) The employer may offer its qualified employees a choice of all
plans offered through a Federally-facilitated SHOP by a single issuer
across all available levels of coverage, as described in Sec.
156.150(b)(2) of this subchapter.
(x) States operating as a State-based Exchange utilizing the
Federal platform for SHOP enrollment functions will have the same
employer choice models available as States with a Federally-facilitated
SHOP.
(4) * * *
(ii) * * *
(B) * * *
(1) In a Federally-facilitated SHOP, payment for the group's first
month of coverage must be received by the premium aggregation services
vendor on or before the 20th day of the month prior to the month that
coverage begins.
(2) [Reserved]
(C) * * *
(2) The number of days for which coverage is being provided in the
month described in paragraph (b)(4)(ii)(C)(1) of this section.
* * * * *
(11) * * *
(ii) * * *
(A) When the employer offers a single plan to qualified employees,
the employer must use a fixed contribution methodology under which the
employer contributes a fixed percentage of the plan's premium for each
qualified employee and, if applicable, for each dependent of a
qualified employee. A tobacco surcharge, if applicable, will be applied
after the employer's contribution is applied to the premium.
(B) When the employer offers a choice of plans to qualified
employees, the employer may use a fixed contribution methodology or a
reference plan contribution methodology. Under the fixed contribution
methodology, the employer contributes a fixed percentage of the
premiums for each qualified employee and, if applicable, for each
dependent of a qualified employee, across all plans in which any
qualified employee, and, if applicable, any dependent of a qualified
employee, is enrolled. Under the reference plan contribution
methodology, the employer will select a plan from within the level of
coverage offered as described in paragraphs (b)(2) and (3) of this
section to serve as a reference plan on which contributions will be
based, and then will define a percentage contribution toward premiums
under the reference plan; the resulting contribution amounts under the
reference plan will be applied toward any plan in which a qualified
employee or, if applicable, any dependent of a qualified employee, is
enrolled, up to the lesser of the contribution amount or the total
amount of any premium for the selected plan before application of a
tobacco surcharge, if applicable. A tobacco surcharge, if applicable,
will be applied after the employer's contribution is applied to the
premium.
(C) The employer will define a percentage contribution toward
premiums for employee-only coverage and, if dependent coverage is
offered, a percentage contribution toward premiums for dependent
coverage. To

[[Page 75584]]

the extent permitted by other applicable law, for plan years beginning
on or after January 1, 2015, a 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.
* * * * *
0
51. Section 155.715 is amended by revising paragraph (g)(1) to read as
follows:

Sec. 155.715 Eligibility determination process for SHOP.

* * * * *
(g) * * *
(1) Each QHP terminates the enrollment through the SHOP of the
employer's enrollees enrolled in a QHP through the SHOP; and
* * * * *
0
52. Section 155.725 is amended by revising paragraphs (c), (e), (h)(2),
(i)(1) introductory text, and (j)(2)(i) to read as follows:

Sec. 155.725 Enrollment periods under SHOP.

* * * * *
(c) Annual employer election period. The SHOP must provide
qualified employers with a standard election period prior to the
completion of the employer's plan year and before the annual employee
open enrollment period, in which the qualified employer may change its
participation in the SHOP for the next plan year, including--
(1) The method by which the qualified employer makes QHPs available
to qualified employees pursuant to Sec. 155.705(b)(2) and (3);
(2) The employer contribution towards the premium cost of coverage;
(3) The level of coverage offered to qualified employees as
described in Sec. 155.705(b)(2) and (3); and
(4) The QHP or QHPs offered to qualified employees in accordance
with Sec. 155.705.
* * * * *
(e) Annual employee open enrollment period. (1) The SHOP must
establish a standardized annual open enrollment period for qualified
employees prior to the completion of the applicable qualified
employer's plan year and after that employer's annual election period.
(2) Qualified employers in a Federally-facilitated SHOP must
provide qualified employees with an annual open enrollment period of at
least one week.
* * * * *
(h) * * *
(2) For a group enrollment received by the Federally-facilitated
SHOP from a qualified employer at the time of an initial group
enrollment or renewal:
(i) Between the first and fifteenth day of any month, the
Federally-facilitated SHOP must ensure a coverage effective date of the
first day of the following month unless the employer opts for a later
effective date within a quarter for which small group market rates are
available.
(ii) Between the 16th and last day of any month, the Federally-
facilitated SHOP must ensure a coverage effective date of the first day
of the second following month unless the employer opts for a later
effective date within a quarter for which small group market rates are
available.
* * * * *
(i) * * *
(1) If a qualified employee enrolled in a QHP through the SHOP
remains eligible for enrollment through the SHOP in coverage offered by
the same qualified employer, the SHOP may provide for a process under
which the employee will remain in the QHP selected the previous year,
unless--
* * * * *
(j) * * *
(2) * * *
(i) Experiences an event described in Sec. 155.420(d)(1) (other
than paragraph (d)(1)(ii)), or experiences an event described in Sec.
155.420(d)(2), (4), (5), (7), (8), or (9);
* * * * *
0
53. Section 155.735 is amended by revising paragraphs (c)(2)
introductory text and (d)(2) to read as follows:

Sec. 155.735 Termination of SHOP enrollment or coverage.

* * * * *
(c) * * *
(2) In an FF-SHOP, for premium payments other than payments for the
first month of coverage--
* * * * *
(d) * * *
(2) In the FF-SHOP, termination is effective:
(i) In the case of a termination in accordance with paragraphs
(d)(1)(i), (ii), (iii), and (v) of this section, termination is
effective on the last day of the month in which the Federally-
facilitated SHOP receives notice of the event described in paragraph
(d)(1)(i), (ii), (iii), or (v) of this section.
(ii) In the case of a termination in accordance with paragraph
(d)(1)(iv) of this section, the last day of coverage in an enrollee's
prior QHP is the day before the effective date of coverage in his or
her new QHP, including for any retroactive enrollments effectuated
under Sec. 155.420(b)(2).
(iii) The FF-SHOP will send qualified employees a notice notifying
them in advance of a child dependent's loss of eligibility for
dependent child coverage under their plan because of age. The notice
will be sent 90 days in advance of the date when the dependent enrollee
would lose eligibility for dependent child coverage. The enrollee will
also receive a separate termination notice when coverage is terminated,
under Sec. 155.735(g).
* * * * *
0
54. Section 155.740 is amended by revising paragraphs (c)(2), (d)(2),
and (l)(3) to read as follows:

Sec. 155.740 SHOP employer and employee eligibility appeals
requirements.

* * * * *
(c) * * *
(2) A failure by the SHOP to provide a timely eligibility
determination or a timely notice of an eligibility determination in
accordance with Sec. 155.715(e).
(d) * * *
(2) A failure by the SHOP to provide a timely eligibility
determination or a timely notice of an eligibility determination in
accordance with Sec. 155.715(f).
* * * * *
(l) * * *
(3) Be effective as follows:
(i) If an employer is found eligible under the decision, then at
the employer's option, the effective date of coverage or enrollment
through the SHOP under the decision can either be made retroactive to
the effective date of coverage or enrollment through the SHOP that the
employer would have had if the employer had been correctly determined
eligible, or prospective to the first day of the month following the
date of the notice of the appeal decision.
(ii) If an employee is found eligible under the decision, then at
the employee's option, the effective date of coverage or enrollment
through the SHOP under the decision can either be made effective
retroactive to the effective date of coverage or enrollment through the
SHOP that the employee would have had if the employee had been
correctly determined eligible, or prospective to the first day of the
month following the date of the notice of the appeal decision.
(iii) If the employer or employee is found ineligible under the
decision, then the decision is effective on the first

[[Page 75585]]

day of the month following the date of the notice of the appeal
decision.
* * * * *

PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES

0
55. The authority citation for part 156 continues to read as follows:

Authority: Title I of the Affordable Care Act, sections 1301-
1304, 1311-1313, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, 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
56. Section 156.20 is amended by adding a definition of ``Standardized
option'' in alphabetical order to read as follows:

Sec. 156.20 Definitions.

* * * * *
Standardized option means a QHP with a standardized cost-sharing
structure specified by HHS and that is offered for sale through an
individual market Federally-facilitated Exchange.
0
57. Section 156.50 amended by revising paragraph (c) to read as
follows:

Sec. 156.50 Financial support.

* * * * *
(c) Requirement for Federally-facilitated Exchange user fee. (1) To
support the functions of Federally-facilitated Exchanges, a
participating issuer offering a plan through a Federally-facilitated
Exchange must remit a user fee to HHS each month, in the time frame and
manner established by HHS, equal to the product of the monthly user fee
rate specified in the annual HHS notice of benefit and payment
parameters for Federally-facilitated Exchanges for the applicable
benefit year and the monthly premium charged by the issuer for each
policy under the plan where enrollment is through a Federally-
facilitated Exchange.
(2) To support the functions of State-based Exchanges on the
Federal platform, a participating issuer offering a plan through a
State-based Exchange that elects to utilize the Federal Exchange
platform for certain Exchange functions described in Sec. 155.200 of
this subchapter, as specified in a Federal platform agreement, must
remit a user fee to HHS, in the timeframe and manner established by
HHS, equal to the product of the sum of the monthly user fee rate
specified in the annual HHS notice of benefit and payment parameters
for State-based Exchanges that use the Federal platform for the
applicable benefit year plus any additional user fee rate that HHS will
collect on behalf of the Sate-based Exchange, multiplied by the monthly
premium charged by the issuer for each policy under the plan where
enrollment is through the State-based Exchange on the Federal platform.
* * * * *
0
58. Section 156.80 is amended by revising paragraph (d)(3)(ii) to read
as follows:

Sec. 156.80 Single risk pool.

* * * * *
(d) * * *
(3) * * *
(ii) A health insurance issuer in the small group market (not
including a merged market) may establish index rates and make the
marketwide adjustments under paragraph (d)(1) of this section, and make
the plan-level adjustments under paragraph (d)(2) of this section, no
more frequently than quarterly. Any changes to rates must have
effective dates of January 1, April 1, July 1, or October 1. Such rates
may only apply to coverage issued or renewed on or after the rate
effective date and will apply for the entire plan year of the group
health plan.
* * * * *
0
59. Section 156.135 is amended by revising paragraph (g) to read as
follows:

Sec. 156.135 AV calculation for determining level of coverage.

* * * * *
(g) Updates to the AV Calculator. HHS will update the AV Calculator
annually for material changes that may include costs, plan designs, the
standard population, developments in the function and operation of the
AV Calculator and other actuarially relevant factors.
0
60. Section 156.150 is amended by adding paragraphs (a)(1) and (2),
(c), and (d) to read as follows:

Sec. 156.150 Application to stand-alone dental plans inside the
Exchange.

(a) * * *
(1) For plan years beginning after 2016, for one covered child--the
dollar limit applicable to a stand-alone dental plan for one covered
child specified in this paragraph (a) increased by an amount equal to
the product of that amount and the quotient of consumer price index for
dental services for the year 2 years prior to the benefit year, divided
by the consumer price index for dental services for 2016.
(2) For plan years after 2016, for two or more covered children--
twice the dollar limit for one child described in paragraph (a)(1) of
this section.
* * * * *
(c) Consumer price index for dental services defined. The consumer
price index for dental services is a sub-component of the US Department
of Labor's Bureau of Labor Statistics Consumer Price Index specific to
dental services.
(d) Increments of cost sharing increases. Any increase in the
annual dollar limits described in paragraph (a)(1) of this section that
does not result in a multiple of 25 dollars will be rounded down, to
the next lowest multiple of 25 dollars.
0
61. Section 156.230 is amended by adding (d), (e), and (f) to read as
follows.

Sec. 156.230 Network adequacy standards.

* * * * *
(d) Minimum threshold. A QHP in a Federally-facilitated Exchange
meets the standard under paragraph (a)(2) of this section if its
network is determined adequate under the following standards:
(1) In a State that implements an acceptable quantifiable network
adequacy metric commonly used in the health insurance industry to
measure network adequacy, under that metric; or
(2) In any other State, under the Federal time and distance
standard, based on minimum number of providers and average time and
distance to those providers. QHPs that cannot meet the time and
distance standard established by HHS may satisfy this requirement by
reasonably justifying variances from this standard based on such
factors as the availability of providers and variables reflected in
local patterns of care.
(e) Provider transitions. A QHP issuer in a Federally-facilitated
Exchange must--
(1) Make a good faith effort to provide written notice of
discontinuation of a provider 30 days prior to the effective date of
the change or otherwise as soon as practicable, to enrollees who are
patients seen on a regular basis by the provider or who receive primary
care from the provider whose contract is being discontinued,
irrespective of whether the contract is being discontinued due to a
termination for cause or without cause, or due to a non-renewal;
(2) In cases where a provider is terminated without cause, allow an
enrollee in active treatment to continue treatment until the treatment
is complete or for 90 days, whichever is shorter, at in-network cost-
sharing rates.
(i) For the purposes of paragraph (e)(2) of this section, active
treatment means:

[[Page 75586]]

(A) An ongoing course of treatment for a life-threatening
condition;
(B) An ongoing course of treatment for a serious acute condition;
(C) The second or third trimester of pregnancy; or
(D) An ongoing course of treatment for a health condition for which
a treating physician or health care provider attests that discontinuing
care by that physician or health care provider would worsen the
condition or interfere with anticipated outcomes.
(ii) Any decisions made for a request for continuity of care under
paragraph (e)(2) of this section must be subject to the health benefit
plan's internal and external grievance and appeal processes in
accordance with applicable State or Federal law or regulations.
(f) Out-of-network cost sharing. Notwithstanding Sec. 156.130(c),
for a network to be deemed adequate, each QHP that uses a provider
network must:
(1) Count the cost sharing paid by an enrollee for an essential
health benefit provided by an out-of-network provider in an in-network
setting towards the enrollee's annual limitation on cost sharing; or
(2) Provide a written notice to the enrollee at least ten business
days before the provision of the benefit that additional costs may be
incurred for an essential health benefit provided by an out-of-network
provider in an in-network setting, including balance billing charges,
unless such costs are prohibited under State law, and that any
additional charges may not count toward the in-network annual
limitation on cost sharing.
0
62. Section 156.235, as amended on February 27, 2015 (80 FR 10873), is
further amended by revising paragraphs (a)(2)(i) and (b)(2)(i) to read
as follows:

Sec. 156.235 Essential community providers.

(a) * * *
(2) * * *
(i) The network includes as participating practitioners at least a
minimum percentage, as specified by HHS, of available essential
community providers in each plan's service area. For plan years
beginning prior to January 1, 2018, multiple providers at a single
location will count as a single essential community provider toward
both the available essential community provider s in the plan's service
area and the issuer's satisfaction of the essential community provider
participation standard. For plan years beginning on or after January 1,
2018, multiple contracted or employed full-time equivalent
practitioners at a single location will count toward both the available
essential community providers in the plan's service area and the
issuer's satisfaction of the essential community provider participation
standard; and
* * * * *
(b) * * *
(2) * * *
(i) The number of its providers that are located in Health
Professional Shortage Areas or five-digit zip codes in which 30 percent
or more of the population falls below 200 percent of the Federal
Poverty Line satisfies a minimum percentage, specified by HHS, of
available essential community provider in the plan's service area. For
plan years beginning prior to January 1, 2018, multiple providers at a
single location will count as a single essential community provider
toward both the available essential community providers in the plan's
service area and the issuer's satisfaction of the essential community
provider participation standard. For plan years beginning on or after
January 1, 2018, multiple contracted or employed full-time equivalent
practitioners at a single location will count toward both the available
essential community providers in the plan's service area and the
satisfaction of the essential community provider participation
standard; and
* * * * *
0
63. Section 156.265 is amended by revising paragraph (b)(2)(ii) to read
as follows:

Sec. 156.265 Enrollment process for qualified individuals.

* * * * *
(b) * * *
(2) * * *
(ii) Ensure the applicant received an eligibility determination for
coverage through the Exchange through the Exchange Internet Web site or
an Exchange approved web service using the FFE single streamline
application.
* * * * *
0
64. Section 156.270 is amended by revising paragraphs (d) introductory
text and (g) to read as follows:

Sec. 156.270 Termination of coverage or enrollment for qualified
individuals.

* * * * *
(d) Grace period for recipients of advance payments of the premium
tax credit. A QHP issuer must provide a grace period of 3 months for an
enrollee, who when failing to timely pay premiums, is receiving advance
payments of the premium tax credit. During the grace period, the QHP
issuer must:
* * * * *
(g) Exhaustion of grace period. If an enrollee receiving advance
payments of the premium tax credit exhausts the 3-month grace period in
paragraph (d) of this section without paying all outstanding premiums,
subject to a premium payment threshold implemented under Sec.
155.400(g) of this subchapter, if applicable, the QHP issuer must
terminate the enrollee's enrollment through the Exchange on the
effective date described in Sec. 155.430(d)(4) of this subchapter,
provided that the QHP issuer meets the notice requirement specified in
paragraph (b) of this section.
* * * * *
0
65. Section 156.285 is amended by revising paragraph (c)(5) and
removing and reserving paragraph (d)(2) to read as follows:

Sec. 156.285 Additional standards specific to SHOP

* * * * *
(c) * * *
(5) In a Federally-facilitated SHOP, must send enrollment
reconciliation files on at least a monthly basis according to a
process, timeline, and file format established by the Federally-
facilitated SHOP;
* * * * *
(d) * * *
(2) [Reserved]
* * * * *
0
66. Section 156.298 is amended by--
0
a. Revising paragraph (b)(4).
0
b. Removing paragraph (b)(5).
0
c. Redesignating paragraph (b)(6) as paragraph (b)(5).
0
d. Revising newly redesignated paragraph (b)(5).
The revision reads as follows:

Sec. 156.298 Meaningful difference standard for Qualified Health
Plans in the Federally-facilitated Exchanges.

* * * * *
(b) * * *
(4) Plan type; or
(5) Child-only versus non Child-only plan offerings.
* * * * *
0
67. The heading of subpart D is revised to read as follows:

Subpart D--Standards for Qualified Health Plan Issuers on
Federally-Facilitated Exchanges and State-Based Exchanges on the
Federal Platform

0
68. Section 156.350 is added to subpart D to read as follows:

Sec. 156.350 Eligibility and enrollment standards for Qualified
Health Plan issuers on State-based Exchanges on the Federal platform.

(a) In order to participate in a State-based Exchange on the
Federal platform,

[[Page 75587]]

a QHP issuer must comply with HHS regulations, and guidance pertaining
to issuer eligibility and enrollment functions as if the issuer were an
issuer of a QHP on a Federally-facilitated Exchange. These requirements
include--
(1) Section 156.285(a)(4)(ii) regarding the premiums for plans
offered on the SHOP;
(2) Section 156.285(c)(8)(iii) regarding enrollment process for
SHOP; and
(3) Section 156.715 regarding compliance reviews of QHP issuers, to
the extent relating directly to applicable eligibility and enrollment
functions.
(b) HHS will permit issuers of QHPs in each State-based Exchange on
the Federal platform to directly enroll applicants in a manner that is
considered to be through the Exchange, as if the issuers were issuers
of QHPs on Federally-facilitated Exchanges under Sec. 156.1230(a), to
the extent permitted by applicable State law.
(c) If the State-based Exchange on the Federal platform does not
substantially enforce a requirement in paragraph (a) of this section
against the issuer or plan, then HHS may do so, in accordance with the
enforcement remedies in subpart I of this part, subject to the
administrative review process in subpart J of this part.
0
69. Section 156.805 is amended by revising paragraph (d) to read as
follows:

Sec. 156.805 Bases and process for imposing civil money penalties in
Federally-facilitated Exchanges.

* * * * *
(d) Request for hearing. (1) An issuer may appeal the assessment of
a civil money penalty under this section by filing a request for
hearing under an applicable administrative hearing process.
(2) If an issuer files a request for hearing under this paragraph
(d), the assessment of a civil money penalty will not occur prior to
the issuance of the final administrative decision in the appeal.
* * * * *
0
70. Section 156.810 is amended by revising paragraphs (a)(12) and (13)
and (e) and adding paragraphs (a)(14) and (15) to read as follows:

Sec. 156.810 Bases and process for decertification of a QHP offered
by an issuer through a Federally-facilitated Exchange.

(a) * * *
(12) The QHP issuer substantially fails to meet the requirements
related to the cases forwarded to QHP issuers under subpart K of this
part;
(13) The QHP issuer substantially fails to meet the requirements
related to the offering of a QHP under subpart M of this part;
(14) The QHP issuer offering the QHP is the subject of a pending,
ongoing, or final State regulatory or enforcement action or
determination that relates to the issuer offering QHPs in the
Federally-facilitated Exchanges; or
(15) HHS reasonably believes that the QHP issuer lacks the
financial viability to provide coverage under its QHPs until the end of
the plan year.
* * * * *
(e) Request for hearing. An issuer may appeal the decertification
of a QHP offered by that issuer under paragraph (c) or (d) of this
section by filing a request for hearing under an applicable
administrative hearing process.
(1) If an issuer files a request for hearing under this paragraph
(e):
(i) If the decertification is under paragraph (b)(1) of this
section, the decertification will not take effect prior to the issuance
of the final administrative decision in the appeal, notwithstanding the
effective date specified in paragraph (b)(1) of this section.
(ii) If the decertification is under paragraph (b)(2) of this
section, the decertification will be effective on the date specified in
the notice of decertification, but the certification of the QHP may be
reinstated immediately upon issuance of a final administrative decision
that the QHP should not be decertified.
(2) [Reserved]
0
71. Section Sec. 156.1110 is amended by revising paragraphs (a) and
(b) and removing paragraph (d) 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 Act:
(1) For plan years beginning before January 1, 2017, is Medicare-
certified or has been issued a Medicaid-only CMS Certification Number
(CCN) and is subject to the Medicare Hospital Conditions of
Participation requirements for--
(i) A quality assessment and performance improvement program as
specified in 42 CFR 482.21; and
(ii) Discharge planning as specified in 42 CFR 482.43.
(2) For plan years beginning on or after January 1, 2017--
(i)(A) Utilizes a patient safety evaluation system as defined in 42
CFR 3.20; and
(B) Implements a mechanism for comprehensive person-centered
hospital discharge to improve care coordination and health care quality
for each patient; or
(ii) Implements evidence-based initiatives to reduce all cause
preventable harm, prevent hospital readmission, improve care
coordination and improve health care quality through the collection,
management and analysis of patient safety events.
(3) A QHP issuer must ensure that each of its QHPs meets the
patient safety standards in accordance with this section.
(b) Documentation. A QHP issuer must collect:
(1) For plan years beginning before January 1, 2017, the CCN from
each of its contracted hospitals with greater than 50 beds, to
demonstrate that those hospitals meet patient safety standards required
in paragraph (a)(1) of this section; and
(2) For plan years beginning on or after January 1, 2017,
information, from each of its contracted hospitals with greater than 50
beds, to demonstrate that those hospitals meet patient safety standards
required in paragraph (a)(2) of this section.
* * * * *
0
72. Section 156.1220 is amended by revising paragraphs (a)(3) and
(a)(4)(ii) to read as follows:

Sec. 156.1220 Administrative appeals.

(a) * * *
(3) 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 date of the 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 the
date of the notification under Sec. 153.310(e) of this subchapter;
(iii) For a reinsurance payment, within 30 calendar days of the
date of the notification under Sec. 153.240(b)(1)(ii) of this
subchapter;

[[Page 75588]]

(iv) For a default risk adjustment charge, within 30 calendar days
of the date of the notification of the default risk adjustment charge;
(v) For reconciliation of cost-sharing reductions, within 30
calendar days of the date of the notification of the cost-sharing
reduction reconciliation payment or charge; and
(vi) For a risk corridors payment or charge, within 30 calendar
days of the date of the notification under Sec. 153.510(d) of this
subchapter.
(4) * * *
(ii) Notwithstanding paragraph (a)(1) 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) of this subchapter, it was so identified and remains
unresolved.
* * * * *
0
73. Section 156.1250 is revised to read as follows:

Sec. 156.1250 Acceptance of certain third party payments.

(a) Issuers offering individual market QHPs, including stand-alone
dental plans, and their downstream entities, must accept premium and
cost-sharing payments from the following third-party entities on behalf
of plan enrollees:
(1) A Ryan White HIV/AIDS Program under title XXVI of the Public
Health Service Act;
(2) An Indian tribe, tribal organization, or urban Indian
organization; and
(3) A local, State, or Federal government program, including a
grantee directed by a government program to make payments on its behalf
consistent with the program's statutory authority.
(b) An entity making third party payments of premiums under
paragraph (a) of this section must notify HHS of its intent to do so,
and the expected number of consumers for which it will do so, in a
format and timeline established by HHS.
0
74. Section 156.1256 is added to subpart M to read as follows:

Sec. 156.1256 Other notices.

As directed by the FFE, health insurance issuer that is offering
QHP coverage through an FFE must notify its enrollees of material plan
or benefit display errors and the enrollees' eligibility for a special
enrollment period, included in Sec. 155.420(d)(4) of this subchapter,
within 30 calendar days after the error is identified.

PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS

0
75. The authority citation for part 158 continues to read as follows:

Authority: Section 2718 of the Public Health Service Act (42
U.S.C. 300gg-18), as amended.

0
76. Section 158.103 is amended by revising the definitions of ``Large
Employer'', ``Small Employer'', and ``Unpaid claim reserves'' to read
as follows:

Sec. 158.103 Definitions.

* * * * *
Large Employer has the meaning given the term in Sec. 144.103 of
this subchapter.
* * * * *
Small Employer has the meaning given the term in Sec. 144.103 of
this subchapter.
* * * * *
Unpaid claim reserves means reserves and liabilities established to
account for claims that were incurred during the MLR reporting year but
had not been paid within 6 months of the end of the MLR reporting year.
0
77. Section 158.140 is amended by revising paragraph (a) introductory
text to read as follows:

Sec. 158.140 Reimbursement for clinical services provided to
enrollees.

(a) General requirements. The report required in Sec. 158.110 must
include direct claims paid to or received by providers, including under
capitation contracts with physicians, whose services are covered by the
policy for clinical services or supplies covered by the policy. In
addition, the report must include claim reserves associated with claims
incurred during the MLR reporting year, the change in contract
reserves, reserves for contingent benefits and the medical claim
portion of lawsuits, and any incurred experience rating refunds.
Reimbursement for clinical services, as defined in this section, is
referred to as ``incurred claims.'' All components of and adjustments
to incurred claims, with the exception of contract reserves, must be
calculated based on claims incurred only during the MLR reporting year
and paid through June 30th of the following year. Contract reserves
must be calculated as of December 31st of the applicable year.
* * * * *

Dated: October 23, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: November 17, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-29884 Filed 11-20-15; 4:15 pm]
BILLING CODE 4120-01-P

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