Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019, 51052-51148 [2017-23599]
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Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Parts 147, 153, 154, 155, 156,
157, and 158
[CMS–9930–P]
RIN 0938–AT12
Patient Protection and Affordable Care
Act; HHS Notice of Benefit and
Payment Parameters for 2019
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 and risk
adjustment data validation programs;
cost-sharing parameters and costsharing reductions; and user fees for
Federally-facilitated Exchanges and
State-based Exchanges on the Federal
platform. It proposes changes that
would enhance the role of States as
related to essential health benefits (EHB)
and qualified health plan (QHP)
certification; and would provide States
with additional flexibility in the
operation and establishment of
Exchanges, including the Small
Business Health Options Program
(SHOP) Exchanges. It includes proposed
changes to standards related to
Exchanges; the required functions of the
SHOPs; actuarial value for stand-alone
dental plans; the rate review program;
the medical loss ratio program;
eligibility and enrollment; exemptions;
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 November 27, 2017.
ADDRESSES: In commenting, please refer
to file code CMS–9930–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–9930–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
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SUMMARY:
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following address ONLY: Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, Attention: CMS–9930–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:
Lindsey Murtagh, (301) 492–4106,
Rachel Arguello, (301) 492–4263, or
Alper Ozinal, (301) 492–4178, for
general information.
Krutika Amin, (301) 492–5153, for
matters related to risk adjustment, and
Federally-facilitated Exchange and
State-based Exchange on the Federal
platform user fees.
Adrianne Patterson, (410) 786–0686
or Abigail Walker, (410) 786–1725, for
matters related to sequestration and
administrative appeals of financial
transfers.
Melissa Jaffe, (301) 492–4129 or Adam
Shaw, (410) 786–1091, for matters
related to risk adjustment data
validation.
Lisa Cuozzo, (410)–786–1746, for
matters related to rate review.
Jenny Chen, (301)–492–5156, for
matters related to establishing a State-
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based Exchange, and State-based
Exchanges on the Federal platform.
Emily Ames, (301) 492–4246, for
matters related to Navigators and nonNavigator assistance personnel.
Elissa Dines, (301) 492–4388, for
matters related to employer-sponsored
coverage verification.
Kendra May, (301) 492–4477, for
matters related to the requirement to file
an income tax return and reconcile
APTC and terminations.
Carolyn Kraemer, (301) 492–4197, for
matters related to special enrollment
periods under part 155.
Amanda Brander, (202) 690–7892, for
matters related to exemptions from the
shared responsibility payment.
Terence Kane, (301) 492–4449, for
matters related to income
inconsistencies.
Jacob Schnur, (410) 786–7703, for
matters related to direct enrollment.
Laura Eldon, (301) 492–4372, for
matters related to the Federallyfacilitated SHOP.
Shilpa Gogna, (301) 492–4257, for
matters related to SHOP in State-based
Exchanges.
Leigha Basini, (301) 492–4380,
Rebecca Zimmermann, (301) 492–4396,
or Allison Yadsko, (410) 786–1740, for
matters related to standardized options,
essential health benefits, stand-alone
dental plans and other standards for
QHP issuers.
Pat Meisol, (410) 786–1917, for
matters related to cost-sharing
reductions, and the premium
adjustment percentage.
Christina Whitefield, (301) 492–4172,
for matters related to the medical loss
ratio program.
Cam Moultrie Clemmons, (206) 615–
2338, for matters related to minimum
essential coverage.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All
comments received before the close of
the comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received: https://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be available for public inspection as
they are received, generally beginning
approximately 3 weeks after publication
of a document, at the headquarters of
the Centers for Medicare & Medicaid
Services, 7500 Security Boulevard,
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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.
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Acronyms
Because of the many organizations
and terms to which we refer by acronym
in this proposed rule, we are listing
these acronyms and their corresponding
terms in alphabetical order below:
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
Code Internal Revenue Code of 1986 (26
U.S.C. 1, et seq.)
EDGE External Data Gathering Environment
EHB Essential health benefits
FFE Federally-facilitated Exchange
FF–SHOP Federally-facilitated Small
Business Health Options Program
FPL Federal poverty level
FR Federal Register
FTI Federal tax information
HCC Hierarchical condition category
HHS United States Department of Health
and Human Services
HIPAA Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104–
191)
ICR Information collection requirements
IRS Internal Revenue Service
MEC Minimum essential coverage
MLR Medical loss ratio
NAIC National Association of Insurance
Commissioners
NHEA National Health Expenditure
Accounts
OIG Office of the Inspector General
OMB Office of Management and Budget
PHS Act Public Health Service Act
PMPM Per member per month
Patient Protection and Affordable Care Act or
PPACA 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
PRA Paperwork Reduction Act of 1995
PTC Premium tax credit
QIA Quality improvement activities
QHP Qualified health plan
RBC Risk-based capital
RXCs Prescription drug utilization factors
SADPs Stand-alone dental plans
SBE State-based Exchange
SBE–FP State-based Exchange on the
Federal platform
SHOP Small Business Health Options
Program
SSA Social Security Administration
Table of Contents
I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
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C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of
Benefit and Payment Parameters for 2019
A. Part 147—Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
B. Part 153—Standards Related to
Reinsurance, Risk Corridors, and Risk
Adjustment Under the Affordable Care
Act
C. Part 154—Health Insurance Issuer Rate
Increases: Disclosure and Review
Requirements
D. Part 155—Exchange Establishment
Standards and Other Related Standards
Under the Affordable Care Act
E. Part 156—Health Insurance Issuer
Standards Under the Affordable Care
Act, Including Standards Related to
Exchanges
F. Part 157—Employer Interactions With
Exchanges and SHOP Participation
G. Part 158—Issuer Use of Premium
Revenue: Reporting and Rebate
Requirements
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Updates to the Risk
Adjustment Model
C. ICRs Regarding Small Group Market
Flexibility for Risk Adjustment
D. ICRs Regarding Risk Adjustment Data
Validation and 500 Billable Member
Months
E. ICRs Regarding Health Insurance Issuer
Rate Increases: Disclosure and Review
Requirements—Applicability
F. ICRs Regarding Rate Increases Subject to
Review
G. ICRs Regarding the Small Business
Health Options Program
H. ICRs Regarding States Defining the
Essential Health Benefits
I. ICRs Regarding Medical Loss Ratio
J. Summary of Annual Burden Estimates
for Proposed Requirements
K. Submission of PRA-Related Comments
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
I. Reducing Regulation and Controlling
Regulatory Costs
I. Executive Summary
American Health Benefit Exchanges,
or ‘‘Exchanges’’ (also called
‘‘Marketplaces’’) are entities established
under the Patient Protection and
Affordable Care Act (PPACA) through
which qualified individuals and
qualified employers can purchase health
insurance coverage. Many individuals
who enroll in qualified health plans
(QHPs) through individual market
Exchanges are eligible to receive a
premium tax credit (PTC) to reduce
their costs for health insurance
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premiums, and receive reductions in
required cost-sharing payments to
reduce out-of-pocket expenses for
healthcare services. The PPACA also
established the risk adjustment program,
which is intended to mitigate the
potential impact of adverse selection
and stabilize the price of health
insurance in the individual and small
group markets, both on and off
Exchanges.
Over time, issuer exits and increasing
insurance rates have threatened the
stability of the individual and small
group Exchanges in many geographic
areas. In previous rulemaking, we
established provisions and parameters
to implement many PPACA provisions
and programs. In this proposed rule, we
propose to amend these provisions and
parameters, with a focus on enhancing
the role of States in these programs and
providing States with additional
flexibilities, reducing unnecessary
regulatory burden on stakeholders,
empowering consumers, and improving
affordability.
On January 20, 2017, the President
issued an Executive Order which stated
that, to the maximum extent permitted
by law, the Secretary of HHS and heads
of all other executive departments and
agencies with authorities and
responsibilities under the PPACA
should exercise all authority and
discretion available to them to waive,
defer, grant exemptions from, or delay
the implementation of any provision or
requirement of the PPACA that would
impose a fiscal burden on any State or
a cost, fee, tax, penalty, or regulatory
burden on individuals, families,
healthcare providers, health insurers,
patients, recipients of healthcare
services, purchasers of health insurance,
or makers of medical devices, products,
or medications. In this proposed rule,
we are proposing, within the limitations
of the current statute, to reduce fiscal
and regulatory burdens across different
program areas, and to support
innovative health insurance models.
We propose several changes that
would significantly expand the role of
States in the administration of the
PPACA. We propose to provide States
with additional flexibility in the
definition of essential health benefits
(EHBs) and outline potential future
directions for defining EHBs. In
addition to granting States more
flexibility regulating their markets, we
believe this change would permit States
to modify EHBs to increase affordability
of health insurance in the individual
and small group markets. We also
propose to explore additional ways to
support State-based Exchanges (SBEs) in
adopting innovative approaches to
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operating and sustaining their
Exchanges, and to make the State-based
Exchanges on the Federal platform
(SBE–FP) model a more appealing and
viable model for States. We propose that
States assume a larger role in the QHP
certification process for the Federallyfacilitated Exchanges (FFEs). This
would confirm States’ traditional role in
overseeing their health insurance
markets, and reduce the issuer burden
associated with having to comply with
duplicative State and Federal reviews.
This proposed rule also contains
several policies that would provide
States with greater flexibility. We
propose to provide States with
significantly more flexibility in how
they operate a Small Business Health
Options Program (SHOP), permitting
them to operate these Exchanges more
efficiently, potentially benefitting
States, issuers, employers and
employees. We propose changes that
would allow for a more efficient SHOP,
such that employers and employees
could enroll in SHOP coverage by
working with a QHP issuer or SHOPregistered agent or broker. Additionally,
we propose to provide States more
flexibility regarding risk adjustment
transfers in their markets. We also
propose to make it easier for States to
apply for and be granted an adjustment
to the individual market medical loss
ratio (MLR) standard in their State. We
believe this change would provide
States with an additional tool to help
stabilize and provide relief in their
individual markets. Additionally, we
seek comment related to the inclusion of
Federal and State taxes in MLR and
rebate calculation, and we propose other
changes to the MLR program to reduce
the burden on issuers.
Risk adjustment continues to be a core
program for stabilizing the individual
and small group markets both on and off
Exchanges, and we propose recalibrated
parameters for the HHS risk adjustment
methodology. We also propose several
changes related to the risk adjustment
data validation program that are
intended to ensure the integrity of the
results of risk adjustment, while
alleviating issuer burden associated
with participating in risk adjustment
data validation.
As we do every year in the HHS
notice of benefit and payment
parameters, we propose updated
parameters applicable in the individual
and small group markets. We propose
the user fee rate for issuers participating
on FFEs and SBE–FPs for 2019 to be 3.5
and 3.0 percent of premiums,
respectively. We propose to update the
premium adjustment percentage for
2019, which is used to set the rate of
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increase for several parameters detailed
in the PPACA, including the maximum
annual limitation on cost sharing for
2019, the required contribution
percentage used to determine eligibility
for certain exemptions under section
5000A of the Code, and the assessable
payment amounts under section
4980H(a) and (b) of the Code. We
propose to update the maximum annual
limitations on cost sharing for the 2019
benefit year for cost-sharing reduction
plan variations. We also propose
changes to the cost-sharing reduction
reconciliation process.
We propose a number of changes
related to rate review that are intended
to provide States with greater flexibility
in the rate filing process and reduce
regulatory burden. Specifically, we
propose to exempt student health
insurance coverage from Federal rate
review requirements, and to provide
States with more flexibility regarding
timing of the rate review process
established under 45 CFR part 154. We
also propose to modify the 10 percent
threshold for reasonableness review to a
15 percent default threshold, with States
continuing to have the flexibility to
establish a different threshold.
Recognizing that Exchanges,
including the FFEs, face resource
constraints, we also propose changes to
the requirements regarding Navigators,
and the requirements regarding nonNavigator assistance personnel subject
to § 155.215, to enable Exchanges to
more easily operate these programs with
limited resources. Similarly, we also
propose to allow an agent, broker or
issuer participating in direct enrollment
to have its selected third-party entity
conduct operational readiness reviews,
rather than requiring those reviews to be
conducted by entities approved by HHS.
In this proposed rule, we propose
relatively minor adjustments to our
programs and rules as we do each year.
We propose a number of incremental
amendments to our policies around
coverage, eligibility, enrollment, and
affordability exemptions.
We continue to be very interested in
exploring ways to improve Exchange
program integrity. In this rule, we seek
comment on a number of program
integrity items, including whether we
should consider shortening the length of
time the Exchanges are authorized to
obtain enrollee tax information, as well
as ways to prompt more timely
consumer reporting of changes in
circumstances during the benefit year
that may impact an individual’s
eligibility for coverage and financial
assistance. In addition, we ask for
comment on any additional program
integrity improvements that have not
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been outlined in this rule, but could be
beneficial in a future rulemaking.
Finally, we note that we intend to
consider proposals in future rulemaking
that would help reduce drug costs and
promote drug price transparency. We
also note that we intend to provide
guidance on other aspects of Exchange
eligibility in the near future. In
particular, we intend to reconsider the
appropriate thresholds for changes in
income that will trigger a data matching
inconsistency, processes for denying
eligibility for advance subsidies for
individuals who fail to reconcile
advance payments of the premium tax
credit (APTC) on their Federal income
tax return, processes for matching
enrollment data with the Medicare and
Medicaid programs, and the appropriate
manner of recalculating APTC following
a midyear change in eligibility, and seek
comments on each of these issues as we
prepare proposed rules on these topics.
Instituting strong program safeguards
to ensure that only individuals who are
eligible are enrolled in Exchange
coverage, and that they are only
receiving the amount of financial
assistance they are eligible for, is
essential to ensuring that the Exchanges
operate as intended, and is also a key
priority for the Administration. We have
already taken action to strengthen
safeguards around Exchange eligibility,
most recently through the
implementation of the Special
Enrollment Verification initiative;
however, we continue to be interested
in exploring ways to further safeguard
Federal tax dollars flowing through
Exchanges.
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 ‘‘Patient
Protection and Affordable Care Act’’ or
‘‘PPACA.’’
Subtitles A and C of title I of the
PPACA 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 PPACA, restricts the variation in
premium rates charged by a health
insurance issuer for non-grandfathered
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health insurance coverage in the
individual or small group market to
certain specified factors. These 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 PPACA. Section 1312(c) of the
PPACA 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 PPACA.
Section 2702 of the PHS Act, as added
by the PPACA, 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.1
Section 2703 of the PHS Act, as added
by the PPACA, and sections 2712 and
2741 of the PHS Act, as added by
HIPAA prior to the enactment of the
PPACA, 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 PPACA, 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 PPACA, 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.’’ 2 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
1 Before enactment of the Patient Protection and
Affordable Care Act, the Health Insurance
Portability and Accountability Act of 1996 (HIPAA)
amended the PHS Act (formerly section 2711) to
generally require guaranteed availability of coverage
for employers in the small group market.
2 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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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 PPACA provides
that any standard or requirement
adopted by a State under title I of the
PPACA, or any amendment made by
title I of the PPACA, is to be applied
uniformly to all health plans in each
insurance market to which the standard
and requirement apply.
Section 1302 of the PPACA provides
for the establishment of an essential
health benefits 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 provided under 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 PPACA
directs all issuers of QHPs to cover the
EHB package described in section
1302(a) of the PPACA, including
coverage of the services described in
section 1302(b) of the PPACA, to adhere
to the cost-sharing limits described in
section 1302(c) of the PPACA and to
meet the AV levels established in
section 1302(d) of the PPACA. 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 health
insurance coverage, irrespective of
whether such coverage is offered
through an Exchange. In addition,
section 2707(b) 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) of the
PPACA.
Section 1302(d) of the PPACA
describes the various levels of coverage
based on actuarial value (AV).
Consistent with section 1302(d)(2)(A) of
the PPACA, AV is calculated based on
the provision of EHB to a standard
population. Section 1302(d)(3) of the
PPACA directs the Secretary to develop
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guidelines that allow for de minimis
variation in AV calculations.
Section 1311(b)(1)(B) of the PPACA
directs that the Small Business Health
Options Program assist qualified small
employers in facilitating the enrollment
of their employees in QHPs offered in
the small group market. Sections
1312(f)(1) and (2) of the PPACA define
qualified individuals and qualified
employers. Under section 1312(f)(2)(B)
of the PPACA, beginning in 2017, States
have the option to allow issuers to offer
QHPs in the large group market through
an Exchange.3 Section 1312(a)(2) of the
PPACA provides that in a SHOP, a
qualified employer may select a level of
coverage, and that employees may then,
in turn, choose SHOP plans within the
level selected by the qualified employer.
Section 1311(c)(1)(B) of the PPACA
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 PPACA
requires the Secretary to continue to
operate, maintain, and update the
Internet portal developed under section
1103 of the PPACA to provide
information to consumers and small
businesses on affordable health
insurance coverage options.
Sections 1311(d)(4)(K) and 1311(i) of
the PPACA direct all Exchanges to
establish a Navigator program.
Section 1311(c)(6)(C) of the PPACA
establishes special enrollment periods
and section 1311(c)(6)(D) of the PPACA
establishes the monthly enrollment
period for Indians, as defined by section
4 of the Indian Health Care
Improvement Act.
Section 1312(e) of the PPACA 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.
Section 1321(a) of the PPACA
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 PPACA. Section 1321(a)(1) of the
PPACA directs the Secretary to issue
regulations that set standards for
meeting the requirements of title I of the
PPACA with respect to, among other
3 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.
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things, the establishment and operation
of Exchanges.
Sections 1313 and 1321 of the PPACA
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
PPACA 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 PPACA, HHS has the
authority under sections 1321(c)(1) and
1311(d)(5)(A) of the PPACA 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 PPACA
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 PPACA
provides that nothing in title I of the
PPACA should be construed to preempt
any State law that does not prevent the
application of title I of the PPACA.
Section 1311(k) of the PPACA specifies
that Exchanges may not establish rules
that conflict with or prevent the
application of regulations issued by the
Secretary.
Section 1343 of the PPACA
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 lowerrisk populations; thereby, reducing
incentives for issuers to avoid higherrisk enrollees.
Section 1402 of the PPACA provides
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. This section also provides
for reductions in cost sharing for
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Indians enrolled in QHPs at any metal
level.
Section 5000A of the Code, as added
by section 1501(b) of the PPACA,
requires all applicable individuals to
maintain minimum essential coverage
(MEC) for each month or make an
individual shared responsibility
payment. Section 5000A(f) of the Code
defines MEC 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 MEC.
The Protecting Affordable Coverage
for Employees Act (Pub. L. 114–60)
amended section 1304(b) of the PPACA
and section 2791(e) of the PHS Act to
amend the definition of small employer
in 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 4
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
4 By premium stabilization program, we are
referring to the risk adjustment, risk corridors and
reinsurance programs established by the PPACA.
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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).
In the December 2, 2015 Federal
Register (80 FR 75487), we published a
proposed rule outlining the benefit and
payment parameters for the 2017 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
2017 Payment Notice). We published
the 2017 Payment Notice final rule in
the March 8, 2016 Federal Register (81
FR 12203).
In the September 6, 2016 Federal
Register (81 FR 61455), we published a
proposed rule outlining the benefit and
payment parameters for the 2018 benefit
year, and to further promote stable
premiums in the individual and small
group markets. We proposed updates to
the risk adjustment methodology, new
policies around the use of external data
for recalibration of our risk adjustment
models, and amendments to the risk
adjustment data validation process
(proposed 2018 Payment Notice). We
published the 2018 Payment Notice
final rule in the December 22, 2016
Federal Register (81 FR 94058).
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
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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 and SHOP, 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 additional 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.
In an interim final rule, published in
the May 11, 2016 Federal Register (81
FR 29146), we made amendments to the
parameters of certain special enrollment
periods (2016 Interim Final Rule). We
finalized these in the 2018 Payment
Notice final rule in the December 22,
2016 Federal Register (81 FR 94058). In
the April 18, 2017 Market Stabilization
final rule Federal Register (82 FR
18346), we amended standards relating
to special enrollment periods and QHP
certification.
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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). In the April 18, 2017 Market
Stabilization final rule (82 FR 18346),
we expanded the de minimis range
applicable to plan metal levels.
5. Minimum Essential Coverage
In the February 1, 2013 Federal
Register (78 FR 7348), we published a
proposed rule that designates other
health benefits coverage as MEC and
outlines substantive and procedural
requirements that other types of
coverage must fulfill in order to be
recognized as MEC. The provisions were
finalized in the July 1, 2013 Federal
Register (78 FR 39494).
In the November 26, 2014 Federal
Register (79 FR 70674), we published a
proposed rule seeking comments on
whether State high risk pools should be
permanently designated as MEC or
whether the designation should be timelimited. In the February 27, 2015
Federal Register (80 FR 10750), we
designated State high risk pools
established on or before November 26,
2014 as MEC.
6. 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
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.
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51057
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). The 2018
Payment Notice final rule in the
December 22, 2016 Federal Register (81
FR 94058) provided additional guidance
on guaranteed availability and
guaranteed renewability. In the April
18, 2017 Market Stabilization final rule
(82 FR 18346), we released further
guidance related to guaranteed
availability.
7. 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 30239), the February 27,
2015 Federal Register (80 FR 10749),
the March 8, 2016 Federal Register (81
FR 12203) and the December 22, 2016
Federal Register (81 FR 94058).
8. 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). The medical loss ratio
program requirements were amended in
final rules published in the March 11,
2014 Federal Register (79 FR 13743),
the May 27, 2014 Federal Register (79
FR 30339), the February 27, 2015
Federal Register (80 FR 10749), the
March 8, 2016 Federal Register (81 FR
12203), and the December 22, 2016
Federal Register (81 FR 94183).
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
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have held a number of listening sessions
with consumers, providers, employers,
health plans, and the actuarial
community to gather public input. We
have solicited input from State
representatives on numerous topics,
particularly essential health benefits,
QHP certification and Exchange
establishment. 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.
HHS also received several thousand
unique comments in response to a
request for information, entitled
‘‘Reducing Regulatory Burdens Imposed
by the Patient Protection and Affordable
Care Act and Improving Healthcare
Choices to Empower Patients’’,
published in the June 12, 2017 Federal
Register (82 FR 26885) (Request for
Information). Review of these comments
is ongoing, and we anticipate
continuing to address comments in
future rulemaking and guidance.
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C. Structure of Proposed Rule
The regulations outlined in this
proposed rule would be codified in 45
CFR parts 147, 153, 154, 155, 156, 157,
and 158.
The proposed regulations in part 147
would amend the rules regarding fair
health insurance premiums and
guaranteed availability to reflect
proposed changes related to the SHOPs
and special enrollment periods.
The proposed regulations in part 153
propose to recalibrate the risk
adjustment models consistent with the
methodology finalized for the 2018
benefit year with slight modifications to
the drug classes included in the 2019
benefit year adult models and the
incorporation of blended MarketScan®
and the most recent enrollee-level
External Data Gathering Environment
(EDGE) data. The proposed regulations
address high-cost risk pooling, where
we are proposing to implement the same
parameters that applied to the 2018
benefit year to the 2019 benefit year.
The proposed regulations in part 153
also include the risk adjustment user fee
and modifications to risk adjustment
data validation. We also propose State
flexibility to the risk adjustment
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transfers starting for the 2019 benefit
year.
The proposed regulations in part 154
propose certain modifications to
enhance State flexibility for the rate
review program. We propose to exempt
student health insurance coverage from
Federal rate review requirements. We
propose to raise the default threshold
for review of reasonableness in the rate
review process from 10 percent to 15
percent. We also propose to allow States
with Effective Rate Review Programs to
set later submission deadlines for rate
filings from issuers that offer non-QHPs
only. In addition, we propose to change
the notification period for States with
Effective Rate Review Programs to notify
HHS prior to posting rate increases
(from 30 days to 5 business days).
The proposed regulations in part 155
include modifications to the functions
of an Exchange, and a new approach to
operational readiness reviews for direct
enrollment partners which would allow
agents, brokers, and issuers to select
their own third-party entities for
conducting those reviews. We propose
modifications to the rules around
verification of eligibility. We also
propose to increase flexibility in the
Navigator program by removing the
requirement that each Exchange must
have at least two Navigator entities, one
of which must be a community and
consumer focused non-profit, and to
remove the standard requiring physical
presence of the Navigator entity in the
Exchange service area. We propose to
modify the parameters around certain
special enrollment periods. We propose
to modify the effective date options for
enrollee-initiated terminations, and
amend the affordability exemption so
that it may be based on the lowest cost
Exchange plan if there is no bronze level
plan sold through the Exchange in that
rating area.
The proposed regulations in part 156
include changes to essential health
benefits and the QHP certification
process. 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 2019. We propose to
update the FFE and SBE–FP user fee
rates for the 2019 benefit year for all
issuers participating on the FFEs or
SBE–FPs. The proposed regulations in
part 156 would designate as MEC
Children’s Health Insurance Program
(CHIP) buy-in programs that provide
identical coverage to the State’s CHIP
program under title XXI of the Social
Security Act. The regulations at part 156
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also include proposals related to
actuarial value for stand-alone dental
plans (SADPs) and the administrative
appeals right with respect to the amount
of the advance payment of cost-sharing
reductions.
The proposed amendments to the
regulations in parts 155, 156, and 157
include proposals that would provide
SHOPs with additional operational
flexibility, and would modify the
requirements for issuers, employers, and
employees interacting with SHOPs.
The proposed amendments to the
regulations in part 158 propose
revisions related to reporting quality
improvement activity expenses as part
of the formula for calculating MLR, and
revisions related to State requests for
adjustment to the individual market
MLR standard.
III. Provisions of the Proposed HHS
Notice of Benefit and Payment
Parameters for 2019
A. Part 147—Health Insurance Reform
Requirements for the Group and
Individual Health Insurance Markets
1. Fair Health Insurance Premiums
(§ 147.102)
As discussed elsewhere in this
proposed rule, we are proposing
substantial changes to the requirements
applicable to SHOPs to provide those
programs with the flexibility to operate
in a leaner fashion, a flexibility that we
intend to utilize in the FF–SHOPs. As
part of these changes and as discussed
in the preamble to §§ 156.285 and
156.286, we are proposing that, effective
on the effective date of the final rule, if
finalized as proposed, the requirement
in § 156.285(a)(4)(ii) regarding premium
rating standards in the FF–SHOPs
would not apply for plan years
beginning on or after January 1, 2018.
Therefore, we propose to delete from
§ 147.102(c)(3)(iii)(D) a reference to
§ 156.285(a)(4), and to replace the
reference to FF–SHOPs with a reference
to SHOPs generally, to reflect that,
under the proposed approach for
SHOPs, some SHOPs may want to
prohibit issuers from offering average
enrollee premiums. We seek comment
on this proposal and on whether issuers
offering coverage through SHOPs should
always be required to offer average
enrollee premiums, or do so only if
required under applicable State law.
2. Guaranteed Availability of Coverage
(§ 147.104)
As discussed elsewhere in this
proposed rule, we are proposing
substantial changes to the requirements
applicable to SHOPs to provide them
with the flexibility to operate in a leaner
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fashion, a flexibility that we intend to
utilize in the FF–SHOPs. Among those
changes, we propose that, effective on
the effective date of the final rule, if
finalized as proposed, the requirements
in § 156.285 would apply for plan years
starting before January 1, 2018. We also
propose a new § 156.286, which
specifies those requirements contained
in § 156.285 that, effective on the
effective date of the final rule, if
finalized as proposed, would continue
to apply for plan years starting on or
after January 1, 2018. Among those
requirements is the requirement in
§ 156.285(e) which permits a QHP
offered in the SHOP to apply group
participation rules under certain
circumstances. This provision is listed
in proposed § 156.286(e). The
marketwide regulations at
§ 147.104(b)(1)(i)(B) currently reference
§ 156.285(e), and we propose to add a
reference to § 156.286(e), to clarify that,
effective on the effective date of the
final rule, if finalized as proposed, for
plans years that start after January 1,
2018, QHPs offered in the SHOP may
restrict the availability of coverage with
respect to a group health plan that
cannot comply with group participation
rules, to an annual enrollment period of
November 15 through December 15 of
each calendar year.
These regulations also propose to
remove the small group coverage
effective dates that are found in the
SHOP regulations at § 155.725 with
respect to plan years beginning on or
after January 1, 2018, effective on the
effective date of the final rule, if
finalized as proposed. However, there
are currently requirements in
§ 147.104(b)(1)(i)(C) that, by crossreferencing § 155.725, apply those same
requirements marketwide, and we do
not propose to remove that marketwide
requirement. We propose changes to
§ 147.104 to reflect these proposed
changes. Specifically, we propose to
eliminate, from § 147.104(b)(1)(i)(C), the
cross-reference to § 155.725. We propose
in place of the cross-reference to
explicitly specify in § 147.104(b)(1)(i)(C)
those same coverage effective dates for
coverage in the small group market, and
for the large group market if such
coverage is offered through a SHOP, that
would be eliminated from the SHOP
regulations under our proposal for
§ 155.725.
We propose to remove paragraph
§ 147.104(b)(1)(iii), along with the crossreference to it in § 147.104(b)(1)(ii), as
paragraph (b)(1)(iii) applies to plan
selections made in 2013, and is
therefore no longer necessary.
Section 147.104(b)(2)(i) extends
several of the special enrollment periods
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that apply to issuers on the Exchange,
to all issuers in the individual market.
Although § 147.104(b)(2)(i) is intended
to specify which special enrollment
periods offered through the Exchange
must also be offered by health insurance
issuers with respect to coverage offered
outside of an Exchange, the paragraph
as currently written could be read to
apply the exceptions to any coverage
offered by a health insurance issuer in
the individual market. We recognize the
potential for confusion, as coverage
offered through an Exchange is offered
by ‘‘a health insurance issuer in the
individual market,’’ but this coverage is
subject to the special enrollment rule at
§ 155.420(d), which is intended to
require special enrollment periods for
triggers including those listed in the
exceptions in paragraph (b)(2)(i).
Therefore, for purposes of clarification,
we propose to amend that phrase in
§ 147.104(b)(2)(i) to clarify that the
exceptions in the paragraph only apply
with respect to coverage offered outside
of the Exchange in the individual
market.
With respect to the subset of special
enrollment periods in § 155.420 that
apply off-Exchange, current regulations
at § 147.104(b)(2)(ii) state that, in
applying § 147.104(b)(2), a reference in
§ 155.420 to a ‘‘QHP’’ is deemed to refer
to a plan, a reference to ‘‘the Exchange’’
is deemed to refer to the applicable
State authority, and a reference to a
‘‘qualified individual’’ is deemed to
refer to an individual in the individual
market. As discussed in the preamble to
§ 155.420, we are proposing a change to
§ 155.420(a)(5) to exempt qualified
individuals from the prior coverage
requirement that applies to certain
special enrollment periods if for at least
1 of the 60 days prior to the date of their
qualifying event they lived in a service
area where there were no QHPs offered
through an Exchange. Section
155.420(a)(5) applies to qualifying
individuals seeking off-Exchange
coverage through an applicable special
enrollment period, so we propose that
this exception for individuals living in
a service area where there were no
QHPs offered through an Exchange
would also apply.7 However, in this
7 As stated in the preamble to § 155.420, the
exception to the requirement to have previous
coverage is intended to relieve individuals of that
requirement when there was no affordable coverage
(that is, coverage that could be purchased through
an Exchange to which APTC might apply) available
in their previous service area. We believe
affordability is key to this exception, and therefore,
that the scope of the exception should apply
equally, regardless of whether the individual is
seeking to purchase coverage inside or outside an
Exchange during the special enrollment periods for
which this exception applies; that is, the exception
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instance the reference to ‘‘QHP’’ should
not be deemed to refer to a plan for
purposes of applying § 147.104(b)(2).
Therefore, we propose to amend
§ 147.104(b)(2)(ii) to state that a
reference in § 155.420 (other than in
§ 155.420(a)(5)) to a ‘‘QHP’’ is deemed
to refer to a plan, a reference to ‘‘the
Exchange’’ is deemed to refer to the
applicable State authority, and a
reference to a ‘‘qualified individual’’ is
deemed to refer to an individual in the
individual market.
We seek comment on these proposals.
Among the special enrollment periods
in § 155.420 that apply off-Exchange are
those specified in § 155.420(d)(2)(i),
under which a qualified individual
gains a dependent or becomes a new
dependent through marriage, birth,
adoption, placement for adoption, or
placement in foster care, or through a
child support order or other court order.
As applied to on-Exchange coverage
under these special enrollment periods,
an existing dependent may enroll in or
change their QHP enrollment through
these special enrollment periods when a
qualified individual gains a dependent
or becomes a new dependent under the
circumstances described in
§ 155.420(d)(2)(i) and the requirement in
§ 155.420(a)(4)(i) that the new
dependent must be allowed to enroll in
the QHP in which the family is already
enrolled is not applicable. Under the
HIPAA special enrollment provisions
that continue to apply to group health
plans and health insurance issuers in
connection with group health coverage,
there are similar special enrollment
periods when a child becomes a
dependent of the employee through
marriage, birth, adoption, or placement
for adoption.8 The HIPAA regulations
specify that, under such circumstances,
those special enrollment periods apply
only to dependents who become a
dependent through marriage, birth,
adoption, or placement for adoption
(that is, new dependents). We seek
comment on whether, in the offExchange individual market, the special
enrollment periods for when an
individual gains a dependent or
should apply if there was no such affordable
coverage available in the individual’s previous
service area (regardless of whether or not any
coverage was being actively marketed in that
service area outside the Exchange). Also, when an
individual seeks to purchase coverage outside an
Exchange during such a special enrollment period,
we believe it might be unreasonably difficult for an
issuer to determine if at least one issuer was
actively marketing coverage in the individual’s
previous service area outside the Exchange, as
opposed to determining if at least one issuer was
making coverage available in that service area
specifically through an Exchange. We solicit
comments on this approach.
8 See § 146.117(b).
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becomes a new dependent under the
circumstances described in
§ 155.420(d)(2)(i) should apply to new
and existing dependents (as is the case
in the Exchanges when the requirement
in § 155.420(a)(4)(i) that the new
dependent must be allowed to enroll in
the QHP in which the family is
currently enrolled is not applicable),
whether they should apply only to new
dependents (consistent with the HIPAA
group market regulations), or whether
we should adopt some other approach,
such as affording the special enrollment
periods to some, but not all categories
of existing dependents.
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
B. 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 2018,9 both
the transitional reinsurance program
and permanent risk adjustment program
are subject to the fiscal year 2018
sequestration. The Federal government’s
2018 fiscal year begins October 1, 2017.
Although the 2016 benefit year is the
final year of the transitional reinsurance
program, HHS will continue to make
reinsurance payments in the 2018 fiscal
year, as the second contribution
collection deadline for the 2016 benefit
year is November 15, 2017. Therefore,
the reinsurance program will be
sequestered at a rate of 6.6 percent for
payments made from fiscal year 2018
resources (that is, funds collected
during the 2018 fiscal year). The risk
adjustment program will also be
sequestered at a rate of 6.6 percent for
payments made from fiscal year 2018
resources (that is, funds collected
during the 2018 fiscal year).
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 the reinsurance and risk
adjustment programs, the funds that are
sequestered in fiscal year 2018 from the
reinsurance and risk adjustment
programs will become available for
payment to issuers in fiscal year 2019
without further Congressional action. If
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
9 Available at https://www.whitehouse.gov/sites/
whitehouse.gov/files/omb/sequestration_reports/
2018_jc_sequestration_report_may2017_potus.pdf.
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fiscal year following that in which it
was sequestered.
2. Provisions and Parameters for the
Risk Adjustment Program
In subparts D and G of 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 PPACA that transfers
funds from lower risk, nongrandfathered plans to higher risk, nongrandfathered plans in the individual
and small group markets, inside and
outside the Exchanges. In 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. HHS will be operating risk
adjustment in every State beginning for
the 2017 benefit year, and did not
receive any applications from States to
operate risk adjustment for the 2019
benefit year.
HHS continues to evaluate the risk
adjustment program, including by
reviewing comments received in
response to the Request for Information,
and intends to propose changes in a
manner that promotes transparency,
considers stakeholder feedback and
provides adequate notice to issuers,
while upholding the integrity and
accuracy of the program.
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 risk
assigned to an individual’s age, sex, and
diagnoses are added together to produce
an individual risk score. Additionally,
in the adult models, we added
enrollment duration factors beginning
for the 2017 benefit year, and
prescription drug utilization factors
(RXCs) beginning for the 2018 benefit
year, in the calculation of enrollees’ risk
scores. Infant risk scores are determined
by inclusion in one of 25 mutually
exclusive groups, based on the infant’s
maturity and the severity of diagnoses.
If applicable, the risk score for adults,
children or infants is multiplied by a
cost-sharing reductions adjustment.
The enrollment-weighted average risk
score of all enrollees in a particular risk
adjustment covered plan (also referred
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to as 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
accords with the Actuarial Standards
Board’s Actuarial Standards of Practice
for risk classification.
b. Proposed Updates to the Risk
Adjustment Model (§ 153.320)
For the 2019 benefit year risk
adjustment model, HHS will continue to
incorporate the methodological
improvements finalized in previous
rulemaking, such as incorporating
preventive services in our simulation of
plan liability, using more granular trend
rates to better reflect the growth in
specialty drug expenditures and drugs
generally as compared to medical and
surgical expenditures, accounting for
partial year enrollment in the adult
models, including prescription drug
utilization factors in the adult models,
adjusting the risk adjustment model and
transfers to account for high-cost
enrollees, and removing a portion of the
premiums in the transfer formula to
account for a portion of administrative
costs that do not vary with claims. For
the 2019 benefit year, we propose to
recalibrate the risk adjustment models
using the methodology finalized for the
2018 benefit year, with small
modifications to the drug classes
included in the 2019 benefit year adult
models, and incorporation of the 2016
benefit year EDGE data in the 2019
benefit year risk adjustment model
recalibration.
We seek comment on these proposals.
i. Recalibration Using EDGE Data
To recalibrate the 2016, 2017 and
2018 benefit year risk adjustment
models, we used the three most recent
years of Truven MarketScan® data. This
approach allowed for using the blended,
or averaged, coefficients from 3 years of
separately solved models, which
promotes stability for the risk
adjustment coefficients year-to-year,
particularly for rare conditions with
small sample sizes. We finalized in the
2018 Payment Notice the collection of
enrollee-level EDGE data and the
recalibration of the risk adjustment
model for the 2019 benefit year using
2016 benefit year EDGE data. We believe
that blending the coefficients calculated
from the 2016 benefit year EDGE
enrollee-level data with MarketScan®
data will provide stability within the
risk adjustment program and minimize
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volatility in changes to risk scores from
the 2018 to 2019 benefit years due to
differences in the datasets’ underlying
populations. As such, we propose
blending 3 years of data to recalibrate
the coefficients used in the risk
adjustment model and, for the 2019
benefit year, blending separately solved
coefficients from the 2016 benefit year
EDGE enrollee-level data and the 2014
and 2015 MarketScan® data using the
methodology that will be finalized in
the 2019 Payment Notice final rule.
Given the timing of the 2019 Payment
Notice and the significant analysis
necessary to develop the 2016 benefit
year EDGE recalibration dataset, we are
not able to incorporate the 2016 benefit
year EDGE data in this proposed rule.
Therefore, we use the 2014 and 2015
MarketScan® data for the coefficients in
this proposed rule. We propose to
finalize the 2019 benefit year blended
coefficients with the separately solved
models from the 2016 benefit year EDGE
enrollee-level data with the 2014 and
2015 MarketScan® data. This approach
is similar to our approach in previous
years, in which we updated the final
coefficients using data from the most
recently available benefit year.10 We
expect to publish the final risk
adjustment model coefficients for the
2019 benefit year in the final rule.
However, we seek comment on whether
we should publish the final risk
adjustment model coefficients in
guidance in the spring of 2018, prior to
rate setting for the 2019 benefit year,
similar to our approach for publishing
the 2018 benefit year risk adjustment
coefficients, if we need additional time
to analyze the 2016 enrollee-level EDGE
data. Under either approach, the final
risk adjustment model coefficients for
the 2019 benefit year would be
determined using the methodology that
we finalize in the 2019 Payment Notice
final rule, and would be published
either in the final rule or in guidance
prior to the 2019 benefit year rate
setting. Additionally, if we find
significant demographic or
distributional differences in the
enrollee-level EDGE data compared to
the MarketScan data, we seek comment
on whether we should make
adjustments to the risk adjustment
recalibration model age-sex, HCC and
RXC categories for the final 2019 benefit
year. In such a case, we would make
adjustments to the models to better align
them with the enrollee-level EDGE data,
to improve the prediction of plan
liability. The risk adjustment model
coefficients listed in Tables 2, 4, and 5
are blended coefficients using the 2014
and 2015 MarketScan® data.
We seek comment on our proposal to
determine coefficients based on a blend
of 2014 and 2015 MarketScan® data and
2016 enrollee-level EDGE data using the
methodology that will be finalized in
the 2019 Payment Notice final rule in
the final rule or through guidance. We
also seek comment on the proposed
methodology to equally weight the
separately solved model coefficients
from the 2014 MarketScan®, 2015
MarketScan®, and 2016 enrollee-level
EDGE data for the final coefficients,
instead of using only the 2016 enrolleelevel EDGE data to recalibrate the risk
adjustment model coefficients for the
2019 benefit year.
ii. Prescription Drugs
In the 2018 Payment Notice, we
finalized the inclusion of twelve RXCs
that interact with diagnoses
(hierarchical condition categories
(HCCs)), or drug-diagnosis (RXC–HCC)
pairs, in the adult risk adjustment
models for the 2018 benefit year. Ten of
the RXC–HCC pairs have three levels of
incremental predicted costs (diagnosisonly, prescription drug-only, and both
diagnosis and prescription drug),
indicating that they can be used to
impute a particular diagnosis. The 2018
benefit year risk adjustment adult
models also included two RXC–HCC
pairs that are used for severity-only—
that is, they predict incremental costs
for enrollees with the diagnosis-only, or
with both the diagnosis and the
prescription drug. For enrollees without
the associated diagnoses documented
for these severity-only RXC–HCC pairs,
the presence of the drug alone would
not lead to the imputation of additional
plan liability costs attributed to the
plan.
51061
For the 2019 benefit year, we propose
to remove the two severity-only RXCs
(RXC 11: Ammonia Detoxicants, and
RXC 12: Diuretics, Loop and Select
Potassium-Sparing). Both severity-only
RXCs have low average costs per
enrollee per year and were constrained
to the average cost of the drugs to avoid
overcompensating issuers for these
RXCs. Constraining these RXCs removed
overprescribing or gaming incentives to
prescribe a low-cost drug to receive a
much larger risk adjustment payment.
However, after constraints, the two
severity-only RXCs have extremely
small coefficients that no longer predict
meaningful incremental plan risk
associated with a severe health
condition. Therefore, we propose
eliminating these two RXCs from the
model. We believe that the remaining
RXCs do not engender significant
gaming concerns due to the cost and
side-effects of the drugs if prescribed
without cause. As we noted in the 2018
Payment Notice, where the risk of
unintended effects on provider
prescribing behavior is low, we are
continuing to include a small number of
prescription drug classes as predictors
of risk and plan liability. For the
remaining RXCs, there is a high rate of
presence of a diagnosis code in the
associated HCC in the MarketScan®
data, indicating a positive predictive
value for using these RXCs to impute
missing diagnoses. Additionally, as we
have previously noted, we intend to
monitor prescription drug utilization for
unintended effects, and may propose to
remove drug classes based on such
evidence in future rulemaking. Table 1
contains the proposed list of
prescription drug factors for the 2019
benefit year risk adjustment model. We
will evaluate the effects of incorporating
prescription drugs in the adult models
to determine whether to continue,
broaden or reduce the impact of this set
of factors on the HHS risk adjustment
models. Additionally, we note that
commenters on the Request for
Information support the inclusion of
prescription drugs in the risk
adjustment methodology.
We seek comment on this proposal.
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
TABLE 1—PROPOSED DRUG-DIAGNOSIS (RXC–HCC) PAIRS FOR THE 2019 ADULT MODEL
RXC
RXC label
HCC
HCC label
Proposed RXC
use
RXC 01 ...........
RXC 02 ...........
Anti-HIV Agents ........................
Anti-Hepatitis C (HCV) Agents
001 ..................................
037C, 036, 035, 034 ......
imputation/severity.
imputation/severity.
RXC 03 ...........
Antiarrhythmics .........................
142 ..................................
HIV/AIDS ......................................................................................
Chronic Hepatitis C, Cirrhosis of Liver, End-Stage Liver Disease, and Liver Transplant Status/Complications.
Specified Heart Arrhythmias ........................................................
10 See, for example, 2018 Payment Notice final
rule, 81 FR 94058 (December 22, 2016).
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TABLE 1—PROPOSED DRUG-DIAGNOSIS (RXC–HCC) PAIRS FOR THE 2019 ADULT MODEL—Continued
RXC
RXC label
HCC
HCC label
Proposed RXC
use
RXC 04 ...........
Phosphate Binders ...................
184, 183, 187, 188 .........
imputation/severity.
RXC 05 ...........
Inflammatory Bowel Disease
Agents.
Insulin ........................................
048, 041 .........................
RXC 07 ...........
Anti-Diabetic Agents, Except Insulin and Metformin Only.
019, 020, 021, 018 .........
RXC 08 ...........
RXC 09 ...........
Multiple Sclerosis Agents .........
Immune Suppressants and
Immunomodulators.
118 ..................................
056, 057, 048, 041 .........
RXC 10 ...........
Cystic Fibrosis Agents ..............
159, 158 .........................
End Stage Renal Disease, Kidney Transplant Status, Chronic
Kidney Disease, Stage 5, Chronic Kidney Disease, Severe
(Stage 4).
Inflammatory Bowel Disease, Intestine Transplant Status/Complications.
Diabetes with Acute Complications; Diabetes with Chronic
Complications; Diabetes without Complication, Pancreas
Transplant Status/Complications.
Diabetes with Acute Complications, Diabetes with Chronic
Complications, Diabetes without Complication, Pancreas
Transplant Status/Complications.
Multiple Sclerosis .........................................................................
Rheumatoid Arthritis and Specified Autoimmune Disorders,
Systemic Lupus Erythematosus and Other Autoimmune Disorders, Inflammatory Bowel Disease, Intestine Transplant
Status/Complications.
Cystic Fibrosis, Lung Transplant Status/Complications ..............
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
RXC 06 ...........
019, 020, 021, 018 .........
imputation/severity.
imputation/severity.
imputation/severity.
imputation/severity.
imputation/severity.
imputation/severity.
high-cost enrollees through the highcost risk pool and improving the
calculation of plan liability in the HHSoperated risk adjustment models for
future benefit years.
iii. High-Cost Risk Pool Adjustment
HHS finalized a high-cost risk pool
adjustment in the 2018 Payment Notice
to account for the incorporation of risk
associated with high-cost enrollees in
the risk adjustment model. Specifically,
we finalized adjusting the risk
adjustment model for high-cost
enrollees beginning for the 2018 benefit
year by excluding a percentage of costs
above a certain threshold level in the
calculation of enrollee-level plan
liability risk scores so that risk
adjustment factors are calculated
without the high-cost risk, because the
average risk associated with HCCs and
RXCs is better accounted for without the
inclusion of the high-cost enrollees. In
addition, to account for issuers’ risk
associated with the high-cost enrollees,
issuers will be compensated for a
percentage of costs above the threshold.
We set the threshold and percentage of
costs at a level that would continue to
incentivize issuers to control costs
while improving the risk prediction of
the risk adjustment model. Issuers with
high-cost enrollees will receive a
payment for the percentage of costs
above the threshold in their respective
transfers. Using claims data submitted
to the EDGE server by issuers of risk
adjustment covered plans, HHS will
calculate the total amount of paid
claims costs for high-cost enrollees
based on the threshold and the
coinsurance rate. HHS will then
calculate a charge as a percentage of the
issuers’ total premiums in the
individual (including catastrophic and
non-catastrophic plans and merged
market plans), or small group markets,
which will be applied to the total
transfer amount in that market,
maintaining the balance of payments
and charges within the risk adjustment
program. In the 2018 Payment Notice,
we finalized a threshold of $1 million
and a coinsurance rate of 60 percent
across all States for the individual
(including catastrophic and noncatastrophic plans and merged market
plans) and small group markets for the
2018 benefit year.
For the 2019 benefit year, we are
proposing to maintain the same
parameters that would apply to the 2018
benefit year. Therefore, we propose to
maintain a $1 million threshold and 60
percent coinsurance rate for the highcost risk pool for the 2019 benefit year
risk adjustment program. We believe
this threshold and coinsurance rate
would result in total payments or
charges nationally that are very small as
a percentage of premiums for issuers,
and will prevent States and issuers with
very high-cost enrollees from bearing a
disproportionate amount of
unpredictable risk. We seek comment
on the proposed parameters of the highcost risk pool for the 2019 benefit year
risk adjustment model.
Comments in response to the Request
for Information noted the benefits of
incorporating the high-cost risk pool in
the risk adjustment methodology. We
have also received feedback from
stakeholders on the structure of the
high-cost risk pool, including that the
pool should be multi-tiered, with
multiple thresholds and increased
coinsurance as the thresholds increase
to account for the reduced number of
enrollees at higher thresholds where
costs to an issuer are catastrophic. We
seek comment on alternative methods
for reimbursing issuers for exceptionally
The proposed factors resulting from
the blended factors from the 2014 and
2015 MarketScan® data separately
solved models (with the incorporation
of the partial year enrollment
adjustment and prescription drugs
reflected in the adult models only) are
shown in the Tables 2, 4, and 5. The
adult, child, and infant models have
been truncated to account for the highcost enrollee pool payment parameters
($1 million threshold, 60 percent
coinsurance) finalized in the 2018
Payment Notice. As discussed in the
preceding section, we are proposing to
keep the 2019 benefit year high-cost
enrollee risk pool payment parameters
the same as those finalized for the 2018
benefit year.
Table 2 contains factors for each adult
model, including the age-sex, HCCs,
RXCs and HCC–RXC interaction
coefficients. As we have previously
noted,11 some interactions of RXCs and
HCCs have negative coefficients;
however, this does not mean that an
enrollee’s risk score decreases due to the
presence of an RXC, an HCC, or both.
Table 3 contains the HHS HCCs in the
severity illness indicator variable. Table
4 contains the factors for each child
model. Table 5 contains the factors for
each infant model. Tables 6 and 7
contain the HCCs included in the infant
model maturity and severity categories,
respectively.
11 2018 Benefit Year Final HHS Risk Adjustment
Model Coefficients. April 18, 2017. Available at
https://www.cms.gov/CCIIO/Programs-andInitiatives/Premium-Stabilization-Programs/
Downloads/2018-Benefit-Year-Final-HHS-RiskAdjustment-Model-Coefficients.pdf.
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c. List of Factors To Be Employed in the
Risk Adjustment Model (§ 153.320)
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TABLE 2—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR A
HCC or RXC No.
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 .....................................................................................
0.174
0.151
0.191
0.252
0.321
0.385
0.510
0.577
0.647
0.286
0.323
0.449
0.540
0.598
0.607
0.686
0.674
0.699
0.138
0.116
0.147
0.198
0.258
0.313
0.428
0.483
0.538
0.232
0.261
0.372
0.454
0.502
0.506
0.581
0.565
0.579
0.094
0.073
0.093
0.132
0.182
0.227
0.328
0.372
0.411
0.163
0.185
0.281
0.355
0.392
0.390
0.456
0.436
0.441
0.052
0.030
0.039
0.065
0.104
0.138
0.222
0.253
0.271
0.093
0.104
0.188
0.257
0.281
0.268
0.323
0.294
0.285
0.050
0.028
0.036
0.062
0.101
0.134
0.217
0.247
0.264
0.090
0.100
0.184
0.253
0.276
0.263
0.317
0.288
0.277
0.520
8.152
5.518
4.063
5.606
21.369
12.190
0.434
7.980
5.438
3.867
5.522
20.985
11.902
0.349
7.865
5.379
3.741
5.468
20.694
11.689
0.275
7.920
5.405
3.677
5.439
20.753
11.686
0.271
7.924
5.407
3.676
5.438
20.756
11.687
5.316
4.295
2.528
5.119
4.100
2.386
4.971
3.948
2.275
4.910
3.888
2.212
4.907
3.885
2.209
1.195
1.076
0.976
0.869
0.864
4.522
0.624
0.624
0.624
11.390
2.122
2.122
2.122
2.122
10.018
5.862
2.158
0.430
0.430
4.242
29.207
9.688
5.465
4.522
2.204
4.340
0.555
0.555
0.555
11.380
2.025
2.025
2.025
2.025
9.924
5.675
2.040
0.327
0.327
4.105
29.126
9.465
5.238
4.340
2.054
4.216
0.490
0.490
0.490
11.365
1.949
1.949
1.949
1.949
9.866
5.548
1.962
0.283
0.283
4.008
29.062
9.302
5.087
4.216
1.947
4.238
0.416
0.416
0.416
11.434
1.887
1.887
1.887
1.887
9.856
5.558
1.918
0.259
0.259
3.986
29.112
9.321
5.089
4.238
1.882
4.239
0.412
0.412
0.412
11.438
1.884
1.884
1.884
1.884
9.856
5.559
1.916
0.258
0.258
3.985
29.112
9.323
5.090
4.239
1.880
2.094
5.492
5.492
3.393
1.032
2.586
2.586
1.108
43.857
11.329
11.329
7.452
7.452
7.452
5.031
5.031
2.419
3.864
3.864
3.093
1.545
1.545
1.055
1.926
5.329
5.329
3.217
0.923
2.421
2.421
0.963
43.613
11.211
11.211
7.322
7.322
7.322
4.913
4.913
2.339
3.647
3.647
2.866
1.407
1.407
0.948
1.795
5.207
5.207
3.077
0.831
2.290
2.290
0.856
43.412
11.123
11.123
7.217
7.217
7.217
4.827
4.827
2.274
3.486
3.486
2.702
1.297
1.297
0.846
1.702
5.219
5.219
3.031
0.726
2.217
2.217
0.777
43.412
11.130
11.130
7.188
7.188
7.188
4.827
4.827
2.237
3.379
3.379
2.629
1.191
1.191
0.736
1.698
5.220
5.220
3.029
0.720
2.213
2.213
0.773
43.412
11.132
11.132
7.187
7.187
7.187
4.827
4.827
2.235
3.373
3.373
2.626
1.186
1.186
0.731
Diagnosis Factors
HCC001
HCC002
HCC003
HCC004
HCC006
HCC008
HCC009
..........................
..........................
..........................
..........................
..........................
..........................
..........................
HCC010 ..........................
HCC011 ..........................
HCC012 ..........................
HCC013 ..........................
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
HCC018 ..........................
HCC019 ..........................
HCC020 ..........................
HCC021 ..........................
HCC023 ..........................
HCC026 ..........................
HCC027 ..........................
HCC029 ..........................
HCC030 ..........................
HCC034 ..........................
HCC035 ..........................
HCC036 ..........................
HCC037_1 ......................
HCC037_2 ......................
HCC038 ..........................
HCC041 ..........................
HCC042 ..........................
HCC045 ..........................
HCC046 ..........................
HCC047 ..........................
HCC048
HCC054
HCC055
HCC056
HCC057
HCC061
HCC062
HCC063
HCC066
HCC067
HCC068
HCC069
HCC070
HCC071
HCC073
HCC074
HCC075
HCC081
HCC082
HCC087
HCC088
HCC089
HCC090
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
VerDate Sep<11>2014
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 ........................................................................
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 Viral Hepatitis C .............................................................................
Chronic Hepatitis, Other/Unspecified ...........................................................
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 ...................................................................................
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Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
TABLE 2—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR A—Continued
HCC or RXC No.
Factor
HCC094 ..........................
HCC096 ..........................
HCC097 ..........................
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 ........................................
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, 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 ........................
HCC102
HCC103
HCC106
HCC107
HCC108
HCC109
HCC110
HCC111
HCC112
HCC113
HCC114
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
HCC115 ..........................
HCC117 ..........................
HCC118 ..........................
HCC119 ..........................
..........................
..........................
..........................
..........................
..........................
..........................
HCC128
HCC129
HCC130
HCC131
HCC132
HCC135
HCC142
HCC145
HCC146
HCC149
HCC150
HCC151
HCC153
HCC154
HCC156
HCC158
HCC159
HCC160
HCC161
HCC162
HCC163
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
HCC183
HCC184
HCC187
HCC188
HCC203
..........................
..........................
..........................
..........................
..........................
HCC204
HCC205
HCC207
HCC208
HCC209
HCC217
HCC226
HCC227
HCC251
HCC253
HCC254
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
HCC120
HCC121
HCC122
HCC125
HCC126
HCC127
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
..........................
Platinum
Gold
Silver
Bronze
Catastrophic
2.381
2.057
0.845
2.241
1.952
0.758
2.130
1.870
0.679
2.064
1.810
0.599
2.061
1.807
0.595
1.055
1.055
9.063
9.063
7.368
7.368
5.019
2.107
0.433
0.364
0.016
0.948
0.948
8.932
8.932
7.239
7.239
4.833
1.911
0.289
0.264
0.000
0.846
0.846
8.834
8.834
7.144
7.144
4.698
1.772
0.181
0.181
0.000
0.736
0.736
8.822
8.822
7.121
7.121
4.663
1.707
0.108
0.108
0.000
0.731
0.731
8.821
8.821
7.120
7.120
4.662
1.705
0.107
0.107
0.000
5.116
4.991
4.900
4.882
4.881
2.109
8.046
2.109
1.970
7.788
1.970
1.873
7.595
1.873
1.783
7.579
1.783
1.778
7.578
1.778
1.423
4.823
8.085
27.074
8.400
8.400
1.288
4.717
7.965
27.045
8.265
8.265
1.183
4.628
7.866
27.016
8.168
8.168
1.100
4.597
7.861
27.096
8.241
8.241
1.096
4.596
7.860
27.100
8.245
8.245
27.593
27.593
2.847
8.501
4.515
5.135
2.365
7.686
2.324
3.171
4.396
2.634
9.113
6.411
3.132
25.523
11.222
0.859
0.859
1.724
5.920
27.404
27.404
2.758
8.214
4.281
5.022
2.241
7.448
2.176
3.011
4.314
2.522
9.051
6.255
2.995
25.380
10.969
0.766
0.766
1.629
5.866
27.268
27.268
2.693
8.005
4.129
4.938
2.148
7.279
2.085
2.895
4.257
2.444
9.004
6.143
2.895
25.270
10.767
0.683
0.683
1.562
5.827
27.331
27.331
2.686
8.114
4.132
4.908
2.080
7.270
2.079
2.840
4.306
2.414
9.096
6.133
2.850
25.354
10.781
0.595
0.595
1.510
5.835
27.336
27.336
2.686
8.120
4.133
4.907
2.077
7.270
2.079
2.837
4.309
2.413
9.101
6.133
2.848
25.358
10.782
0.591
0.591
1.507
5.836
7.636
31.427
1.369
1.369
1.219
7.438
31.237
1.313
1.313
1.074
7.304
31.086
1.276
1.276
0.947
7.276
31.232
1.285
1.285
0.745
7.276
31.238
1.286
1.286
0.733
1.219
1.219
3.243
3.243
3.243
1.958
8.626
2.240
23.527
8.149
3.928
1.074
1.074
2.827
2.827
2.827
1.865
8.433
2.124
23.526
8.067
3.819
0.947
0.947
2.608
2.608
2.608
1.801
8.291
2.033
23.520
8.005
3.740
0.745
0.745
2.399
2.399
2.399
1.788
8.324
1.957
23.544
8.041
3.770
0.733
0.733
2.398
2.398
2.398
1.788
8.326
1.954
23.544
8.043
3.772
8.221
8.221
8.221
8.406
8.406
8.406
8.532
8.532
8.532
8.658
8.658
8.658
8.663
8.663
8.663
8.221
8.406
8.532
8.658
8.663
8.221
8.406
8.532
8.658
8.663
8.221
8.221
8.406
8.406
8.532
8.532
8.658
8.658
8.663
8.663
Interaction Factors
SEVERE × HCC006 .......
SEVERE × HCC008 .......
SEVERE × HCC009 .......
SEVERE × HCC010 .......
SEVERE × HCC115 .......
SEVERE × HCC135 .......
SEVERE × HCC145 .......
VerDate Sep<11>2014
Severe illness × Opportunistic Infections .....................................................
Severe illness × Metastatic Cancer .............................................................
Severe illness × Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia.
Severe illness × Non-Hodgkin’s Lymphomas and Other Cancers and Tumors.
Severe illness × Myasthenia Gravis/Myoneural Disorders and GuillainBarre Syndrome/Inflammatory and Toxic Neuropathy.
Severe illness × Heart Infection/Inflammation, Except Rheumatic ..............
Severe illness × Intracranial Hemorrhage ...................................................
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Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
TABLE 2—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR A—Continued
HCC or RXC No.
Factor
SEVERE × G06 ..............
Severe illness × HCC group G06 (G06 is HCC Group 6 which includes
the following HCCs in the blood disease category: 67, 68).
Severe illness × HCC group G08 (G08 is HCC Group 8 which includes
the following HCCs in the blood disease category: 73, 74).
Severe illness × End-Stage Liver Disease ..................................................
Severe illness × Acute Liver Failure/Disease, Including Neonatal Hepatitis
Severe illness × Atherosclerosis of the Extremities with Ulceration or
Gangrene.
Severe illness × Vascular Disease with Complications ...............................
Severe illness × Aspiration and Specified Bacterial Pneumonias and
Other Severe Lung Infections.
Severe illness × Artificial Openings for Feeding or Elimination ..................
Severe illness × HCC group G03 (G03 is HCC Group 3 which includes
the following HCCs in the musculoskeletal disease category: 54, 55).
SEVERE × G08 ..............
SEVERE × HCC035 .......
SEVERE × HCC038 .......
SEVERE × HCC153 .......
SEVERE × HCC154 .......
SEVERE × HCC163 .......
SEVERE × HCC253 .......
SEVERE × G03 ..............
Platinum
Gold
Silver
Bronze
Catastrophic
8.221
8.406
8.532
8.658
8.663
8.221
8.406
8.532
8.658
8.663
1.816
1.816
1.816
1.916
1.916
1.916
1.979
1.979
1.979
2.088
2.088
2.088
2.092
2.092
2.092
1.816
1.816
1.916
1.916
1.979
1.979
2.088
2.088
2.092
2.092
1.816
1.816
1.916
1.916
1.979
1.979
2.088
2.088
2.092
2.092
0.491
0.439
0.356
0.302
0.263
0.220
0.217
0.160
0.121
0.106
0.097
0.431
0.384
0.308
0.261
0.229
0.193
0.191
0.141
0.107
0.098
0.091
0.385
0.337
0.264
0.222
0.195
0.164
0.164
0.121
0.095
0.090
0.085
0.363
0.317
0.245
0.204
0.179
0.148
0.148
0.109
0.088
0.086
0.083
0.363
0.316
0.244
0.204
0.178
0.147
0.147
0.109
0.088
0.086
0.083
7.903
42.192
0.115
0.640
1.926
1.520
0.499
20.967
12.856
10.619
2.849
7.394
41.724
0.115
0.640
1.751
1.384
0.437
20.276
12.303
10.340
2.926
7.016
41.357
0.115
0.640
1.620
1.235
0.369
19.754
11.895
10.149
2.995
6.869
41.522
0.115
0.640
1.446
1.059
0.282
19.796
11.956
10.250
3.292
6.863
41.530
0.115
0.640
1.437
1.049
0.277
19.801
11.959
10.255
3.306
3.993
4.162
4.267
4.300
4.301
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
¥1.002
¥0.915
¥0.829
¥0.721
¥0.715
0.444
0.410
0.463
0.550
0.555
¥0.174
¥0.161
¥0.129
¥0.129
¥0.130
¥4.718
¥4.268
¥3.935
¥3.822
¥3.819
¥0.505
¥0.528
¥0.536
¥0.574
¥0.576
¥2.712
¥2.470
¥2.285
¥2.173
¥2.168
¥0.434
¥0.272
¥0.144
0.012
0.020
1.311
1.573
1.744
1.909
1.917
Enrollment Duration Factors
One month of enrollment .............................................................................
Two months of enrollment ...........................................................................
Three months of enrollment .........................................................................
Four months of enrollment ...........................................................................
Five months of enrollment ...........................................................................
Six months of enrollment .............................................................................
Seven months of enrollment ........................................................................
Eight months of enrollment ..........................................................................
Nine months of enrollment ...........................................................................
Ten months of enrollment ............................................................................
Eleven months of enrollment .......................................................................
Prescription Drug Factors
RXC
RXC
RXC
RXC
RXC
RXC
RXC
RXC
RXC
RXC
RXC
01
02
03
04
05
06
07
08
09
10
01
...........................
...........................
...........................
...........................
...........................
...........................
...........................
...........................
...........................
...........................
× HCC001 .........
RXC 02 × HCC037_1,
036, 035, 034.
RXC 03 × HCC142 .........
RXC 04 × HCC184, 183,
187, 188.
RXC 05 × HCC048, 041
RXC 06 × HCC018, 019,
020, 021.
RXC 07 × HCC018, 019,
020, 021.
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
RXC 08 × HCC118 .........
RXC 09 × HCC056 or
057 and 048 or 041.
RXC 09 × HCC056 .........
RXC 09 × HCC057 .........
RXC 09 × HCC048, 041
VerDate Sep<11>2014
Anti-HIV Agents ...........................................................................................
Anti-Hepatitis C (HCV) Agents ....................................................................
Antiarrhythmics ............................................................................................
Phosphate Binders .......................................................................................
Inflammatory Bowel Disease Agents ...........................................................
Insulin ...........................................................................................................
Anti-Diabetic Agents, Except Insulin and Metformin Only ...........................
Multiple Sclerosis Agents .............................................................................
Immune Suppressants and Immunomodulators ..........................................
Cystic Fibrosis Agents .................................................................................
Additional effect for enrollees with RxC 01 (Anti-HIV Agents) and HCC
001 (HIV/AIDS).
Additional effect for enrollees with RxC 02 (Anti-Hepatitis C (HCV)
Agents) and (HCC 037_1 (Chronic Viral Hepatitis C) or 036 (Cirrhosis
of Liver) or 035 (End-Stage Liver Disease) or 034 (Liver Transplant
Status/Complications)).
Additional effect for enrollees with RxC 03 (Antiarrhythmics) and HCC
142 (Specified Heart Arrhythmias).
Additional effect for enrollees with RxC 04 (Phosphate Binders) and
(HCC 184 (End Stage Renal Disease) or 183 (Kidney Transplant Status) or 187 (Chronic Kidney Disease, Stage 5) or 188 (Chronic Kidney
Disease, Severe Stage 4)).
Additional effect for enrollees with RxC 05 (Inflammatory Bowel Disease
Agents) and (HCC 048 (Inflammatory Bowel Disease) or 041 (Intestine
Transplant Status/Complications)).
Additional effect for enrollees with RxC 06 (Insulin) and (HCC 018 (Pancreas Transplant Status/Complications) or 019 (Diabetes with Acute
Complications) or 020 (Diabetes with Chronic Complications) or 021
(Diabetes without Complication)).
Additional effect for enrollees with RxC 07 (Anti-Diabetic Agents, Except
Insulin and Metformin Only) and (HCC 018 (Pancreas Transplant Status/Complications) or 019 (Diabetes with Acute Complications) or 020
(Diabetes with Chronic Complications) or 021 (Diabetes without Complication)).
Additional effect for enrollees with RxC 08 (Multiple Sclerosis Agents)
and HCC 118 (Multiple Sclerosis).
Additional effect for enrollees with RxC 09 (Immune Suppressants and
Immunomodulators) and (HCC 048 (Inflammatory Bowel Disease) or
041 (Intestine Transplant Status/Complications)) and (HCC 056 (Rheumatoid Arthritis and Specified Autoimmune Disorders) or 057 (Systemic
Lupus Erythematosus and Other Autoimmune Disorders)).
Additional effect for enrollees with RxC 09 (Immune Suppressants and
Immunomodulators) and HCC 056 (Rheumatoid Arthritis and Specified
Autoimmune Disorders).
Additional effect for enrollees with RxC 09 (Immune Suppressants and
Immunomodulators) and HCC 057 (Systemic Lupus Erythematosus
and Other Autoimmune Disorders).
Additional effect for enrollees with RxC 09 (Immune Suppressants and
Immunomodulators) and (HCC 048 (Inflammatory Bowel Disease) or
041 (Intestine Transplant Status/Complications)).
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Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
TABLE 2—PROPOSED ADULT RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR A—Continued
HCC or RXC No.
RXC 10 × HCC159, 158
Factor
Platinum
Additional effect for enrollees with RxC 10 (Cystic Fibrosis Agents) and
(HCC 159 (Cystic Fibrosis) or 158 (Lung Transplant Status/Complications)).
Gold
29.675
29.853
Silver
Bronze
29.949
Catastrophic
29.967
29.967
A The proposed risk adjustment model factors for the 2019 benefit year include blended coefficients based on separately solved 2014 and 2015 MarketScan® data.
We are proposing to finalize the 2019 benefit year risk adjustment model factors based on blended factors from separately solved models using the 2014 and 2015
MarketScan® data, and the 2016 benefit year enrollee-level EDGE data.
TABLE 3—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 4—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR
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 .............................................................
0.194
0.130
0.199
0.268
0.147
0.104
0.189
0.298
0.139
0.091
0.156
0.218
0.100
0.069
0.147
0.239
0.077
0.043
0.099
0.156
0.047
0.029
0.095
0.167
0.023
0.004
0.056
0.102
0.007
0.002
0.057
0.100
0.020
0.002
0.054
0.100
0.005
0.001
0.055
0.097
5.744
5.340
5.034
4.949
4.944
13.174
13.022
12.922
12.938
12.940
7.345
3.062
16.688
30.079
7.194
2.879
16.642
29.879
7.085
2.757
16.604
29.711
7.094
2.629
16.594
29.715
7.095
2.625
16.593
29.715
9.654
9.442
9.264
9.190
9.186
8.104
2.866
7.883
2.706
7.707
2.572
7.615
2.460
7.611
2.454
2.866
2.706
2.572
2.460
2.454
1.218
21.519
2.422
2.422
2.422
11.421
8.584
8.584
8.584
8.584
1.090
21.274
2.129
2.129
2.129
11.335
8.361
8.361
8.361
8.361
0.977
21.082
1.939
1.939
1.939
11.264
8.176
8.176
8.176
8.176
0.858
21.114
1.683
1.683
1.683
11.302
8.141
8.141
8.141
8.141
0.852
21.116
1.672
1.672
1.672
11.304
8.139
8.139
8.139
8.139
8.584
21.519
11.016
6.158
6.888
1.679
10.719
21.519
8.361
21.274
10.865
6.041
6.742
1.571
10.579
21.274
8.176
21.082
10.767
5.950
6.621
1.470
10.476
21.082
8.141
21.114
10.761
5.916
6.604
1.385
10.479
21.114
8.139
21.116
10.761
5.914
6.604
1.381
10.480
21.116
asabaliauskas on DSKBBXCHB2PROD 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 Viral Hepatitis C .....................................................
Chronic Hepatitis, Other/Unspecified ...................................
Acute Liver Failure/Disease, Including Neonatal Hepatitis
Intestine Transplant Status/Complications ..........................
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TABLE 4—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR—Continued
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
Factor
Platinum
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 ............................................
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 ................
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Gold
Silver
Bronze
Catastrophic
10.481
3.953
10.876
10.202
3.763
10.686
9.989
3.613
10.549
9.995
3.521
10.567
9.996
3.518
10.569
2.107
6.687
3.868
3.868
4.271
1.992
6.344
3.678
3.678
4.056
1.891
6.085
3.524
3.524
3.872
1.793
5.986
3.459
3.459
3.782
1.788
5.981
3.456
3.456
3.778
1.227
1.364
1.111
1.258
0.999
1.162
0.872
1.079
0.867
1.075
1.364
1.407
55.787
12.015
12.015
1.258
1.241
55.354
11.906
11.906
1.162
1.107
55.012
11.825
11.825
1.079
0.982
54.989
11.801
11.801
1.075
0.977
54.988
11.800
11.800
6.603
6.603
6.603
6.007
6.007
6.387
6.387
6.387
5.869
5.869
6.217
6.217
6.217
5.759
5.759
6.130
6.130
6.130
5.696
5.696
6.126
6.126
6.126
5.693
5.693
4.186
5.541
5.541
4.669
1.809
1.681
0.678
2.792
4.074
5.318
5.318
4.332
1.621
1.507
0.582
2.619
3.976
5.157
5.157
4.086
1.462
1.356
0.476
2.478
3.905
5.092
5.092
3.973
1.283
1.179
0.338
2.413
3.902
5.090
5.090
3.968
1.275
1.171
0.332
2.409
2.339
2.176
2.067
2.032
2.031
1.838
1.513
1.693
1.364
1.582
1.228
1.491
1.070
1.487
1.063
0.737
12.154
12.154
10.641
10.641
3.473
0.640
12.087
12.087
10.489
10.489
3.289
0.528
12.058
12.058
10.347
10.347
3.147
0.382
12.138
12.138
10.348
10.348
3.055
0.375
12.142
12.142
10.348
10.348
3.051
7.137
3.125
0.730
6.947
2.921
0.588
6.796
2.787
0.484
6.711
2.797
0.395
6.706
2.797
0.391
1.219
1.108
1.019
0.949
0.946
8.961
2.675
9.417
8.809
2.515
9.117
8.687
2.397
8.880
8.653
2.310
8.847
8.652
2.307
8.846
2.675
1.887
3.800
2.515
1.743
3.697
2.397
1.611
3.620
2.310
1.470
3.605
2.307
1.463
3.605
5.359
31.233
9.997
5.248
31.127
9.799
5.156
31.052
9.667
5.116
31.184
9.653
5.114
31.190
9.653
9.997
21.519
21.519
5.652
4.541
4.541
11.390
9.799
21.274
21.274
5.562
4.481
4.481
11.285
9.667
21.082
21.082
5.482
4.446
4.446
11.206
9.653
21.114
21.114
5.438
4.422
4.422
11.181
9.653
21.116
21.116
5.435
4.421
4.421
11.179
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Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
TABLE 4—PROPOSED CHILD RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR—Continued
Factor
Platinum
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 ...................................................
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
5.172
1.451
5.012
1.360
4.857
1.244
4.735
1.128
4.729
1.122
0.894
3.536
12.297
6.626
3.425
3.713
2.871
0.810
3.385
12.087
6.537
3.247
3.626
2.748
0.707
3.253
11.936
6.482
3.122
3.568
2.664
0.612
3.178
11.925
6.494
3.047
3.555
2.635
0.609
3.175
11.925
6.494
3.043
3.555
2.635
10.177
15.267
12.509
21.519
21.519
9.954
15.144
12.400
21.274
21.274
9.794
15.047
12.319
21.082
21.082
9.715
15.063
12.358
21.114
21.114
9.712
15.063
12.360
21.116
21.116
0.364
0.364
3.740
0.303
0.303
3.635
0.220
0.220
3.537
0.128
0.128
3.471
0.123
0.123
3.469
8.744
13.420
33.178
1.895
1.895
8.694
13.163
33.107
1.768
1.768
8.652
12.976
33.050
1.660
1.660
8.688
12.979
33.146
1.557
1.557
8.690
12.978
33.150
1.555
1.555
1.049
1.049
1.049
2.784
2.784
2.784
2.025
0.899
0.899
0.899
2.404
2.404
2.404
1.939
0.765
0.765
0.765
2.197
2.197
2.197
1.854
0.553
0.553
0.553
1.961
1.961
1.961
1.785
0.542
0.542
0.542
1.958
1.958
1.958
1.781
5.331
5.100
4.905
4.806
4.802
1.417
1.296
1.168
1.028
1.019
21.519
11.532
7.235
21.274
11.432
7.007
21.082
11.368
6.844
21.114
11.481
6.738
21.116
11.487
6.734
TABLE 5—PROPOSED INFANT RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
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) ........................................
Age1 * Severity Level 5 (Highest) .......................................
Age1 * Severity Level 4 .......................................................
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Gold
268.917
164.057
34.929
34.929
34.929
163.691
72.779
33.416
24.515
24.515
118.666
26.998
13.865
7.702
5.180
94.243
14.247
5.672
3.403
1.530
49.506
8.229
Fmt 4701
Sfmt 4702
267.690
162.851
34.068
34.068
34.068
162.498
71.594
32.404
23.529
23.529
117.511
25.884
13.000
7.015
4.663
93.167
13.396
5.124
2.987
1.305
48.891
7.779
Silver
Bronze
266.660
161.848
33.319
33.319
33.319
161.499
70.608
31.556
22.711
22.711
116.565
24.983
12.294
6.435
4.139
92.263
12.715
4.602
2.524
0.896
48.377
7.399
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02NOP3
266.665
161.805
33.095
33.095
33.095
161.501
70.581
31.393
22.500
22.500
116.511
24.819
11.914
5.861
3.538
92.087
12.261
3.974
1.843
0.365
48.287
7.151
Catastrophic
266.666
161.804
33.090
33.090
33.090
161.503
70.582
31.387
22.490
22.490
116.512
24.815
11.898
5.832
3.508
92.080
12.242
3.940
1.808
0.345
48.283
7.141
51069
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TABLE 5—PROPOSED INFANT RISK ADJUSTMENT MODEL FACTORS FOR 2019 BENEFIT YEAR—Continued
Group
Platinum
Age1 * Severity Level 3 .......................................................
Age1 * Severity Level 2 .......................................................
Age1 * Severity Level 1 (Lowest) ........................................
Age 0 Male ...........................................................................
Age 1 Male ...........................................................................
Gold
2.945
1.913
0.513
0.575
0.115
Silver
2.674
1.697
0.420
0.533
0.100
Bronze
2.388
1.446
0.276
0.515
0.088
2.123
1.161
0.179
0.461
0.060
Catastrophic
2.112
1.147
0.175
0.456
0.059
TABLE 6—HHS HCCS INCLUDED IN INFANT MODEL MATURITY CATEGORIES
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 1,000–1,499 Grams.
Premature Newborns, Including Birthweight 1,500–1,999 Grams.
Premature Newborns, Including Birthweight 2,000–2,499 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 7—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES
Severity category
HCC
asabaliauskas on DSKBBXCHB2PROD 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
Severity
Severity
Severity
Level
Level
Level
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
5
5
5
4
4
4
4
4
4
4
4
4
4
4
4
(Highest) ..................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
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..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
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
4
4
4
4
4
4
4
4
4
4
4
4
4
4
3
3
3
3
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
VerDate Sep<11>2014
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Metastatic Cancer.
Pancreas Transplant Status/Complications.
Liver Transplant Status/Complications.
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.
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51070
Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
TABLE 7—HHS HCCS INCLUDED IN INFANT MODEL SEVERITY CATEGORIES—Continued
Severity category
HCC
Severity Level 3 ..................................................
Severity Level 3 ..................................................
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.
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.
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
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
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..................................................
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..................................................
..................................................
Severity Level 3 ..................................................
Severity Level 3 ..................................................
Severity Level 3 ..................................................
asabaliauskas on DSKBBXCHB2PROD 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
Severity
Level
Level
Level
Level
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
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
..................................................
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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
..................................................
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(Lowest) ...................................
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Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
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 healthcare
services by enrollees receiving costsharing reductions (induced demand) in
all States where HHS operates risk
adjustment. The proposed cost-sharing
reductions adjustment factors for the
2019 benefit year risk adjustment are
unchanged from those finalized in the
2018 Payment Notice, and are set forth
in Table 8. These adjustments would be
effective for 2016, 2017, 2018, and 2019
risk adjustment, and would be
multiplied against the sum of the
demographic, diagnosis, and interaction
51071
factors, and enrollment and prescription
drug utilization factors (for the adult
model). We anticipate adjusting these
factors in the annual HHS notice of
benefit and payment parameters for the
2020 benefit year as enrollee-level data
from the individual market will be
available in time for proposal in that
rulemaking.
We seek comment on this approach.
TABLE 8—COST-SHARING REDUCTIONS ADJUSTMENT
Household income
Induced
utilization
factor
Plan AV
Silver Plan Variant Recipients
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%
>300%
>300%
>300%
of
of
of
of
FPL
FPL
FPL
FPL
.............................................................................
.............................................................................
.............................................................................
.............................................................................
e. Model Performance Statistics
(§ 153.320)
To evaluate the model’s performance,
we examined its R-squared statistic 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
Platinum (90%) ..........................................................................
Gold (80%) .................................................................................
Silver (70%) ...............................................................................
Bronze (60%) .............................................................................
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-
1.00
1.07
1.12
1.15
squared statistic and the predictive
ratios are in the range of published
estimates for concurrent risk adjustment
models.12 Because we are proposing to
blend the coefficients from separately
solved models based on MarketScan®
2014 and 2015 data in the proposed
rule, we are publishing the R-squared
statistic for each model and benefit year
separately to verify their statistical
validity. The R-squared statistic for each
model is shown in Table 9.
TABLE 9—R-SQUARED STATISTIC FOR PROPOSED HHS RISK ADJUSTMENT MODELS
R-squared statistic
Risk adjustment model
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
2014
Platinum Adult ..........................................................................................................................................................
Platinum Child ..........................................................................................................................................................
Platinum Infant .........................................................................................................................................................
Gold Adult ................................................................................................................................................................
Gold Child ................................................................................................................................................................
Gold Infant ...............................................................................................................................................................
Silver Adult ...............................................................................................................................................................
Silver Child ...............................................................................................................................................................
Silver Infant ..............................................................................................................................................................
Bronze Adult ............................................................................................................................................................
Bronze Child ............................................................................................................................................................
12 Winkleman, Ross and Syed Mehmud. ‘‘A
Comparative Analysis of Claims-Based Tools for
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Health Risk Assessment.’’ Society of Actuaries.
April 2007.
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0.4221
0.293
0.3284
0.4179
0.2883
0.3264
0.4143
0.2841
0.325
0.4117
0.2805
2015
0.4212
0.3314
0.3329
0.4164
0.3269
0.3309
0.4123
0.3227
0.3295
0.4095
0.3188
51072
Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
TABLE 9—R-SQUARED STATISTIC FOR PROPOSED HHS RISK ADJUSTMENT MODELS—Continued
R-squared statistic
Risk adjustment model
2014
Bronze Infant ...........................................................................................................................................................
Catastrophic Adult ...................................................................................................................................................
Catastrophic Child ...................................................................................................................................................
Catastrophic Infant ...................................................................................................................................................
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
i. Accounting for High-Cost Risk Pool in
the Transfer Formula
We previously 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 (total payments
and charges including outlier pooling)
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. The total payment or charge is thus
calculated to balance the State market
risk pool in question. In addition to the
total charge collected and payment
made for the State market risk pool, in
the 2018 Payment Notice, we added to
the risk adjustment methodology
additional transfers that would reflect
the payments and charges assessed with
respect to the costs of high-risk
enrollees. To account for costs
associated with high-risk enrollees, we
added transfer terms (a payment term
and a charge term) that would be
calculated separately from the State
transfer formula. Thus, the non-high
cost pooling portion of plan risk would
continue to be calculated as the member
month weighted average of individual
enrollee risk scores. Beginning for the
2018 benefit year, we added one term
that reflects 60 percent of costs above $1
million, the threshold for our payments
for these high-risk enrollees, and
another term that reflects a percentage
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of PMPM premium adjustment to the
transfer formula for the high-cost
enrollee pool to maintain the balance of
payment and charges within the risk
adjustment program. For the 2019
benefit year we propose to maintain this
adjustment to the risk adjustment
transfers with the threshold of $1
million and a coinsurance rate of 60
percent, as finalized for the 2018 benefit
year.
ii. Administrative Cost Reduction to
Statewide Average Premium
Additionally, we propose to continue
the policy finalized in the 2018 Payment
Notice to reduce the Statewide average
premium in the risk adjustment transfer
formula by 14 percent to account for the
proportion of administrative costs that
do not vary with claims for the 2019
benefit year and future benefit years
until changed in rulemaking. As a note,
we define unadjusted Statewide average
premiums as the sum of average
premium per member month of plan
(P i) multiplied by plan i’s share of
Statewide enrollment in the market in
the risk pool (S i). For the 2019 benefit
year, the Statewide average premium,
which will be used for the transfer
formula finalized beginning for the 2018
benefit year, will be calculated based on
the formula below:
Where:
si = plan i’s share of Statewide enrollment in
the market in the risk pool;
P i = average premium per member month of
plan i.
iii. State Flexibility
The HHS risk adjustment payment
transfer formula generally transfers
amounts from issuers with lower than
average actuarial risk to those with
higher than average actuarial risk. Such
risk adjustment transfers are widely
used in health insurance markets and
recognized as critical in mitigating the
effects of adverse selection, ensuring
financial viability of plans that enroll a
higher proportion of high-risk enrollees,
and thus, fostering competitive health
insurance markets. The HHS risk
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0.3292
0.4094
0.3186
0.3292
adjustment program transfers are scaled
with the Statewide average premium in
the applicable State market. In the 2018
Payment Notice, we noted that
compared to other scaling factors, such
as, plans’ own premiums, our analyses
found Statewide average premium
proves to be a more accurate means of
scaling the transfers for differences in
relative actuarial risk, particularly in the
context of a budget-neutral system. We
also finalized in the 2018 Payment
Notice an administrative cost
adjustment to the statewide average
premium to remove a portion of
administrative costs that did not vary
based on claims differences from the
Statewide average premium and base
the transfers on the portion of the
premiums that vary with claims.13
Nevertheless, we acknowledge that, for
some States that deviate significantly
from the national dataset used, a further
adjustment to the Statewide average
premium may more precisely account
for differences between the plan
premium estimate reflecting adverse
selection and the plan premium
estimate not reflecting selection in the
respective State market risk pools.
In the 2016 Interim Final Rule,14 HHS
recognized some State regulators’ desire
to reduce the magnitude of risk
adjustment charge amounts for some
issuers. We acknowledged that States
are the primary regulators of their
insurance markets, and as such, we
encouraged States to examine whether
any local approaches under State legal
authority are warranted to help ease the
transition to new health insurance
markets.
In the small group market, employers
select the plans offered to their
employees and often pay a significant
portion of employees’ premiums to
encourage enrollment. Depending on
the participation rules and market
dynamics within a particular State, risk
selection can be significantly less in a
State’s small group market compared to
13 81 FR 94099, 94100. (December 22, 2016).
Available at https://www.gpo.gov/fdsys/pkg/FR2016-12-22/pdf/2016-30433.pdf.
14 91 FR 29146, 29152. (May 11, 2016). Available
at https://www.gpo.gov/fdsys/pkg/FR-2016-05-11/
pdf/2016-11017.pdf.
E:\FR\FM\02NOP3.SGM
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EP02NO17.001</GPH>
f. Overview of the Payment Transfer
Formula (§ 153.320)
0.3247
0.4115
0.2803
0.3247
2015
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Proposed Rules
its individual market. The HHS
methodology calculates relative risk
scores between issuers in a State market,
and in the case of the small group
market, the differences between risk
scores for issuers within State markets
are generally smaller, leading to a
smaller magnitude of risk adjustment
transfers in the small group market as
compared to the individual market.
However, certain States have opined
that the HHS risk adjustment
methodology, which is calibrated on a
national dataset, may in some
circumstances, overcompensate for risk
differences in the small group market
for their particular State. In such cases,
the States have the statutory authority to
operate their own State risk adjustment
program under a Federally-certified
alternate risk adjustment methodology
as they deem fit. We believe that
allowing certain State-by-State
adjustments to the HHS risk adjustment
program can account for such Statespecific differences in risk without the
necessity for States to undertake
operation of their own risk adjustment
program. Therefore, in the case of small
group markets, where States can
demonstrate that the actuarial risk
differences due to adverse selection are
mitigated by the small group market
dynamics described above, to tailor the
risk adjustment methodology to
particularities of reduced risk selection
in a State’s small group market, we are
proposing to permit States’ primary
insurance regulators to request a
percentage adjustment in the calculation
of the risk adjustment transfer amounts
in the small group market in their State,
beginning for the 2019 benefit year.
Under this proposal, beginning in the
2019 benefit year and beyond, HHS
would require any State that intends to
request this flexibility to submit its
proposal for an adjustment to the
Statewide average premium in the small
group market within 30 calendar days
after publication of the proposed HHS
notice of benefit and payment
parameters for the applicable benefit
year in order to permit issuers to
incorporate any such adjustment into
their proposed rates. For example, for
the 2019 benefit year risk adjustment
transfers, which will be calculated in
the 2020 calendar year, State proposals
would be submitted to HHS no later
than 30 days after publication of this
proposed HHS notice of benefit and
payment parameters for the 2019 benefit
year, similar to the public comment
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18:32 Nov 01, 2017
Jkt 244001
deadline for the proposed rule. In order
to promote transparency and solicit
feedback from consumers and
stakeholders on the proposed
adjustment to the HHS risk adjustment
transfer formula, HHS would publish
the requested State adjustments for
public comment in guidance while it
begins its initial review of the State
proposal. HHS would then make final
determinations of approval of State
requests by March 1 of the benefit year
prior to the applicable benefit year, in
time for issuers’ initial rate setting
deadline. That is, for the 2019 benefit
year, HHS would make final
determinations of approval by March 1,
2018. The proposed timing of the State
adjustment request submission,
publication of HHS guidance, the public
notice and comment period and HHS
request approval process will permit
plans to incorporate approved
adjustments in their rates for the
applicable benefit year.
HHS would consider requests from
State regulators to reduce the
calculation of the Statewide average
premium used in the HHS risk
adjustment transfer formula by up to 50
percent for the applicable benefit year.
As noted above, Statewide average
premium is defined as unadjusted
Statewide average premium reduced by
14 percent, to account for a portion of
administrative costs, or as 86 percent of
unadjusted Statewide average premium.
Transfers in the small group market
could be reduced by up to an additional
43 percent (or 50 percent of the transfer
amounts, after the 14 percent reduction
for a portion of administrative costs to
the Statewide average premium). We
believe this adjustment would
proportionally reduce the magnitude of
risk adjustment transfers in the small
group market. We seek comment on all
aspects of this proposal, including the
permissible extent of the adjustment,
the timing of the submission, any
evidence the State should be required to
provide, and what procedural
requirements should be in place.
We also seek comment on whether we
should establish a similar process
through which States could request an
adjustment to the calculation of
Statewide average premiums for risk
adjustment in the individual market
similarly to the proposed small group
market adjustment. Although adverse
selection in the individual market is not
mitigated by group enrollment or
minimum participation requirements
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51073
that require a minimum percentage of
employees to enroll in coverage as is the
selection in the small group market, a
State may believe the HHS risk
adjustment methodology, which is
calibrated on a national dataset,
disproportionately accounts for relative
actuarial risk differences in its
individual market risk pool. We seek
comment on whether, if a State can
demonstrate such a difference in
calculated relative actuarial risk, we
should reduce States’ administrative
burden in operating its own risk
adjustment program by allowing some
flexibility in the HHS risk adjustment
methodology to the extent permissible
under the statute. Therefore, we seek
comment on whether the adjustment
described above for the small group
market should also apply to the
individual market, what individual
market features would justify such an
adjustment, and what additional
submissions a State should provide in
order to justify such a departure for that
market. For example, to accommodate a
State with particular State rating
practices that serve to mitigate risk
selection, we might require a statistical
or actuarial study demonstrating the
extent to which transfer amounts
calculated pursuant to the HHS risk
adjustment methodology finalized for
the applicable benefit year would
overstate differentials in
uncompensated predicted risk in the
individual market.
As noted above, a State that wishes to
make an adjustment for the magnitude
of these transfers in the individual and
small group markets may take
temporary, reasonable measures under
State authority to mitigate effects under
their own authority.
We seek comment on these proposals.
iv. The Payment Transfer Formula
Except as proposed above, the
payment transfer formula would be
unchanged from what was finalized in
the 2014 Payment Notice (78 FR 15430
through 15434). We believe it 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:
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Where:
Ps = Statewide 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.
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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 adjustment charge or
receives a risk adjustment 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 (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.
This existing formula would be
multiplied by the number of member
months to determine the total payment
or charge assessed with respect to plan
average risk scores for a plan’s
geographic rating area for the market
within the State, and this payment or
charge will be added to the transfer
terms described above to account for the
costs of high-risk enrollees.
g. Risk Adjustment Data Validation
Requirements When HHS Operates Risk
Adjustment (§ 153.630)
HHS will conduct risk adjustment
data validation under § 153.630 in any
State where HHS is operating risk
adjustment on a State’s behalf.15 The
purpose of risk adjustment data
validation is to ensure issuers are
providing accurate high-quality
information to HHS, which is crucial for
the proper functioning of the risk
adjustment program. Risk adjustment
data validation consists of an initial
validation audit and a second validation
audit. Under § 153.630, each issuer of a
risk adjustment covered plan must
engage an independent initial validation
15 Starting with the 2017 benefit year, no State has
elected to operate a risk adjustment program.
Therefore, HHS operates risk adjustment in all
States.
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audit entity. The issuer provides
demographic, enrollment, and medical
record documentation for a sample of
enrollees selected by HHS to its initial
validation auditor for data validation.
Set forth below are proposed
amendments and clarifications to the
risk adjustment data validation program
in light of experience and feedback from
issuers during the first pilot year.
i. Payment Adjustments for Error Rates
Under § 153.350(c), HHS may adjust
risk adjustment payments and charges
to all issuers of risk adjustment covered
plans based on adjustments to the
average actuarial risk of a risk
adjustment plan due to errors
discovered during risk adjustment data
validation. We believe that some
variation and error should be expected
in the compilation of data for risk
scores, because providers’
documentation of enrollee health status
varies across provider types and groups.
Our experiences with the Medicare
Advantage risk adjustment data
validation program and the HHS risk
adjustment data validation pilot for the
2015 benefit year reinforce this belief.
We propose evaluating material
statistical deviation in error rates in
applying error rates to risk scores
beginning with the 2017 benefit year
risk adjustment data validation. We are
considering adjusting an issuer’s risk
score only when the issuer’s error rate
materially deviates from a statistically
meaningful value, such as the central
tendency (a mean or typical value) of
errors, nationally. HHS could also
evaluate error rates within each HCC, or
groups of HCCs, and then only apply
error rates to outlier issuers’ risk scores
within each HCC or group of HCCs.
When an error rate materially deviates
from the central tendency, we propose
to apply the difference between the
mean error rate or the confidence
interval around the population’s central
tendency and the calculated error rate
instead of the full error rate. If all error
rates in a State risk pool do not
materially deviate from the national
central tendency of error rates, we
propose to not apply any adjustments to
issuers’ risk scores for that benefit year
in the respective State risk pool.
We believe the implementation of any
of the alternative evaluations and
subsequent adjustments we propose
here would reduce issuer burden,
streamline the risk adjustment data
validation process, improve issuers’
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ability to predict risk adjustment
transfers, and promote confidence and
stability in the budget-neutral payment
transfer methodology while ensuring the
integrity and quality of data provided by
issuers.
We seek comment on this proposal
and alternatives to evaluating material
deviation in error rates for applying
error rates to risk scores beginning with
the 2017 benefit year risk adjustment
data validation.
ii. Payment Adjustments for Issuers
That Have Exited the Market
In the 2015 Payment Notice, we
established that HHS will use a
prospective approach to adjust risk
scores and payment transfers based on
the results of risk adjustment data
validation. Specifically, HHS will apply
the error rate calculated through the risk
adjustment data validation process for
the applicable benefit year to plan risk
scores in the subsequent benefit year,
and then make risk adjustment payment
transfers based on adjusted plan average
risk scores in that subsequent benefit
year. However, in some cases, an issuer
of a risk adjustment covered plan may
have exited a State market during or at
the end of the benefit year being audited
and therefore would not have risk scores
or payment transfers in the subsequent
benefit year to which HHS could make
adjustments.
As previously noted, the purpose of
data validation for risk adjustment is to
promote confidence in the budgetneutral payment transfer methodology
by ensuring the integrity and quality of
data provided from issuers. HHS
believes that the prospect of not
receiving payment adjustments based on
the results of risk adjustment data
validation results could undermine
these goals by eliminating the incentive
for an exiting issuer to carefully and
accurately submit risk adjustment data
for its final benefit year in the market.
Not only could this type of inaccuracy
result in overpayments to the exiting
issuer, it could also cause the other
issuers in the market to be over or
undercompensated for the actual risk of
their enrollee populations. Therefore,
we propose that HHS would use the
error rate derived from the risk
adjustment data validation process to
adjust the payment transfer for the
issuer’s final benefit year in the State
market, which would be concurrent
with the benefit year being audited, for
issuers that exit a State market during or
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at the end of the benefit year being
audited. Because risk adjustment
transfers for a given benefit year are
calculated and paid before the risk
adjustment data validation process for
that benefit year is completed, this
approach would require HHS to make a
retroactive adjustment to the issuer’s
payment transfer for its final benefit
year and reallocate the adjusted transfer
amount to the other issuers in the State
market in that year.
HHS believes that the proposed
retroactive adjustment to an exited
issuer’s payment transfer would help
ensure that an issuer with inaccurate
data does not benefit from this error and
that other issuers in the State market are
not harmed by it. However, we
acknowledge that this approach could
reduce issuers’ confidence in the
finality of risk adjustment transfers for
any given benefit year because of the
potential for retroactive adjustments for
an issuer that has exited the market. In
addition, the calculation of payment
transfers could become increasingly
complex for 2018 benefit year risk
adjustment transfers and beyond,
because HHS could be adjusting
payment transfers based on the results
of data validation, even if transfers were
already adjusted retroactively for an
exited issuer’s data validation
adjustment (for example, 2018 benefit
year risk adjustment transfers would be
adjusted for 2017 benefit year risk
adjustment data validation, and would
also be adjusted for 2018 risk
adjustment benefit year data validation
if an issuer exits the market at the end
of the 2018 benefit year). However, we
believe the payment adjustment
proposal for error rates that is discussed
above could result in some exiting
issuers not being adjusted at all,
alleviating some of the complexity
associated with retroactively adjusting
transfers. We seek comment on this
proposal to make retroactive
adjustments to payment transfers for
issuers that have exited the market
based on the results of risk adjustment
data validation for the most recent
benefit year in which they participated
in risk adjustment.
iii. 500 Billable Member Months
Numerous small issuers have
expressed concern regarding the
regulatory burden and cost associated
with complying with the risk
adjustment data validation program.
HHS has previously considered these
concerns and provided relief where
possible. For example, in the 2017
Payment Notice, we included a lower,
separate default risk adjustment charge
for small issuers with 500 billable
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member months or fewer beginning
with the 2016 benefit year in light of the
high operational burden associated with
compliance for these issuers.
We propose that, beginning with 2017
benefit year risk adjustment data
validation, issuers with 500 billable
member months or fewer that elect to
establish and submit data to an EDGE
server would not be subject to the
requirement to hire an initial validation
auditor or submit initial validation audit
results. Issuers at or below the 500
billable member months threshold
would have their risk score adjusted by
a default error rate equal to the lower of
either the national average negative
error rate, or the average negative error
rate within a State, as set forth in the
2018 Payment Notice. We believe
exempting issuers with 500 billable
member months or fewer from the
requirement to hire an initial validation
auditor is appropriate because issuers of
this size would have a
disproportionately high operational
burden for compliance with risk
adjustment data validation. We note
that, beginning with 2018 benefit year
risk adjustment data validation, these
issuers would not be subject to random
sampling under the materiality
threshold discussed below, and would
continue to not be subject to the
requirement to hire an initial validation
auditor or submit initial validation audit
results, but would have their risk scores
adjusted by a default error rate annually.
We note that if the proposal discussed
above to implement a central tendency
approach to payment adjustments is
finalized, then it is possible no
adjustment would occur for issuers
below this threshold. We seek comment
on the proposed exemption from risk
adjustment data validation, including
the 500 billable member months
threshold.
iv. Materiality Threshold for Risk
Adjustment Data Validation
In the 2018 Payment Notice, HHS
implemented a materiality threshold for
risk adjustment data validation to ease
the burden of annual audit requirements
for smaller issuers of risk adjustment
covered plans. Specifically, we stated
that issuers with total annual premiums
at or below $15 million (calculated
based on the premiums of the benefit
year being validated) will not be subject
to annual initial validation audit
requirements, beginning with the 2017
benefit year, but will still be subject to
an initial validation audit
approximately every 3 years. HHS based
the timeline for enforcement of the
materiality threshold on the expectation
that we would begin making payment
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adjustments based on the results of 2016
benefit year risk adjustment data
validation, effectively requiring all
issuers of risk adjustment covered plans
to participate in the first benefit year for
which risk adjustment payments are
adjusted. However, in light of our
subsequent decision to convert the 2016
benefit year to another pilot year,16 we
propose to postpone application of the
materiality threshold to the 2018 benefit
year. Therefore, all issuers of risk
adjustment covered plans would be
required to conduct an initial validation
audit for the 2017 benefit year risk
adjustment data validation, other than
issuers with 500 billable member
months or fewer as discussed above.
Beginning with the 2018 benefit year,
issuers below the $15 million premium
threshold would not be required to
conduct an initial validation audit every
year. Under this proposal, HHS would
still conduct random and targeted
sampling under which issuers below the
materiality threshold would be subject
to an initial validation audit
approximately every 3 years, beginning
with 2018 benefit year risk adjustment
data validation. In addition, issuers
below the $15 million threshold that are
not selected for the random and targeted
sampling would have their risk
adjustment transfers adjusted by a
default error rate equal to the lower of
the average negative error rate
nationally, or the average negative error
rate within a State. We note that if the
proposal to implement a central
tendency approach to payment
adjustments discussed above is
finalized, then it is possible no
adjustment would occur for issuers
below this threshold. We seek comment
on this proposal.
v. Data Validation Sampling
Methodology
Section 153.350(a) requires that a
statistically valid sample of enrollees
from each issuer of risk adjustment
covered plans be validated. In the 2015
Payment Notice, HHS finalized its
methodology for selecting the sample of
enrollees for the initial validation audit
for each issuer of a risk adjustment
covered plan. We established a sample
size per issuer for each State in which
the issuer offers risk adjustment covered
plans and clarified that the sample
would include 200 enrollees per issuer
for each risk pool in which the issuer
participates, not 200 enrollees per plan.
However, HHS will not calculate a risk
16 ‘‘HHS-Operated Risk Adjustment Data
Validation (HHS–RADV)—2016 Benefit Year
Implementation and Enforcement.’’ May 3, 2017.
Available at https://www.regtap.info/uploads/
library/HRADV_PilotGuidance_5CR_050317.pdf.
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score, or apply risk adjustment payment
transfers except for high-cost risk pool
transfers beginning with the 2018
benefit year, on behalf of a State in a
market and risk pool when there is only
one issuer in the market and risk pool.
That issuer may participate in another
market in the State where it is not the
sole issuer and, as such, would still
participate in risk adjustment and risk
adjustment data validation for the
applicable benefit year. In this
circumstance, data from the risk pools
in which the issuer was the sole issuer
would not be part of a State market risk
pool payment transfer, and would not
be subject to the same quality controls
as data used to calculate risk scores and
payment transfers; consequently, the
data could not be validated with the
same confidence that data used for
payment can be validated. Therefore,
HHS would not require the issuer to
validate data for its plans in a risk pool
that was not risk adjusted against
another issuer in the State risk pool in
the applicable benefit year. We propose
to change the sampling methodology so
that, beginning with the 2017 benefit
year data validation, the initial data
validation audit sample will only
include enrollees from State risk pools
in which there was more than one issuer
and where HHS conducted risk
adjustment on behalf of the State for the
benefit year being validated.17 We seek
comment on this proposal.
vi. Mental and Behavioral Health
Records
Under § 153.630(b)(6), the issuer of a
risk adjustment covered plan must
provide the initial validation auditor
and second validation auditor with all
relevant source enrollment
documentation, all claims and
encounter data, and medical record
documentation from providers of
services to each enrollee in the
applicable sample without unreasonable
delay and in a manner that reasonably
assures confidentiality and security in
transmission. Issuers have advised HHS
that certain States’ medical privacy laws
may limit providers’ ability to furnish
mental and behavioral health records for
risk adjustment data validation
purposes. We believe that section 1343
of the PPACA and associated
regulations require issuers of risk
adjustment covered plans to furnish any
records needed for purposes of the risk
adjustment program, including mental
and behavioral health records. We
17 For
the 2018 and future benefit years, HHS
would not require the sole issuer in the State
market to include high-cost risk pool enrollees in
its sample for data validation, as these payments
will be subject to a separate audit process.
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believe that the HIPAA Privacy Rule at
45 CFR 164.512(a) generally permits
disclosures of protected health
information that are required by law
within the meaning of 45 CFR 164.103.
Nevertheless, we recognize that some
State and Federal privacy laws impose
requirements for mental and behavioral
health information that are different
from, and potentially more restrictive
than, the HIPAA regulations. However,
without the necessary mental and
behavioral health information, the
diagnosis code for an applicable
enrollee cannot be validated and,
therefore, it would be rejected during
risk adjustment data validation.
To address these potential issues, we
propose to amend § 153.630(b)(6) to
provide that, if a provider is prohibited
from furnishing a full mental or
behavioral health record by State or
Federal privacy laws, the provider
instead may furnish a mental or
behavioral health assessment that
providers routinely prepare, for
validation of a mental or behavioral
health diagnosis. Although HHS needs
the full content of the mental or
behavioral health record to ensure full
validation of the accuracy of diagnosis
codes, we believe that we can still
perform some risk adjustment data
validation based on the information
contained in mental or behavioral
health assessments in those instances in
which State or Federal law prohibits
submission of the full record. For risk
adjustment data validation purposes, we
would expect a mental or behavioral
health assessment to be signed by a
qualified provider who is licensed by
the State to diagnose mental illness and,
to the extent permissible under
governing privacy and confidentiality
laws, to contain: (i) The enrollee’s name;
(ii) gender; (iii) date of birth; (iv) current
status of all mental or behavioral health
diagnoses; and (v) dates of service. We
note that ‘‘psychotherapy notes,’’ a
subset of mental and behavioral health
information that receives special
protections under the HIPAA Privacy
Rule, are not required for the purposes
of risk adjustment data validation.18 We
also note that some State and Federal
privacy laws require that providers
18 ‘‘Psychotherapy notes’’ are notes recorded by a
health care provider who is a mental health
professional documenting or analyzing the contents
of conversation during a private counseling session,
or a group, joint, or family counseling session and
that are separated from the rest of the individual’s
medical record. Psychotherapy notes do not include
medication prescription and monitoring, counseling
session start and stop times, modalities and
frequency of treatment, test results, and summaries
of diagnoses, functional status, treatment plan,
symptoms, prognosis, and progress to date. See 45
CFR 164.501.
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obtain patient consent before disclosing
mental or behavioral health records, and
that these consent requirements may
apply to mental or behavioral health
assessments. We clarify that we do not
view a State or Federal law requiring
patient consent as inconsistent with the
risk adjustment data validation
requirements to furnish a mental or
behavioral health record or assessment.
Additionally, we note that certain
substance use disorder patient records
are subject to the Federal confidentiality
law at 42 U.S.C. 290dd–2 and the
regulations promulgated thereunder in
42 CFR part 2 and to similar State laws,
and generally require consent prior to
disclosure. We believe that this proposal
is consistent with the foregoing Federal
and State confidentiality rules, and that
the substance use disorder
confidentiality requirements should
govern when applicable. Therefore,
issuers or providers may be required to
obtain written patient consent in order
to comply with this proposal.
The proposal described above allows
issuers an additional avenue to achieve
compliance by permitting abbreviated
mental or behavioral health assessments
for risk adjustment data validation in
the event that a provider is subject to
State or Federal privacy laws that
prohibit the provider from providing a
complete mental or behavioral health
record to HHS. To submit a mental or
behavioral health assessment instead of
the full mental or behavioral health
record, a provider would be required to
attest that relevant State or Federal
privacy laws prohibit him or her from
providing the entire mental or
behavioral health record. HHS also
believes that the proposal supports the
integrity of the risk adjustment data
validation program by ensuring that an
initial validation auditor obtains data
that will enable proper validation of
mental or behavioral health HCCs,
which are susceptible to discretionary
coding. Furthermore, we believe the use
of mental or behavioral health
assessments would reduce burden on
providers by permitting them to utilize
records they routinely prepare and
likely already have, which would avoid
the need to prepare special summaries
solely for the purpose of risk adjustment
data validation. We seek comment as to
the prevalence and typical contents of
mental or behavioral health assessments
under current practice, as well as other
aspects of this proposal.
vii. Inter-Rater Reliability Rates
Under § 153.630(b)(8), the initial
validation auditor must measure and
report to the issuer and HHS, in a
manner and timeframe specified by
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HHS, its inter-rater reliability rates
among its reviewers. An initial
validation auditor must achieve a
consistency measure of at least 95
percent for his or her review outcomes,
except for the initial benefit years of risk
adjustment data validation, for which
the initial validation auditor may meet
an inter-rater reliability standard of 85
percent. Consistent with our decision to
make the 2016 benefit year another pilot
year as referenced above, we propose to
amend § 153.630(b)(8) to add the 2016
benefit year as an initial year of risk
adjustment data validation for which
the initial validation auditor may meet
the lower inter-rater reliability standard
of 85 percent.
viii. Civil Money Penalties
An effective risk adjustment data
validation program is essential to the
proper functioning of HHS-operated risk
adjustment. In order to enforce risk
adjustment data validation standards
when operating risk adjustment data
validation on behalf of a State, we are
proposing to clarify and amend the
bases upon which HHS may impose
CMPs for violations of risk adjustment
data validation requirements.
To give HHS additional flexibility for
ensuring compliance with the risk
adjustment data validation requirements
and in light of our experience in the first
pilot year of the risk adjustment data
validation program, HHS is proposing to
amend § 153.630(b)(9) to give HHS the
authority to impose a CMP on an issuer
of a risk adjustment covered plan in the
event of misconduct or substantial noncompliance with the risk adjustment
data validation standards and
requirements. Specifically, we propose
to amend § 153.630(b)(9) to state that, if
an issuer of a risk adjustment covered
plan (1) fails to engage an initial
validation auditor; (2) fails to submit the
results of an initial validation audit to
HHS; (3) engages in misconduct or
substantial non-compliance with the
risk adjustment data validation
standards and requirements applicable
to issuers of risk adjustment covered
plans; or (4) intentionally or recklessly
misrepresents or falsifies information
that it furnishes to HHS, HHS may
impose CMPs in accordance with the
procedures set forth in § 156.805(b)
through (e). We note that § 153.630(b)(9)
already addresses the possible
imposition of CMPs for (1) and (2)
above, and provides a cross-reference to
§ 156.805, which contains the bases and
procedures for imposing CMPs for (3)
and (4) above. Section 153.630(b)(9)
provides the authority to assess CMPs
on all issuers of risk adjustment covered
plans, not just issuers on an FFE as does
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§ 156.805.19 Through this proposal, we
are clarifying that the authority to
impose CMPs for (3) and (4) applies to
all issuers of risk adjustment covered
plans, not just those issuers on an FFE.
We note that the CMP authority would
be in addition to HHS’s ability to adjust
an issuer’s transfers under § 153.350(c).
As previously noted in the Second
2013 Program Integrity Rule, and in the
2015 Payment Notice, we propose that
HHS’s possible application of CMPs
would continue to take into account the
totality of the issuer’s circumstances,
including such factors as an issuer’s
previous record of non-compliance (if
any), the frequency and level of the
violation, and any aggravating or
mitigating circumstances. Additionally,
we would continue to impose any CMPs
so that the level of the enforcement
action is proportional to the level of the
violation. While we reserve the right to
impose penalties up to the maximum
amounts set forth in § 156.805(c), as a
general principle, we intend to work
collaboratively with issuers to address
any problems in conducting the risk
adjustment data validation process.
We believe this additional CMP
authority will improve program
integrity and fairness by permitting HHS
the authority to assess CMPs on issuers
that engage in misconduct in risk
adjustment data validation. Although
§ 153.630(e) permits HHS to adjust
payments and charges for issuers that do
not comply with audit requirements and
standards, this provision only makes the
markets whole in the event of a
violation of the risk adjustment data
validation standards or misconduct. We
do not believe this provision provides a
sufficient deterrent effect to ensure
program integrity of the risk adjustment
data validation program. Additionally,
we believe this additional authority is
necessary in light of the policies
finalized in the 2018 Payment Notice,
specifically, the concerns HHS
highlighted around gaming and the
inclusion of prescription drug data in
the risk adjustment model. We seek
comment on this proposal.
19 Pursuant to § 153.20, risk adjustment covered
plan means, for the purpose of the risk adjustment
program, any health insurance coverage offered in
the individual or small group market with the
exception of grandfathered health plans, group
health insurance coverage described in 45 CFR
146.145(c), individual health insurance coverage
described in 45 CFR 148.220, and any plan
determined not to be a risk adjustment covered plan
in the applicable Federally certified risk adjustment
methodology.
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ix. Adjustment of Risk Adjustment
Transfers Due to Submission of
Incorrect Data
On September 2, 2015, HHS released
the Adjustment of Risk Adjustment
Transfers Due to Submission of
Incorrect Data guidance,20 setting forth
the process by which HHS would
address instances of materially incorrect
EDGE server data submissions. We
propose to include risk adjustment data
validation as a method of discovering
materially incorrect EDGE server data
submissions and making adjustments
pursuant to § 153.630(e), as described in
our September 2, 2015 guidance. We
propose that demographic or enrollment
errors discovered during risk adjustment
data validation would be the basis for an
adjustment to the applicable benefit
year transfer amount, rather than the
subsequent benefit year risk score. The
elements being validated are related to
the transfer formula. As such, we
believe they are substantially similar to
a discrepancy in the transfer process,
which is addressed in the current
benefit year as part of the process for
handling discrepancies in data under
§ 153.710, as opposed to a discrepancy
in underlying enrollee diagnoses
contributing to risk scores, which is
addressed through subsequent year risk
score adjustments as part of risk
adjustment data validation.
As we noted in the September 2, 2015
guidance, an overstatement or
understatement of premium data may
affect issuers differently, because it will
lead to an increase or decrease in the
absolute value of the magnitude of the
transfers (and will affect the calculation
of the geographic rating area factors).
Therefore, an issuer’s submission of
incorrect EDGE server premium data
may have the effect of increasing or
decreasing the magnitude of risk
adjustment transfers to other issuers in
the market, depending on the direction
of the premium error, holding constant
the other elements of the payment
transfer formula. In cases where there is
a material impact on risk adjustment
transfers for that particular market as a
result of incorrect EDGE server premium
data, HHS would calculate the dollar
value of differences in risk adjustment
transfers, and, where the difference is
detrimental to one or more issuers in the
market, adjust the other issuers’ risk
adjustment transfer amount by that
calculation, and increase the risk
adjustment charge (or decrease the risk
adjustment payment) to the issuer that
made the data error, in order to balance
20 Available at https://www.cms.gov/CCIIO/
Resources/Regulations-and-Guidance/Downloads/
RA-Adjustment-Guidance-9-2-15.pdf.
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the market.21 We believe this approach
allows HHS to operate the risk
adjustment program efficiently, while
ensuring that issuers do not profit from
their data submission errors or harm
their competitors in the relevant market.
We seek comment on this proposal.
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h. Risk Adjustment User Fee for 2019
Benefit Year (§ 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 its behalf. In 2019, HHS
anticipates operating a risk adjustment
program in every State. As described in
the 2014 Payment Notice, HHS’s
operation of risk adjustment on behalf of
States is funded through a risk
adjustment user fee. Section
153.610(f)(2) provides that an issuer of
a risk adjustment covered plan must
remit a user fee to HHS equal to the
product of its monthly billable member
enrollment in the plan and the per
member 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 established
Federal policy regarding user fees, and
specified 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
mitigates the financial instability
associated with potential adverse risk
selection. The risk adjustment program
also contributes to consumer confidence
in the health insurance industry by
helping to stabilize premiums across the
individual and small group markets.
In the 2018 Payment Notice, we
calculated the Federal administrative
expenses of operating the risk
adjustment program for the 2018 benefit
year to result in a risk adjustment user
fee rate of $1.68 per billable member per
year or $0.14 PMPM, based on our
estimated contract costs for risk
adjustment operations and estimates of
billable member months for individuals
enrolled in a risk adjustment covered
plan. For the 2019 benefit year, we
propose to use the same methodology to
estimate our administrative expenses to
operate the program. These contract
costs cover development of the model
21 Calculation of the dollar value will include
adjustment to the statewide premium average and,
to the extent possible, adjustment to the geographic
cost factor.
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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
divided HHS’s projected total costs for
administering the risk adjustment
programs on behalf of States by the
expected number of billable member
months in risk adjustment covered
plans in HHS-operated risk adjustment
States for the benefit year.
We estimate that the total cost for
HHS to operate the risk adjustment
program on behalf of States for 2019
will be approximately $38 million, and
the risk adjustment user fee would be
$1.68 per billable member per year, or
$0.14 PMPM. The risk adjustment user
fee contract costs for the 2019 benefit
year are lower than the 2018 benefit
year contract costs due to lower risk
adjustment data validation and
stakeholder training costs as issuers are
becoming more familiar with our
programs. We expect billable member
months to decline slightly compared to
the 2016 benefit year, whereas we
expected billable member months to
increase over this time period when
setting the risk adjustment user fee rate
for the 2018 benefit year. Therefore, the
calculated 2019 benefit year risk
adjustment user fee is lower than the
rate for the 2018 benefit year prior to
rounding, but after rounding to the
nearest cent, is the same as that for the
2018 benefit year. We seek comment on
the proposed risk adjustment user fee
for the 2019 benefit year.
C. Part 154—Health Insurance Issuer
Rate Increases: Disclosure and Review
Requirements
1. Applicability (§ 154.103)
Since July 18, 2011, issuers have been
required to submit rate filing
justifications for rate increases for nongrandfathered plans in the individual
and small group markets.22 This
requirement was established, in part, to
carry out the Secretary’s responsibility,
in conjunction with 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.
Student health insurance coverage is
considered by HHS to be a type of
individual market coverage and is
generally subject to the PHS Act
individual market requirements
22 See Rate Increase Disclosure and Review; Final
Rule, 76 FR 29964, 29966 (May 23, 2011).
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including rate review.23 However,
student health insurance coverage is not
subject to single risk pool
requirements.24 Because student health
insurance coverage is only available
through colleges and universities, it is
also exempt from the guaranteed
availability and guaranteed renewability
requirements enacted under HIPAA. For
purposes of the guaranteed availability
and guaranteed renewability
requirements enacted under the PPACA,
a health insurance issuer that offers
student health insurance coverage is not
required to accept individuals who are
not students or dependents of students,
and is not required to renew or continue
in force coverage for individuals who
are no longer students or dependents of
students. Student health insurance
coverage also need not be issued on a
calendar year basis.25
We propose to modify § 154.103(b) to
exempt from rate review student health
insurance coverage, effective for plan or
policy years beginning on or after
January 1, 2019. Grandfathered health
plan coverage as defined in 45 CFR
147.140 and excepted benefits as
described in section 2791(c) of the PHS
Act are already exempted from rate
review under the existing regulation at
§ 154.103(b).
The Federal rate review requirements
currently apply to student health
insurance coverage because it is
considered individual market
coverage.26 Issuers of student health
insurance plans are required to use the
Rate Review Justification module of the
Health Insurance Oversight System
(HIOS) to submit the required rate filing
information. However, student health
insurance coverage is written and sold
more like large group coverage, which
was exempted from rate review as part
of the implementing regulations in part
154 because States traditionally focused
their efforts on the review of rates in the
small group and individual markets.
Additionally, purchasers in the large
group market were viewed as being
more sophisticated, with greater
leverage, and therefore better able to
23 See Student Health Insurance Coverage Final
Rule 77 FR 16453 (March 21, 2012).
24 A health insurance issuer that offers student
health insurance coverage may establish one or
more separate risk pools for an 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 schoolrelated classification and not based on a health
factor (as described in 45 CFR 146.121). However,
student health insurance rates must reflect the
claims experience of individuals who comprise the
risk pool, and any adjustments to rates within a risk
pool must be actuarially justified. See 45 CFR
147.145(b)(3).
25 45 CFR 147.145(b)(1).
26 45 CFR 147.145.
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avoid the imposition of large rate
increases.27 Similarly, institutions of
higher education that offer student
health insurance coverage are seen as
well informed, with significant
purchasing power, and student health
insurance coverage is generally rated
and administered differently from other
forms of individual health insurance
coverage.28
States have allowed rating practices
for student health insurance coverage to
be more in line with large group pricing,
in which experience rating and other
factors can be used to determine rates.
Because student health insurance
coverage is typically experience rated,
and is typically only available to
students and their dependents with an
open enrollment period coinciding with
the start of the academic year, it is
exempt from single risk pool rating
requirements and not guaranteed to be
available or renewable to individuals
who are not students or dependents of
students in an institution of higher
education. In addition, States have
generally given student health insurance
coverage more plan design flexibility
compared to individual market plans to
better meet student needs and
utilization of on-campus providers.
Because of these factors, some States
have requested student health insurance
coverage be exempt from the rate review
requirements in part 154 of title 45. The
proposed change would reduce the
regulatory burden on States and issuers
of student health insurance plans. This
proposal is consistent with our general
approach of providing tailored
flexibility with respect to the PHS Act
individual market reforms for student
health insurance coverage. Eliminating
the burdens associated with the Federal
rate review requirements may
incentivize issuers to offer more student
health insurance plans, increasing
competition among issuers to the benefit
of institutions of higher education and
their students.
We note that States would continue to
have the flexibility to review rate
increases or other aspects of student
health insurance coverage. Under this
proposal, in States that do not have an
Effective Rate Review Program, we
would monitor the compliance of
student health insurance coverage with
applicable market rating reforms based
on complaints and as part of targeted
market conduct examinations. In States
where we are enforcing market reforms,
27 See preamble discussion in the proposed rule,
‘‘Rate Increase Disclosure and Review’’ 75 FR
81004, 81009 (December 23, 2010).
28 See preamble discussion in the final rule,
‘‘Health Insurance Market Rules; Rate Review’’ 78
FR 13406, 13424 (February 27, 2013).
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we would continue to review form
filings for student health insurance
coverage for compliance with applicable
PHS Act individual market
requirements, but would not review rate
increases for reasonableness under part
154 of title 45.
We solicit comment on this proposal.
2. Rate Increases Subject to Review
(§ 154.200)
Section 2794(a)(1) of the PHS Act
requires the Secretary, in conjunction
with States, to establish a process for the
annual review of unreasonable premium
increases for health insurance coverage.
Section 2794(a)(2) of the PHS Act
requires health insurance issuers to
submit to the Secretary and relevant
State a justification for an unreasonable
premium increase prior to
implementation. States may establish a
more robust review process, and many
have chosen to do so.
Section 154.200(a)(1) currently
provides that a rate increase for single
risk pool coverage beginning on or after
January 1, 2017 is subject to a
reasonableness review if: (1) The
average increase, including premium
rating factors described in 45 CFR
147.102, for all enrollees, weighted by
premium volume for any plan within
the product, meets or exceeds 10
percent; or (2) the increase exceeds a
State-specific threshold approved by the
Secretary. We propose to amend this
provision to establish a 15 percent
default threshold for reasonableness
review, in recognition of significant rate
increases in the past number of years,
rather than the current 10 percent
default threshold, and seek comment on
the appropriate default threshold.29
A reasonableness review looks at the
assumptions used in determining the
rate increase to make sure those
assumptions are supported by evidence.
The reasonableness review also checks
that the increase will not result in a
projected Federal MLR below the
minimum standard in the applicable
market and will not unfairly
discriminate between insureds with
similar risk categories.
Regardless of the threshold set for
reasonableness review, all issuers must
submit a Uniform Rate Review Template
(URRT) (Part I of the Rate Filing
29 The 10 percent threshold was established in the
‘‘Rate Increase Disclosure and Review’’ Final rule
(76 FR 29963, May 23, 2011) based upon three
indices. These indices are: (1) The medical
component of the Consumer Price Index (CPI); (2)
the National Health Expenditure data (NHE); and
(3) the Standard and Poor’s Healthcare Economic
Commercial Index. The threshold was finalized at
10 percent based on the analysis of the trend in
health care costs and rate increases provided in the
preamble to the proposed rule.
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Justification) for all single risk pool plan
submissions. Issuers offering a QHP or
any single risk pool submission
containing a rate increase of any size
must also submit an actuarial
memorandum (Part III of the Rate Filing
Justification). Issuers with rate filings
that do not meet the threshold for a
reasonableness review are exempt from
the requirement to submit Part II of the
Rate Filing Justification (Consumer
Justification Narrative) for those rate
filings. No changes are being proposed
to these requirements.
We note that the threshold set by CMS
constitutes a minimum standard. Some
States currently employ stricter rate
review standards and may continue to
do so. Section 154.200(a)(2) currently
requires States to submit a proposal to
the Secretary for approval of any Statespecific threshold. We propose to
amend § 154.200(a)(2) to require
submission of a proposal only if the
State-specific threshold is higher than
the Federal default threshold. We are
proposing this change to reduce burdens
and promote State flexibility. We also
propose to amend this provision to
clarify that a State seeking approval for
a higher threshold than the Federal
default must base its request on factors
impacting rate increases in the State to
the extent that the data relating to such
factors are available by August of the
preceding year.
CMS released guidance entitled,
‘‘State-Specific Threshold Proposals,
Guidance for States’’ on March 27,
2012,30 and outlined the process to be
followed by States wishing to propose a
State-specific threshold to be effective
from September 1, 2012 through August
31, 2013. We will issue future guidance
on the process for submission and
review of State requests to propose a
State-specific threshold above what is
set by CMS, to be effective for rate
filings submitted on or after January 1,
2019.
We also propose to delete paragraph
(b) in its entirety. That paragraph
currently requires that the Secretary
publish a notice each year indicating
which threshold applies to each State.
CMS currently posts information
regarding State-specific threshold
requests on its Web site 31 and would
continue to do so for States that request
a State-specific threshold above what is
set by CMS, beginning with rate filings
submitted on or after January 1, 2019. If
this proposal is finalized, CMS would
30 https://www.cms.gov/CCIIO/Resources/Files/
Downloads/dwnlds/rrjssptguidance.pdf.
31 https://www.cms.gov/CCIIO/Programs-andInitiatives/Health-Insurance-Market-Reforms/
sst.html.
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not post information on States where
the Federal default or a stricter Statespecific threshold applies. Under the
proposed approach, we would rely on
States to communicate information
about stricter thresholds, as well as any
other State-specific requirements.
We propose to redesignate paragraph
(c) as paragraph (b) and revise that
paragraph to delete the language related
to rates filed for coverage beginning
before January 1, 2017, currently
captured in paragraph (c)(1) as this
provision is no longer necessary.32 We
propose to redesignate paragraph (d) as
paragraph (c). Finally, we propose
conforming changes to change the cross
references in § 154.200 to align with the
changes described above.
We seek comment on these proposals.
3. Submission of Rate Filing
Justification (§ 154.215)
Section 154.215(h)(2) includes a
reference to 45 CFR 5.65, which defined
trade secret, confidential commercial or
financial information under HHS
regulations implementing the Freedom
of Information Act, 5 U.S.C. 552. HHS
revised 45 CFR part 5 in a final rule
issued on October 28, 2016, effective on
November 28, 2016 (81 FR 74930). We
propose to make a technical correction
to § 154.215(h)(2) to refer to 45 CFR
5.31(d) because 45 CFR 5.65 no longer
exists and § 5.31(d) now lists the
reasons a record may be withheld.
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4. Timing of Providing the Rate Filing
Justification (§ 154.220)
Section 154.220(b) provides that 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 by the earlier of (1) the
date by which the State requires
submission of a rate filing; or (2) the
date specified in guidance by the
Secretary. As discussed in the 2016
Payment Notice,33 we have interpreted
that section to require submission of all
rate filings, for both QHPs and nonQHPs, at a uniform time. We have
issued rate filing timeline guidance on
an annual basis establishing the
respective dates for each benefit year
and reiterating that requirement.34
32 This standard (that is, the average increase for
all enrollees weighted by premium volume meets or
exceeds the applicable threshold), however,
continues to apply to rates filed for coverage
beginning before January 1, 2017, including with
respect to compliance reviews and enforcement
actions.
33 80 FR 10782.
34 See, for example, Bulletin: Revised Timing of
Submission and Posting of Rate Filing Justifications
for the 2017 Filing Year for Single Risk Pool
Coverage; Revised Timing of Submission for
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Several State regulators have
indicated that requiring all submissions
at one time poses an undue regulatory
burden. They have stated that they
prefer to set a later date for submission
of rate filings from issuers that only
offer non-QHPs to enable regulators to
complete the review of QHP rate filings
first and review non-QHP rate filings
later. Therefore, starting with plan year
2019, we propose to interpret
§ 154.220(b) to allow a State with an
Effective Rate Review Program to set
different submission deadlines for rate
filings from issuers that only offer nonQHPs. This change would reduce
burden while empowering States to pick
the timeframe that works best for their
markets, and also accounts for market
differences between States. This is also
in line with a comment we received in
response to the Request for Information
requesting that States be allowed to set
rate filing dates. Under this proposal, an
issuer that offers both QHPs and nonQHPs in a market in a given State would
be required to submit its rate filing in
accordance with the deadlines
established for QHPs pursuant to
§ 154.220(b) to support regulatory
review of compliance with the single
risk pool requirement.
CMS would need to coordinate with
all States in order to continue collecting
preliminary rate filing information and
final rate determinations in order to
comply with the statutory requirement
under section 2794(b)(2)(A) of the PHS
Act to monitor premium increases of
health insurance coverage offered inside
and outside of the Exchanges. This
coordination will also be important to
support compliance under section
1311(e)(2) of the PPACA for the FFEs to
take into consideration State
recommendations provided under
section 2794(b)(1) of the PHS Act when
certifying QHPs, as well as information
on any excess premium growth outside
of Exchanges as compared to inside the
Exchanges. We solicit comment on this
proposal.
5. Determinations of Effective Rate
Review Programs (§ 154.301)
a. State Posting of Rate Increases
We propose to modify § 154.301(b)(2),
which requires a State with an Effective
Rate Review Program to notify us in
writing, no later than 30 days prior to
the date it intends to make any
proposed or final rate filing information
public if the State will be posting prior
Qualified Health Plan Certification Application
(April 13, 2017), available at https://www.cms.gov/
CCIIO/Resources/Regulations-and-Guidance/
Downloads/Final-Revised-2017-filing-timelinebulletin-4-13-17.pdf.
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to the date specified by the Secretary.
We propose to reduce the advance
notification required from 30 days to 5
business days. The 30-day notification
period was intended to give us
sufficient notice in advance of State rate
increase announcements. However, in
many instances a State does not know
the posting date 30 days in advance, so
it was difficult to meet this requirement.
Shortening the advance notice period to
5 business days would better reflect
existing State practices. Under this
proposal, if a State opts to post
submissions on a rolling basis, as
specified in the proposed change below,
then the State would need to provide
this notification to us only for the first
submission for a given plan year that is
publicly posted.
b. Posting of Rate Increases
Section 154.301(b)(3) currently
provides that a State with an Effective
Rate Review Program must ensure that
information regarding rate increases is
made available to the public at a
uniform time for all proposed and final
rate increases, as applicable, in the
relevant market segment and without
regard to whether coverage is offered on
or off of an Exchange. That provision
was codified in order to set a level
playing field, to prevent issuers that
submit rate filings later from having an
advantage over their competitors that
submitted rate filings earlier.
Upon further analysis and input from
stakeholders, including a comment we
received in response to the Request for
Information, we propose to eliminate
the requirement for uniform posting by
deleting paragraph (b)(3). This would
permit States that have an Effective Rate
Review Program to post proposed and
final rate filing information on a rolling
basis. We believe that providing this
flexibility better accords with State laws
and historical practices. Prior to the
introduction of the Federal rate review
program, many States received and
posted rate filing information on a
rolling basis. Some State laws conflict
with the Federal uniform posting
requirement and require posting of rate
filing information upon receipt. In
addition, several States faced challenges
due to information systems that were
unable to suppress rate filing
information until a later date.
Under this proposal, States with
Effective Rate Review Programs would
continue to be required to provide
access from their respective Web sites to
at least the same information from the
rate filing that we make available on our
Web site (or provide our web address for
such information). Further, such States
must have a mechanism for receiving
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public comments on proposed rate
increases subject to review and must
post the required rate filing information
by the applicable deadlines established
under § 154.301(b)(1).
We would need to coordinate with
States to continue collecting
preliminary rate filing information and
final rate determinations to comply with
the statutory requirement under section
2794(b)(2)(A) of the PHS Act to monitor
premium increases of health insurance
coverage offered inside and outside of
the Exchanges. This coordination would
also be important to support compliance
under section 1311(e)(2) of the PPACA
for the FFEs to take into consideration
State recommendations provided under
section 2794(b)(1) of the PHS Act when
certifying QHPs, as well as information
on any excess premium growth outside
of Exchanges as compared to inside the
Exchanges. We would continue to post
proposed and final rate changes at
https://ratereview.HealthCare.gov at a
uniform time, consistent with current
practices and § 154.215(h).
We solicit comment on these
proposals for posting of rate increases.
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D. Part 155—Exchange Establishment
Standards and Other Related Standards
Under the Affordable Care Act
1. Standardized Options (§ 155.20)
In the 2017 Payment Notice, HHS
introduced standardized options (also
now referred to as Simple Choice plans).
A standardized option is a QHP offered
for sale through an individual market
Exchange that either has a standardized
cost-sharing structure specified by HHS
in rulemaking or has a standardized
cost-sharing structure specified by HHS
in rulemaking that is modified only to
the extent necessary to align with the
high deductible health plan (HDHP)
requirements under section 223 of the
Code or the applicable annual limitation
on cost sharing and HHS actuarial value
requirements. For the 2017 and 2018
benefit years, HHS specified
standardized options in rulemaking,
encouraged issuers to offer such plans
and provided differential display of
these plans on HealthCare.gov.
We seek to encourage free market
principles in the individual market, and
to maximize innovation by issuers in
designing and offering a wide range of
plans to consumers. We have heard
concerns that providing differential
display for these plans may limit
enrollment in coverage with plan
designs that do not match the
standardized options, removing
incentives for issuers to offer coverage
with innovative plan designs. We
believe that encouraging innovation is
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especially important now, given the
stresses faced by the individual market.
Therefore, we are proposing not to
specify any standardized options for the
2019 benefit year, and not to provide
differential display for standardized
options on HealthCare.gov. If this
proposal is finalized, agents, brokers
and issuers that assist consumers with
QHP selection and enrollment as
described in § 155.220(c)(3) and
§ 156.265(b), respectively, would also
not be required to provide differential
display for standardized options on
those third-party Web sites.
We seek comment on this proposal.
2. General Standards Related to the
Establishment of an Exchange
a. Flexibility for State-Based Exchanges
and State-Based Exchanges on the
Federal Platform (§ 155.106 and
§ 155.200)
While the PPACA allowed each State
to operate its own SBE, currently, 11
States and the District of Columbia
operate their own Exchanges, five States
utilize the SBE–FP model, and FFEs
operate in the remaining 34 States. We
seek to support innovation by States
operating SBEs by providing
opportunities for increased program
flexibilities to help support the
retention and financial selfsustainability of States participating in
the SBE model. In particular, we seek
comment on how HHS can best support
SBE efforts to utilize commercial
platform services, including what type
of technical support would be useful
and what, if any, specific regulatory
changes would facilitate the use of these
services.
We also propose to explore strategies
to make the SBE–FP model more
appealing and viable to States with
FFEs, as well as to support retention of
existing SBE–FPs. As codified in the
2017 Payment Notice, the SBE–FP
model allows States to establish the
legal status of their Exchanges as SBEs
while leveraging the economies of scale
available through the Federal eligibility
and enrollment platform and
information technology infrastructure.
The SBE–FP model offers States
opportunities to retain more control
over their Exchanges than if an FFE
operated in the State, as it allows them
to control plan management and
consumer assistance activities, without
the additional responsibility of building
the infrastructure required to operate an
IT eligibility and enrollment platform.
Accordingly, we seek to explore options
for streamlining current requirements
and leveraging private sector and
Federal platform technologies and
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advances to increase opportunities for
those States interested in remaining or
becoming SBE–FPs.
As discussed in prior rulemaking, due
to operational limitations, HHS is
unable at this time to offer a ‘‘menu’’ of
Federal services from which an SBE–FP
may select some, but not other, services
on the Federal platform. However, we
have stated in previous rules that we
would explore the availability of new
capabilities of the Federal platform to
customize particular functionalities. We
intend to continue to explore additional
areas where current authority,
technology, and operational capacities
would permit HHS to provide
additional options in operational
functions to SBE–FPs and provide SBE–
FPs with a greater role in decisionmaking. Those areas include allowing
SBE–FPs greater access to enrollment
data and operational statistics to enable
States to more effectively design their
local outreach and education strategies,
providing SBE–FPs access to personally
identifiable consumer data to assist the
FFE with conducting resource-intensive
consumer assistance activities such as
data matching issues or special
enrollment period verifications, and
exploring branding opportunities for
SBE–FPs to make their role more
visible, including potential Statespecific landing pages on
HealthCare.gov. We seek comment on
these options, as well as other activities
that SBE–FPs could undertake that
would strengthen and enhance the SBE–
FP model.
b. Election To Operate an Exchange
After 2014 (§ 155.106)
Section 155.106 describes the process
for a State electing to operate an SBE,
for a State terminating its SBE and
transitioning to an FFE, and for a State
seeking to operate an SBE–FP. This
section applies to both individual
market and SHOP Exchanges. Currently,
under § 155.106(c), as finalized in the
2017 Payment Notice, States can elect to
operate an individual market SBE–FP,
an SBE–FP for SHOP, or both. If a State
operates an SBE–FP for SHOP, the SBE–
FP utilizes the Federal platform for
enrollment, eligibility, and premium
aggregation services.
As discussed more fully in section
III.D.7 of this proposed rule, we are
proposing changes to required SHOP
functionality, effective on the effective
date of the final rule, if finalized as
proposed, for plan years beginning on or
after January 1, 2018, under which
qualified employers and employees
could enroll in SHOP plans by working
with a QHP issuer or SHOP-registered
agent or broker. If these proposals are
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finalized as proposed, many Federal
platform services currently available to
a State operating an SBE–FP would no
longer exist, including employee
eligibility, enrollment, and premium
aggregation services. Therefore, States
operating an SBE–FP for SHOP would
no longer be able to utilize the Federal
platform for those functions.
If the proposed changes reducing
SHOP requirements for SHOP
functionality are finalized as proposed,
we propose to amend § 155.106(c) to
remove the option for States to seek
approval to operate an SBE–FP for
SHOP after the effective date of the final
rule. Nonetheless, States that are
currently operating an SBE–FP for
SHOP, which include Kentucky and
Nevada, could maintain their existing
SBE–FPs for SHOP, using the Federal
platform functionality that would
remain if the proposals regarding SHOP
functionality are finalized as proposed
and subject to the applicable
requirements in § 155.200(f)(4), which
we also have proposed to amend to
align with the proposed changes to
SHOP functionality requirements.
Issuers in these SBE–FPs for SHOP
would continue to be subject to
§ 156.350, which we have also proposed
to amend to align with the proposed
changes to SHOP functionality
requirements. For those issuers that
offer SHOP QHPs in SBE–FPs for SHOP
beginning on or after January 1, 2018,
the expected burden (as well as
expected reduction in burden) should
be similar to that of issuers in the FF–
SHOPs.
We seek comment on all aspects of
this proposal.
c. Additional Required Benefits
(§ 155.170)
Section 1311(d)(3)(B) of the PPACA
permits a State, at its option, to require
QHPs to cover benefits in addition to
the EHB, 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
previous rulemaking, we directed States
to identify additional State-required
benefits that are subject to defrayal and
provided direction on how States must
calculate the cost of those benefits.35
At § 156.111 of this proposed rule, we
make a number of proposals related to
35 See the EHB Rule, available at https://
www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/201304084.pdf. Also see the 2016 Payment Notice Final
Rule, available at https://www.gpo.gov/fdsys/pkg/
FR-2015-02-27/pdf/2015-03751.pdf. and the 2017
Payment Notice Final Rule, available at https://
www.gpo.gov/fdsys/pkg/FR-2016-03-08/pdf/201604439.pdf.
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State changes to EHB-benchmark plans
beginning for the 2019 plan year. In
light of those proposals, we are
affirming that we are not proposing any
changes to the policies governing Staterequired benefits at § 155.170. Under
any of the proposed methods for a State
to select a new EHB-benchmark plan,
benefits mandated by State action prior
to or on December 31, 2011 could be
considered EHB according to the
continuing policy described above and
would not require State defrayal.
However, State-required benefits
mandated by State action taking place
after December 31, 2011, other than for
purposes of compliance with Federal
requirements, would continue to be
considered in addition to EHB under
this continuing policy even if embedded
in the State’s newly selected EHBbenchmark plan under the proposals at
§ 156.111, and their costs would
accordingly be required to be defrayed
by the State. Therefore, whether a State
mandate could be considered EHB is
dependent on when the State enacted
the mandate.
As discussed more in the preamble for
§ 156.111, we propose that § 155.170
would continue to apply in the same
manner as it currently applies to
§ 156.110 and that the proposed
§ 156.111, which offers States the
flexibility to select a new EHBbenchmark plan, would not remove the
obligations required under the proposed
§ 156.111(a)(3) with regard to maximum
allowed generosity for a State’s EHBbenchmark plan. For further discussion
of how the State mandate policy at
§ 155.170 would apply to EHB under the
proposals at § 156.111 supplying States
with options to select a new EHBbenchmark plan for plan years
beginning in 2019 and later, see the
preamble to § 156.111.
We solicit comments regarding State
mandates and our proposal to apply
§ 155.170 in the same manner as it
currently applies to § 156.110 to the
options proposed at § 156.111, which
would allow States to select new EHBbenchmark plans. Specifically, we are
interested in comments on different
applications of the State mandate policy
to the proposed policy for EHBbenchmark plan selections at § 156.111
that would increase State flexibility,
while also being cost effective for States,
consumers, and the Federal government,
such as allowing States the flexibility to
update benefits mandated by State
action prior to or on December 31, 2011,
that are considered EHB if the State can
prove that the update to the State
mandate is budget neutral.
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3. General Functions of an Exchange
a. Functions of an Exchange (§ 155.200)
The 2017 Payment Notice finalized
requirements at § 155.200(f)(2) for SBE–
FPs to establish and oversee certain
requirements for their QHPs and QHP
issuers that are no less strict than the
requirements that apply to QHPs and
QHP issuers on an FFE. Due to the
operational complexities in
implementing these requirements from
both the State and Federal perspective,
and to promote the goal of returning
regulatory authority over the insurance
markets to States, we propose to
eliminate requirements for SBE–FPs to
enforce FFE standards for network
adequacy at § 155.200(f)(2)(ii) and
essential community providers at
§ 155.200(f)(2)(iii). Instead, we propose
that the SBE–FPs, like other SBEs,
would have the flexibility to determine
how to implement the network
adequacy and essential community
provider standards with which issuers
offering QHPs through the SBE–FP must
comply. We believe SBE–FPs are best
positioned to determine these standards
for the QHP certification process in their
States, and that the removal of the
requirement that SBE–FPs establish and
oversee requirements for their issuers
that are no less strict that the manner in
which these regulatory requirements are
applied to FFE issuers would streamline
certain aspects of the QHP certification
process, and return traditional
insurance market regulatory authority to
the States. Additionally, HHS is
proposing elsewhere in this proposed
rule that, for 2019 plan years and later,
the FFEs would rely on State reviews of
network adequacy standards where the
States have been determined to have an
adequate review process. Accordingly,
we believe similar deference should be
granted to States with SBE–FPs. We
believe these changes would further
empower SBE–FPs to use their QHP
certification authority to encourage
issuers to stay in the Exchange, enter the
Exchange for the first time, or expand
into additional service areas.
We also are proposing to remove the
requirement at § 155.200(f)(2)(iv) that
QHP issuers in SBE–FPs comply with
the Federal meaningful difference
standard to reflect the proposal to
remove § 156.298 described elsewhere
in this rule.
Section 155.200(f)(4) describes
requirements for States that operate an
SBE–FP for SHOP. As discussed above,
although we are proposing that States
can no longer elect to operate SBE–FPs
for SHOP after the effective date of the
final rule, if finalized as proposed,
Kentucky and Nevada are already
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approved to operate SBE–FPs for SHOP,
and thus the requirements in
§ 155.200(f)(4) could remain relevant for
those SBE–FPs for SHOP. We therefore
propose to amend § 155.200(f)(4) to
reflect the proposed amendments
(described in section III.D.7 of this
proposed rule) under which the
functionality of the FF–SHOPs’ platform
would be reduced for plan years
beginning on or after January 1, 2018.
Specifically, we propose to amend the
introductory text to § 155.200(f)(4) to
describe the requirement applicable,
effective on the effective date of the
final rule, if finalized as proposed, for
plan years beginning on January 1, 2018
and beyond, and to make the
requirements in paragraphs (f)(4)(i)
through (vii), effective on the effective
date of the final rule, if finalized as
proposed, applicable for only plan years
beginning prior to January 1, 2018.
Specifically we propose that the
requirements in (f)(4)(i) and (iv), which
require SBE–FPs for SHOP to align their
premium payment and employer
contribution calculation methodologies
with those used by the Federal platform,
would not apply for plan years
beginning on or after January 1, 2018,
effective on the effective date of the
final rule, if finalized as proposed.
Because under our proposed
amendments to § 155.705 and proposed
introduction of § 155.706, for plan years
beginning on or after January 1, 2018,
the Federal platform for SHOP would no
longer calculate premium rates or
employer contributions, and would no
longer aggregate premium payments (as
of the effective date of the final rule, if
finalized as proposed), there would be
no further need for such alignment for
plan years beginning on or after January
1, 2018.
Because under our proposed approach
the Federal platform would continue to
include plan display with premium
amounts, we do not propose changes to
the requirement that States operating an
SBE–FP must require its QHP issuers to
make any changes to rates in accordance
with the timeline applicable in a
Federally-facilitated SHOP under
current § 155.705(b)(6)(i)(A), which
regulation is mirrored in our proposed
introduction of § 155.706(b)(6)(i)(A).
However, we propose to specify that
this requirement applies in the
introductory text to (f)(4), to reflect the
proposed change to make the
requirements in (f)(4)(i) through (vii)
applicable for only plan years beginning
prior to January 1, 2018, effective on the
effective date of the final rule, if
finalized as proposed.
Additionally, because under our
proposed approach, for plan years
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beginning on or after January 1, 2018,
the Federal platform would, effective on
the effective date of the final rule, if
finalized as proposed, no longer
calculate whether a qualified employer
has met the applicable minimum
participation rate, there would no longer
be any need for States operating an
SBE–FP for SHOP to align their
minimum participation rate
requirements and calculation
methodologies with those applicable in
the FF–SHOPs for plan years beginning
on or after January 1, 2018. We therefore
propose that this requirement would
only apply for plan years beginning
prior to January 1, 2018, effective on the
effective date of the final rule, if
finalized as proposed.
To align with our proposed
amendments at § 155.725 and proposed
new section § 155.726, under which the
FF–SHOPs, effective on the effective
date of the final rule, if finalized as
proposed, for plan years beginning on or
after January 1, 2018, would no longer
establish annual employee open
enrollment periods, or establish
effective dates of coverage for an initial
group enrollment or group renewal, we
also propose that the requirements in
§ 155.200(f)(4)(v) and (vi) would only
apply for plan years beginning prior to
January 1, 2018, effective on the
effective date of the final rule, if
finalized as proposed. Finally, to align
with our proposed amendments at
§ 155.735, under which the FF–SHOP,
effective on the effective date of the
final rule, if finalized as proposed, for
plan years beginning on or after January
1, 2018, would no longer determine the
timing, form, and manner in which
coverage or enrollment in a SHOP QHP
may be terminated, we propose that the
requirement in § 155.200(f)(4)(vii)
would only apply for plan years
beginning prior to January 1, 2018,
effective on the effective date of the
final rule, if finalized as proposed.
We seek comment on these proposals.
b. Navigator Program Standards
(§ 155.210)
Each Exchange is required under
section 1311(d)(4)(K) and 1311(i) of the
PPACA to establish a Navigator program
under which it awards grants to entities
that, among other things: Conduct
public education activities to raise
awareness of the availability of QHPs,
distribute fair and impartial information
concerning enrollment in QHPs and the
availability of premium tax credits and
CSRs, and facilitate enrollment in QHPs.
Under section 1311(i)(2)(B) of the
PPACA, these entities may include
trade, industry, and professional
associations; commercial fishing
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industry organizations; ranching and
farming organizations; community and
consumer-focused nonprofit groups;
chambers of commerce; unions;
resource partners of the Small Business
Administration; other licensed
insurance agents and brokers; and other
entities that meet the statutory
requirements at section 1311(i)(3), (4),
and (5) of the PPACA.
Currently, § 155.210(c)(2) specifies
that each Exchange must include among
its Navigator grantees both a community
and consumer-focused nonprofit group
and at least one other entity that is from
one of the other categories listed at
§ 155.210(c)(2), including other public
or private entities or individuals that
meet the requirements of § 155.210.
Section 155.210(c)(2)(viii) specifies that
these other entities may include Indian
tribes, tribal organizations, urban Indian
organizations, and State or local human
service agencies.
To maximize the flexibility and
efficiency of the Navigator program, we
propose to amend § 155.210(c)(2) to
remove the requirements that each
Exchange must have at least two
Navigator entities and that one of these
entities must be a community and
consumer-focused nonprofit group. We
believe removing these requirements
would provide Exchanges with
improved flexibility to award funding to
the number and type of entities that
would be most effective for the specific
Exchanges. Eliminating the requirement
to have at least two Navigator entities
would allow each Exchange to
optimally use the funding amounts
available, which may include selecting
a single, high performing grantee in an
Exchange.
The requirement that one Navigator
grantee in each Exchange must be a
community and consumer-focused
nonprofit group may unnecessarily limit
an Exchange’s ability to award grants to
the strongest applicants. Additionally, if
we finalize our proposal to permit an
Exchange to have only one Navigator
grantee but retain the requirement
regarding community and consumerfocused nonprofit groups, this
requirement could effectively exclude
any other type of statutorily eligible
entities from becoming Navigators.
Eliminating this requirement would
provide Exchanges with the flexibility
to target grants to the highest scoring
and performing entities, regardless of
organization type.
Removing these requirements at
§ 155.210(c)(2) would also promote
Exchange flexibility and autonomy to
structure Navigator programs tailored to
each Exchange. An Exchange could
award a grant to a single Navigator
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entity from any of the permitted types.
Alternatively, Exchanges could elect to
continue awarding two or more grants,
as they have been doing thus far, and
include a community and consumerfocused nonprofit group among those
grantees.
Section 155.210(e)(7) requires each
Navigator entity to maintain a physical
presence in the Exchange service area,
so that face-to-face assistance can be
provided to applicants and enrollees.
We propose to remove this requirement
to provide more flexibility to each
Exchange to structure its Navigator
program to best serve the Exchange
service area. Under section 1311(i)(2)(A)
of the PPACA and § 155.210(c)(1)(ii),
entities seeking to become Navigator
grantees must demonstrate to the
Exchange that they have existing
relationships, or could readily establish
relationships, with employers and
employees, consumers (including
uninsured and underinsured
consumers), or self-employed
individuals likely to be eligible for
enrollment in a QHP. Consistent with
those provisions, Navigator grant
applicants in the FFEs are scored on
their ability to make this demonstration.
Based on HHS’s experience with
Navigator programs in FFEs and other
public programs, we believe entities
with a physical presence and strong
relationships in their FFE service areas
tend to deliver the most effective
outreach and enrollment results.
However, we believe that each Exchange
is best suited to determining the weight
to give a physical presence in the
Exchange service area when selecting
Navigator entities, as long as the
Exchange’s Navigator grantee selection
process is consistent with section
1311(i)(2)(A) of PPACA and
§ 155.210(c)(1)(ii).
These proposals are intended to
maximize flexibility for each Exchange
in awarding Navigator grants. We seek
comment on statutorily acceptable
alternative types of entities that could
serve as Navigators and possible new
ways in which Navigators could carry
out their duties.
For reasons similar to those
motivating our proposed changes to
§ 155.210(e)(7), as well as to promote
consistency across programs, we
propose to remove the corresponding
requirement at § 155.215(h) that requires
maintenance of a physical presence in
the Exchange service area by all nonNavigator entities subject to § 155.215.
In addition to the requirement to
maintain a physical presence in the
Exchange service area, §§ 155.210(e)(7)
and 155.215(h) currently provide that,
in an FFE, no individual or entity is
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ineligible to operate as a Navigator or
non-Navigator assistance personnel
solely because its principal place of
business is outside of the Exchange
service area. We note that there is also
a corresponding provision applicable to
certified application counselors and
certified application counselor
organizations at § 155.225(b)(3). We are
not proposing changes to these
provisions. We codified these
provisions due to concerns about nonFederal requirements that these types of
assisters maintain their principal place
of business in the State (79 FR 30273–
30274), and we continue to have these
concerns.
We solicit comments on all aspects of
these proposals.
c. 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 (§ 155.215)
For a discussion of the provisions of
this proposed rule related to standards
applicable to non-Navigator Assistance
Personnel subject to § 155.215, please
see the preamble to § 155.210.
d. Standards for Third-Party Entities To
Perform Audits of Agents, Brokers, and
Issuers Participating in Direct
Enrollment (§ 155.221)
In the 2018 Payment Notice, we
implemented an approach for an HHSapproved third party to conduct
onboarding operational readiness
reviews and audits authorized by
§ 155.220(c)(5), specific to use of the
direct enrollment pathway by agents
and brokers registered with the FFEs.
HHS proposes new standards in this
rule to replace the standards set forth in
the 2018 Payment Notice for § 155.221.
HHS also proposes to expand the
applicability of this section to require
issuers, in addition to agents and
brokers, participating in direct
enrollment to engage third-party entities
to conduct the required operational
readiness reviews. We propose a
conforming edit to § 156.1230(b)(2) to
reflect this proposal.
HHS is proposing to implement an
approach wherein agents, brokers, and
issuers that participate in direct
enrollment and use their own Internet
Web site for QHP selection or to
complete the Exchange eligibility
application would select their own
third-party entities for conducting
audits, rather than requiring HHS to
initially review and approve these
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entities. HHS anticipates this approach
would reduce the regulatory burden on
agents, brokers, and issuers by allowing
the opportunity to choose an auditor or
use an existing auditor. In addition,
HHS anticipates that agents, brokers,
and issuers already conduct audits for
compliance with HHS requirements,
and implementing this program would
reduce duplicative HHS oversight. This
approach would also reduce the burden
on third-party entity reviewers, as the
entities would no longer need to apply
for HHS-approval to perform
operational readiness reviews. HHS
believes this approach would expand
the available number of qualified thirdparty entities to perform the audits,
thereby enabling more agents, brokers
and issuers to demonstrate operational
readiness to participate in direct
enrollment. We believe this would
expand consumer access to direct
enrollment pathways for enrolling in
Exchange coverage. The proposed
approach would also reduce the
burdens on HHS by no longer requiring
the establishment of a Federal
application, approval and appeals
process for these entities to conduct
operational readiness reviews. HHS
anticipates this approach would allow
more flexibility for private entities to
respond to potential changes and HHS
requirements as HHS considers future
enhancements to the direct enrollment
pathway. Under this proposal, agents,
brokers and issuers must select an
auditor who meets the requirements
described in the proposed amendments
to § 155.221(b), such as privacy and
security experience, to perform a review
to demonstrate operational readiness as
required under § 155.220(c)(3)(i)(K) and
§ 156.1230(b)(2).
We propose to replace § 155.221(a)
with a new paragraph to require agents,
brokers, and issuers to select a thirdparty entity that meets the proposed
standard outlined in the new
§ 155.221(b), described below, to
perform these operational readiness
reviews, instead of restricting the
availability to third-party entities that
have been pre-approved by HHS.
Specifically, § 155.221(a) would require
that the agent, broker, or issuer engage
a third-party entity that meets the
standards outlined in the new
§ 155.221(b) to conduct an annual
operational readiness review prior to
participating in direct enrollment.
Consistent with § 155.220(c)(3)(i)(K) and
§ 156.1230(b)(2), the operational
readiness review would be performed
using the third parties’ own audit
processes and methods subject to HHSdefined specifications and
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requirements. The third-party entity’s
review would verify compliance by the
agent, broker, or issuer with the
applicable requirements in §§ 155.220,
155.260, 156.265, and 156.1230, and
would need to be completed prior to the
use of the agent, broker or issuer
Internet Web site for submission of an
Exchange application or completion of
QHP selection. HHS would publish
technical guidance outlining the review
standards and other operational details,
as well as provide other resources to
assist the third-party entities in
conducting the reviews at a later date.
The new proposed paragraph (a) also
provides that the third-party entity
would be a downstream or delegated
entity of the agent, broker or issuer that
participates or wishes to participate in
direct enrollment. Therefore, these
third-party entities would be subject to
HHS oversight as delegated or
downstream entities of an agent, broker,
or issuer, and the agent, broker, or issuer
would remain responsible for
compliance with all applicable direct
enrollment requirements.
HHS proposes revising § 155.221(b) to
modify the standards that third-party
entities must satisfy to perform the
reviews to demonstrate operational
readiness under § 155.220(c)(3)(i)(K)
and § 156.1230(b)(2). HHS proposes
replacing the introductory language at
§ 155.221(b) with new language to align
with the new proposed approach where
the agent, broker, or issuer selects the
third-party entity to perform the audit
under paragraph (a) and remove the
requirement for approval of these
entities by HHS. New § 155.221(b)(1)
would remove the requirement that an
entity must submit its application to
HHS; instead we propose to require the
entity to have experience conducting
audits or similar services, including
specific experience with relevant
privacy and security standards due to
the operational requirements of the
current direct enrollment processes and
any potential future enhancements. This
would include demonstrated experience
with current National Institute of
Standards and Technology (NIST) SP
800–53 or the HIPAA Security Rule
standards, and the review of compliance
with those standards. Auditors must
also be capable of performing
penetration testing on all interfaces that
collect personally identified information
or connect with HHS. We propose
modifying § 155.221(b)(2) to include
issuers participating in direct
enrollment and to expand the scope of
the audit to also include review of
compliance with other applicable
program requirements (for example,
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Web site design, or consumer
disclosures). We propose to modify
§ 155.221(b)(3) to require the auditor to
collect, store, and share with HHS all
data related to its audits of agents,
brokers, and issuers under paragraph (a)
in a manner, format, and frequency
specified by HHS until 10 years from
the date of creation. The proposed
amendments to paragraph (b)(3) also
require the auditor to comply with the
privacy and security standards HHS
adopts for agents, brokers, and issuers as
required in accordance with § 155.260.
Further, HHS proposes adding new
paragraph (b)(4) to implement a conflict
of interest standard that requires
disclosure of financial relationships
between a third-party entity conducting
a direct enrollment operational
readiness review and the agent, broker,
or issuer. We also propose to add
§ 155.221(b)(5) to require compliance by
the third-party entity with all applicable
Federal and State requirements, and to
add § 155.221(b)(6) to require the thirdparty entity to ensure, on an annual
basis, that appropriate staff successfully
complete operational readiness review
training as established by HHS prior to
conducting audits under paragraph (a)
of this section. The training would
provide information about compliance,
direct enrollment technical
requirements, applicable privacy and
security standards, and reporting
requirements.
Under proposed § 155.221(b)(7), a
third-party entity would be required to
permit access by the Secretary and the
Office of the Inspector General (OIG), or
their designees, in connection with their
right to evaluate through audit,
inspection, or other means, to the thirdparty entity’s books, contracts,
computers, or other electronic systems,
relating to the third-party entity’s audits
of agents, broker’s, or issuer’s
obligations in accordance with Federal
standards under paragraph (a) of this
section until 10 years from the date of
creation. This is intended to align with
the existing obligation on QHP issuer
downstream and delegated entity
requirements under § 156.340(b) to
cooperate with HHS and OIG audits,
investigations, or other reviews.
Proposed new paragraph (b)(8) would
require compliance with other
minimum business criteria specified in
guidance by HHS.
To provide agents, brokers, and
issuers with flexibility, HHS proposes
replacing § 155.221(c) with a new
paragraph to permit an agent, broker, or
issuer participating in direct enrollment
to engage multiple third-party entities to
perform the audits under paragraph (a)
and to clarify that each such third-party
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entity will need to separately comply
with the standards proposed under
paragraph (b).
HHS proposes deleting paragraphs
§ 155.221(d) (regarding a list of HHSapproved entities) and (e) (regarding an
appeals process for entities that were
not approved) to conform to the other
proposed changes in this section.
We solicit comments on these
proposals, and general feedback on the
direct enrollment process to inform the
development of future direct enrollment
operational and oversight standards,
including improvements to the pathway
to further expand access to coverage.
4. Exchange Functions in the Individual
Market: Eligibility Determinations for
Exchange Participation and Insurance
Affordability Programs
a. Eligibility Standards (§ 155.305)
Section § 155.305(f)(4)(i) prohibits an
Exchange from determining a consumer
is eligible for APTC if APTC payments
were made on behalf of the tax filer for
the consumer’s household (or either
spouse, if the tax filer is married) for a
previous year for which tax data would
be utilized for verification of household
income and family size, and the tax filer
or his or her spouse did not comply
with the requirement to file an income
tax return and reconcile APTC received
for that year. Under the current
regulation at paragraph (f)(4)(ii),
Exchanges cannot discontinue APTC
due to the failure to file and reconcile
associated APTC unless direct
notification is first sent to the tax filer
that his or her eligibility will be
discontinued as a result of the tax filer’s
failure to comply with the requirement
specified under paragraph (f)(4)(i) of
§ 155.305.
We propose to amend § 155.305(f)(4)
by removing the direct notification
requirement in paragraph (f)(4)(ii) and
revising the remaining paragraph (f)(4)
to move the content in paragraph
(f)(4)(i) into paragraph (f)(4).
Upon further examination, we have
determined that notification practices in
place prior to adoption of the direct
notification requirement provide
sufficient clarity for consumers prior to
action being taken to discontinue APTC.
Specifically, these practices were to
discontinue APTC by notifying the
household contact that his or her
eligibility will be discontinued as a
result of the tax filer’s failure to comply
with the filing and reconciliation
requirement.
In past years, the FFEs have sent
notifications to the household contact
based on notification preference—
electronically or at the address specified
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when he or she submitted the
application. Because of the restrictions
on disclosing Federal tax information
(FTI), these notices cited three possible
reasons why a consumer may be at risk
for losing APTC, one of which is failure
to file and reconcile. In our experience
operating the FFEs and the Federal
eligibility and enrollment platform, the
household contact may often be the
same person as the tax filer on whose
behalf APTC is paid; accordingly, since
FFE notices have been sent to the
household contact, we believe the
notifications have been addressed, in
many cases, to the person who is the tax
filer for the household. In cases where
the household contact has not been the
tax filer, because the notification has
been clear that it concerns eligibility for
APTC, we expect that the household
contact likely has shared the notice with
the tax filer on whose behalf APTC was
paid. As evidence that tax filers
generally have received notification
directly regarding their receipt of APTC
and information that they have not
satisfied the requirement to file and
reconcile, this notification method has
successfully resulted in tax filers for
approximately 60 percent of households
receiving the notification taking
appropriate action to file a tax return
and reconcile associated APTC.
However, because tax filers for
approximately 40 percent of households
receiving the notification did not take
appropriate action, HHS believes it is
important for program integrity
purposes that Exchanges discontinue
APTC for tax filers who failed to file a
tax return and reconcile after the notice
was provided. If the Exchange
discontinues APTC in connection with
the requirement under paragraph
§ 155.305(f)(4), the enrollee would have
the right to appeal the discontinuation
of APTC and maintain APTC during the
appeal. Therefore, we propose to
remove the direct notification
requirement in § 155.305(f)(4)(ii).
We also believe this change could
reduce burden on Exchanges. Absent
this proposed change, in order to
discontinue APTC for consumers who
failed to file a tax return and reconcile
their income taxes, Exchanges would be
required to establish a mechanism
through which to notify tax filers
without making an unauthorized
disclosure of protected FTI. Doing so
could be financially and operationally
burdensome and out of proportion to
the limited need for FTI handling in
Exchange notice generation
functionality.
As discussed above, we believe that
removing the direct notification
requirement will reduce the burden on
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Exchanges, while tax filers and
households that have been identified as
not meeting the requirement to file and
reconcile will continue to receive
adequate notice under the approach that
Exchanges using the federal eligibility
and enrollment platform have taken in
past years. However, improving the
clarity and overall effectiveness of this
notification process is a priority, and we
continue to explore ways to make the
process even more robust and
consumer-friendly, without unduly
burdening the Exchanges. We may issue
additional information about our
notification process in the future as an
aid to SBEs seeking to implement a
more robust process.
We seek comment on this proposal.
b. Verification Process Related to
Eligibility for Insurance Affordability
Programs (§ 155.320)
i. Income Inconsistencies
Section § 155.320(c)(3)(iii) sets forth
the verification process for increases in
household income. Generally, if income
data from our electronic data sources
indicate a tax filer’s attested projected
annual income is more than the income
amount represented by income data
returned by the IRS and the SSA and
current income data sources,
§ 155.320(c)(3)(iii) requires the
Exchange to accept the attestation
without further verification. Currently,
Exchanges generally are not permitted
to create inconsistencies for consumers
when the consumer’s attested income is
greater than the amount represented by
income data returned by IRS and the
SSA and current income data sources.
We propose to revise
§ 155.320(c)(3)(iii) to specify that the
Exchange will also generate annual
income inconsistencies in certain
circumstances when a tax filer’s attested
projected annual income is greater than
the income amount represented by
income data returned by IRS and the
SSA and current income data sources.
Current regulations generally require the
Exchange to accept a consumer’s
attestation to projected annual
household income when the attestation
reflects a higher income than what is
indicated in data from the IRS and
Social Security Administration. This
approach continues to make sense from
a program integrity perspective when
both the attestation and data from
trusted data sources are over 100
percent Federal poverty level (FPL),
since an attestation that is higher than
data from trusted data sources in that
situation would reflect a lower APTC
than would be provided if the
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information from trusted data were used
instead.
However, where electronic data
sources reflect income under 100
percent FPL and a consumer attests to
income between 100 percent FPL and
400 percent FPL, where the attested
income exceeds the income reflected in
trusted data sources by more than some
reasonable threshold, we believe it
would be reasonable to request
additional documentation, since the
consumer’s attested income could make
him or her eligible for APTC that would
not be available using income data from
electronic data sources. This proposal
also would help limit tax filers’
potential liability at tax reconciliation to
repay excess APTC. Accordingly, we
propose to add new paragraphs
(c)(3)(iii)(D) and (E), and to modify
paragraphs (c)(3)(vi)(C), (D), (F), and (G),
to specify that the Exchange will follow
the procedures in § 155.315(f)(1)
through (4) to create an annual income
data matching issue for consumers if: (1)
The consumer attested to projected
annual income between 100 percent and
400 percent of the FPL; (2) the Exchange
has data from IRS and SSA that
indicates income is below 100 percent
FPL; (3) the Exchange has not assessed
or determined the consumer to have
income within the Medicaid or CHIP
eligibility standard; and (4) the
consumer’s attested projected annual
income exceeds the income reflected in
the data available from electronic data
sources by a reasonable threshold
established by the Exchange and
approved by HHS. We propose that a
reasonable threshold must not be less
than 10 percent, and can also include a
threshold dollar amount. In accordance
with the existing process in
§ 155.315(f)(1) through (4), if the
applicant fails to provide
documentation verifying their income
attestation, the Exchange would
redetermine the applicant’s eligibility
for APTC and CSRs based on available
IRS and SSA data, which under this
proposal would typically result in
discontinuing APTC and CSR as
required in paragraph (c)(3)(vi)(G). The
adjustment and notification process
would work like other inconsistency
adjustments laid out in paragraph
(c)(3)(vi)(F).
We propose to allow the Exchange to
set the threshold for setting a data
matching issue similar to
§ 155.320(c)(3)(vi). We propose that a
reasonable threshold should take into
account that consumers with incomes
near 100 percent FPL have a smaller
margin for error in dollar terms.
Therefore, a reasonable threshold might
also include a fixed dollar amount in
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addition to a percentage threshold. We
seek comment on this proposal.
In paragraph (c)(3)(vi)(D) we propose
to make changes to provide consistency
with changes finalized in the 2017
Payment Notice regarding the threshold
for the generation of annual income data
matching issues for decreases in annual
household income. This proposed
change would specify that the 10
percent threshold standard no longer
applies to cases when a tax filer’s
attested projected income is less than all
data sources, or when no electronic data
sources are available. Instead, an
Exchange would use the reasonable
threshold established in accordance
with § 155.320(c)(3)(vi).
We note, however, our interest in
providing further guidance on the
appropriate thresholds for the
generation of data matching issues
generally. It is our intent to reconsider
and provide further guidance on these
thresholds in the near future, and in
anticipation of that effort we seek
comment on the appropriate thresholds
to use at various income levels and in
various circumstances. In particular, we
welcome data and evidence on this
issue.
We intend to address this issue as part
of broader rulemaking and guidance on
a number of related program integrity
issues, including further examination of
our processes for denying eligibility for
subsidies for individuals who have
failed to reconcile APTC on their
Federal income tax return, Exchange
processes for matching enrollment data
with Medicare and Medicaid in order to
remove duplicate enrollments, and our
rules around recalculation of eligibility
for APTC following a midyear change in
eligibility. In anticipation of these
actions, we seek comment generally on
these and other program integrity topics.
ii. Verification of Eligibility for
Employer Sponsored Coverage
An employee, or a member of the
employee’s family, who is eligible to
enroll in qualifying coverage in an
eligible employer-sponsored plan is not
eligible for a premium tax credit unless
the plan’s coverage for the employee is
either unaffordable, as defined in
section 36B(c)(2)(C)(i)(II) of the Code, or
does not provide minimum value, as
defined in section 36B(c)(2)(C)(ii) of the
Code. An employee (or member of the
employee’s family) also is not eligible if
he or she actually enrolls in the
employer-sponsored plan, even if the
plan is not affordable or fails to provide
minimum value.
When an individual submits a request
for an eligibility determination for
insurance affordability programs,
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including as part of the eligibility
verification process for APTC and CSRs,
§ 155.320(d) requires the Exchange to
verify whether the applicant reasonably
expects to be 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.
Paragraph (d)(2) of § 155.320 describes
the data sources an Exchange must use
to perform verification. Paragraph
(d)(2)(i) requires an Exchange to obtain
data from any electronic data sources
that are available to the Exchange and
which have been approved by HHS
based on evidence showing that such
data sources are sufficiently current,
accurate, and minimize administrative
burden. Paragraph (d)(2)(ii) requires that
the Exchange also obtain available data
based on Federal employment through
HHS, and paragraph (d)(2)(iii) requires
the Exchange to obtain available data
from the SHOP that corresponds to the
State in which the Exchange is
operating. Under § 155.320(d)(4), if an
Exchange is unable to fulfill the
requirement to connect to the data
sources set forth in (d)(2), the Exchange
is required to conduct sampling as
described under paragraph (d)(4)(i), or—
for benefit years 2016 and 2017—it may
conduct an HHS-approved alternative
process instead of sampling, as provided
under paragraph (d)(4)(ii).
We propose to amend § 155.320(d)(4)
to allow an Exchange to conduct an
HHS-approved alternative process
instead of sampling, as provided under
paragraph (d)(4)(ii), for benefit years
through 2019. When we introduced this
option for benefit years 2016 and 2017,
we received comments that encouraged
us to make this option permanent.
However, at the time we stated that we
believed the alternative process should
be used as an interim measure to gather
information about the verification
process as Exchanges improve their
long-term verification programs.36 We
also stated that we believed the
temporary option would provide
Exchanges with needed flexibility as
verification processes are refined and
employer databases compiled, to
improve long-term verification
programs. While Exchanges have since
gained greater access to data and
explored approaches to sampling,
challenges remain. To reduce regulatory
burdens on Exchanges while they
address remaining hurdles to
developing a long-term approach to
verification, we believe the option to
use an alternative process instead of
36 81
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sampling should be extended through
plan year 2019.
After the option to use an alternate
process for benefit years 2016 or 2017
was finalized, HHS investigated the
feasibility of connecting to a
comprehensive database of information
on employer-sponsored coverage that
could be used by all Exchanges to fulfill
verification requirements under
§ 155.320(d)(2)(i). Such a database
would be most useful and cost-effective
if it contained information on employersponsored coverage from as many nonFederal and non-SHOP employers as
possible. We found that a
comprehensive database does not
currently exist and building such a
database would be a resource-intensive
endeavor. In addition, employers are not
required to provide information to
Exchanges or HHS regarding the
coverage they offer, potentially limiting
the completeness of such a database.
Because of the current challenges
associated with building an HHSapproved database that is sufficiently
complete and accurate to satisfy
requirements under paragraph (d)(2)(i),
we anticipate many Exchanges will
fulfill verification requirements using an
alternate process, as described under
paragraph (d)(4). And, in recognition of
the challenges that Exchanges may
encounter with conducting sampling, as
explained below, we propose to extend
the option for Exchanges to conduct an
alternative process to sampling through
benefit year 2019. Our hope is that
Exchanges can continue to compile
databases sufficient to meet verification
requirements under paragraph (d)(2)
and to continue to refine their
approaches to sampling to meet
verification requirements under
paragraph (d)(4)(i).
In accordance with the requirement at
paragraph (d)(4) to pursue an alternate
process, the FFE conducted a pilot
study that incorporated many
components of sampling. The pilot was
intended to assess sampling’s value
protecting the integrity of the attestation
process regarding applicant access to
and enrollment in employer-sponsored
coverage. As part of this sampling pilot,
employers for a small sample of
enrollees receiving APTC through the
FFE were contacted by telephone, based
on the employer contact information
applicants provided on their Exchange
applications, and asked whether
specified employees were also enrolled
in a qualifying employer-sponsored plan
or were offered qualifying coverage in
an employer-sponsored plan. The FFE
collected information by contacting
employers’ human resources personnel.
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Sampling may be a lower cost option
for SBEs compared to FFEs. For
example, the FFE operates Exchanges
for 38 States, and the volume of
employers that the FFE encompasses
may inherently present challenges in
relying on sampling results that States
may not face. Some states may collect
and have access to data from employers
that makes verifying consumers’
attestations more efficient and reliable,
or may have existing channels through
which they can communicate with inState employers. Therefore, we are
maintaining the option to use sampling
as an alternate method of verification
under paragraph (d)(4) to allow SBEs
maximum flexibility. We expect that the
proposed change to paragraph (d)(4) to
allow Exchanges to continue to use an
HHS-approved alternative process to
sampling through plan year 2019 will
provide Exchanges with important
flexibility to conduct the most efficient,
reliable alternate method of verification
as Exchanges refine their approaches to
conducting sampling over time, and
until data sources exist that provide an
effective way to verify consumers’
enrollment in or access to qualifying
employer-sponsored coverage. If SBEs
use an alternative process to sampling to
conduct verification under paragraph
(d)(4)(ii), the process must be approved
by HHS. To be approved by HHS, we
expect an Exchange to develop an
alternate process that provides insight
into whether employees provide
accurate information or the Exchange
effectively verifies information about
enrollment in and eligibility for
qualifying coverage in an eligible
employer-sponsored plan.37 This
requires Exchanges to conduct reliable
and sufficient verification, while giving
them the flexibility to find the most
efficient ways of doing so for their
Exchange.
We note that to the extent an
Exchange believes an alternate process
to verification through data sources
other than those described under
paragraph (d)(2) may result in a more
efficient or comprehensive verification
procedure, the Exchange may also, in
accordance with §§ 155.315(h) and
155.320(a)(2), request HHS approval for
use of an alternate process for verifying
enrollment in and access to employer
sponsored coverage. We note that HHS
received support for providing
flexibility for the use of alternate data
sources by Exchanges in comments to
the Request for Information. For
example, we received comments
indicating that, for some Exchanges, due
to the limited number of Federal
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employees in their State, connecting to
the database containing data on Federal
employment provides little utility in
Exchange verification of applicants’
eligibility for employer-sponsored
coverage. One commenter encouraged
HHS to consider removing the
regulatory requirement to connect to
this database for purposes of employersponsored coverage verification. We
have also received feedback from some
Exchanges noting challenges and
limitations connecting to a SHOP
database. These Exchanges noted that,
given the limited enrollment in SHOP in
many States and that many States do not
have a SHOP database to which to
connect, requiring verification through
SHOP imposes a technical and financial
challenge for States that may not be the
most efficient and cost-effective way to
perform verification.
We seek comment on these proposals.
Additionally, we seek information and
suggestions from State-based Exchanges
and other stakeholders on ways to
improve verification of whether an
applicant reasonably expects to be
enrolled in an eligible employersponsored plan or is eligible for
qualifying coverage in an eligible
employer-sponsored plan for the benefit
year for which coverage is requested.
c. Eligibility Redetermination During a
Benefit Year (§ 155.330)
We seek comment on ways to better
encourage enrollees to report changes in
circumstance during the benefit year
that may have an impact on their
eligibility for Exchange coverage or for
advance payment of the premium tax
credit or cost sharing reductions. The
FFEs currently conduct proactive
outreach to enrollees through a variety
of means, including emails, phone calls,
and paper mail to encourage them to
return to the Exchange to update their
information throughout the benefit year
and during key Exchange operational
efforts, such as open enrollment. The
FFEs also periodically provide general
information and reminders to enrollees.
However, many individual changes in
circumstance, such as an individual’s
changes in household income or size,
remain unknown by the Exchanges until
reported by the enrollee and, such
changes may have a significant impact
on the enrollee’s eligibility for QHP
coverage through the Exchange and for
financial assistance.
Therefore, we are interested in
hearing from stakeholders about ways to
increase enrollee reporting of individual
changes in circumstance within 30 days
of the change in order to ensure
compliance with § 155.330(b).
Increasing such reporting would benefit
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enrollees by ensuring that they continue
to be enrolled given their current
eligibility for financial assistance and
would improve program integrity.
d. Annual Eligibility Redetermination
(§ 155.335)
We are considering the possibility of
amending the length of time that
individuals may authorize the
Exchanges to obtain the updated tax
return information for enrollees as
described in § 155.335(k)(2). Currently,
the Exchanges may obtain updated tax
return information for a period of no
more than five years based on a single
authorization.
We seek comment on whether five
years is an appropriate amount of time
for this type of an authorization to last
or whether a shorter time period should
be considered. In particular, we are
contemplating whether shortening this
authorization period would improve
Exchange program integrity by helping
to ensure that the enrollee’s application
at the time of re-enrollment accurately
reflects his or her data collection
preferences, that all sources of income
that may impact his or her eligibility for
APTC and cost sharing reductions are
listed on the application, and that
individuals update their applications on
a more regular basis to reflect other
changes in circumstances that affect
eligibility (such as changes in
employment or marital status).
5. Exchange Functions in the Individual
Market: Enrollment in Qualified Health
Plans
a. Special Enrollment Periods
(§ 155.420)
i. Plan Options Under Select Special
Enrollment Periods
For many special enrollment periods,
a dependent of an Exchange enrollee
may newly enroll in Exchange coverage
or switch Exchange plans when the
dependent or another qualified
individual on the Exchange application
qualifies for a special enrollment period.
Even though dependents may access
special enrollment periods based on
different qualifying events, when they
qualify for a special enrollment period
to newly enroll in Exchange coverage,
regardless of whether it is a special
enrollment period due to gaining or
becoming a dependent or due to a loss
of minimum essential coverage, we
believe they should be treated alike.
Section 155.420(a)(4) defines the
coverage changes Exchange enrollees
may make when they or their
dependents qualify for special
enrollment periods. We are proposing to
modify how paragraph (a)(4)(iii) treats
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dependents to align more closely with
paragraph (a)(4)(i) which addresses
when an existing enrollee gains a new
dependent. To do this, we propose to
modify paragraph (a)(4)(iii) to establish
a distinction between how the rule
treats existing enrollees who qualify for
one of the relevant special enrollment
periods themselves or when existing
Exchange enrollees themselves and their
dependent(s) qualify for one of the
relevant special enrollment periods; and
when only new dependents qualify for
one of the relevant special enrollment
periods and are enrolling in coverage
with an existing Exchange enrollee. We
propose to establish this distinction by
separating these situations into new
paragraphs (a)(4)(iii)(A) and
(a)(4)(iii)(B). We believe the latter
situation is akin to when an enrollee
adds a new dependent to their coverage,
even though in this situation the
dependent is qualifying for a different
special enrollment period.
Proposed new paragraph (a)(4)(iii)(A)
would address the coverage options
available to current enrollees and
dependents who qualify for a special
enrollment period. As is current policy
under paragraph (a)(4)(iii), paragraph
(a)(4)(iii)(A) would continue to allow
enrollees and their dependents who
qualify for the special enrollment
periods specified in paragraphs (d),
other than those described in
paragraphs (d)(2)(i), (d)(4), (d)(6)(i) or
(ii) for becoming newly eligible for
CSRs, (d)(8), (d)(9), and (d)(10) of this
section, to use their special enrollment
period to change to another QHP within
the same level of coverage or one metal
level higher or lower, if no such QHP is
available, as outlined in § 156.140(b) of
this subchapter.
Proposed new paragraph (a)(4)(iii)(B)
would address the coverage options
available when only a dependent who is
not currently enrolled in Exchange
coverage qualifies for a special
enrollment period. We are proposing to
revise the policy for these qualified
individuals to align with paragraph
(a)(4)(i) of this section. We propose that,
if a new dependent qualifies for one of
the special enrollment periods specified
in paragraphs (d)(1), (d)(3), (d)(6)(iii),
(d)(6)(iv), (d)(7), (d)(11), and (d)(13) of
this section and an enrollee would like
to add the dependent to his or her QHP
at that time, the Exchange must allow
the enrollee to add the dependent to his
or her current QHP; or, if the plan’s
business rules do not allow the
dependent to enroll, the Exchange must
allow the enrollee and dependent to
change to another QHP within the same
level of coverage; or, if no such QHP is
available, allow them to switch to a
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QHP one metal level lower or higher, as
outlined in § 156.140(b) of this
subchapter. Alternatively, the enrollee
may enroll the dependent in a separate
QHP at any metal level.
We believe that these modifications
are needed in order to align the
flexibilities available to enrollees and
dependents when a dependent is newly
enrolling in Exchange coverage during
the benefit year due to qualifying for a
special enrollment period. With this
proposed change, regardless of the
special enrollment period for which a
dependent qualifies, an enrollee may
either add the dependent to his or her
existing QHP, as long as they continue
to qualify for it, or enroll the new
dependent in a separate QHP at any
metal level.
In the event that both the enrollee and
the new dependent qualify for special
enrollment periods referenced in
proposed paragraphs (a)(4)(iii)(A) and
(a)(4)(iii)(B), respectively, and the
enrollee wants to add this new
dependent to his or her QHP, the
Exchange would allow both the enrollee
and dependent to switch to a new QHP
at the same metal level, if available, as
described in proposed paragraph
(a)(4)(iii)(A).
In addition, we propose to exclude
the special enrollment period in
paragraph (d)(12) for material plan or
benefit display errors from paragraph
(a)(4)(iii). This is because we
understand that certain material plan or
benefit display errors may impact an
enrollees’ decision to enroll in a level of
coverage, in addition to his or her
decision to enroll in a specific QHP.
Therefore, we believe that, if an enrollee
qualifies for the special enrollment
period because of a material plan or
benefit display error, he or she should
be allowed to switch to a different QHP
at any metal level that better meets his
or her needs.
We seek comment on these proposals.
ii. Exception to Prior Coverage
Requirement for Qualified Individuals
Who Have Lived in Service Areas
Where No QHP Is Offered Through an
Exchange
In response to concerns from
stakeholders that certain special
enrollment periods intended to help
qualified individuals maintain
continuous coverage for themselves and
their families were being used to newly
enroll in coverage mid-year, HHS
recently added a prior coverage
requirement to the special enrollment
period for gaining access to new QHPs
as a result of a permanent move,
described in § 155.420(d)(7), and the
special enrollment period for gaining or
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becoming a dependent through
marriage, described in § 155.420(d)(2)(i).
Section 155.420(a)(5) specifies how a
qualified individual can satisfy the prior
coverage requirement. Qualified
individuals can either demonstrate that
they had minimum essential coverage as
described in 26 CFR 1.5000A–1(b) for 1
or more days during the 60 days
preceding the date of the qualifying
event; lived in a foreign country or in
a United States territory for 1 or more
days during the 60 days preceding the
date of the qualifying event; or are an
Indian, as defined by section 4 of the
Indian Health Care Improvement Act.
This prior coverage requirement
encourages individuals to maintain
coverage throughout the year.
However, we recognize that
individuals living in a service area, as
defined by § 155.1055, where no
Exchange QHPs are offered, may not be
able to obtain affordable coverage. We
believe that individuals in this situation
should not later be prevented from
enrolling in coverage through a special
enrollment period that requires prior
coverage, when they were previously
unable to enroll in Exchange coverage
because it was unavailable or
inaccessible. Therefore, we propose to
amend paragraph (a)(5) to exempt
qualified individuals from the prior
coverage requirement if, for at least 1 of
the 60 days prior to the date of their
qualifying event, they lived in a service
area where there were no QHPs offered
through an Exchange. Absent this
change, qualified individuals who have
lived for part of the benefit year in a
location where no QHPs were offered
through an Exchange, and therefore may
have been unable to enroll in minimum
essential coverage, would be prevented
from subsequently qualifying for a
special enrollment period due to a
permanent move or marriage.
Additionally, we note that the
proposed amendment to paragraph
(a)(5) would apply, along with the rest
of the paragraph, to the individual
market outside of the Exchange through
the cross-reference to § 155.420(d) in
§ 147.104(b)(2). In this context, health
insurance issuers offering coverage
outside an Exchange would not be able
to require qualified individuals to
demonstrate prior coverage if they lived
for at least 1 of the 60 days prior to their
qualifying event in a service area where
there were no QHPs offered through an
Exchange.
We invite comment on this proposal.
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iii. Effective Date Options for Special
Enrollment Periods Relating to Gaining
or Becoming a Dependent
Paragraph (b)(2)(i) of § 155.420
requires Exchanges to provide qualified
individuals who qualify for a special
enrollment period due to gaining or
becoming a dependent through birth,
adoption, placement for adoption, or
placement in foster care with a
retroactive coverage effective date back
to the date of the qualifying event, and
provides Exchanges with the option to
allow these consumers to elect an
effective date of the first of the month
following the date of the event or
following regular coverage effective
dates, in accordance with paragraph
(b)(1) of this section. Paragraph (b)(2)(v)
addresses coverage effective date
options for special enrollment periods
related to gaining or becoming a
dependent due to a child support or
other court order as described in
paragraph (d)(2)(i); it requires
Exchanges to ensure that coverage takes
effect on the date of the court order and
permits the Exchange to allow qualified
individuals to elect an effective date
based on paragraph (b)(1), but it does
not provide qualified individuals with
an option to begin their coverage the
first of the month following the date of
the event.
We propose to remove paragraph
(b)(2)(v) of this section and to revise
paragraph (b)(2)(i) to include the special
enrollment period for a court order to
align the coverage effective dates for all
special enrollment periods based on
gaining or becoming a dependent, with
the exception of gaining or becoming a
dependent through marriage. Aligning
coverage effective date options ensures
that Exchanges provide qualified
individuals in similar situations with
the same flexibility with regard to
coverage effective dates. We then
propose to redesignate current
paragraph (b)(2)(vi) as paragraph
(b)(2)(v).
In addition, we propose to modify
paragraph (b)(2)(i) so that, in addition to
requiring an Exchange to ensure that
coverage is effective retroactive to the
date of the qualifying event, it may
permit the qualified individual or
enrollee to elect a coverage effective
date of the first of the month following
plan selection, rather than the first of
the month following the qualifying
event, as currently written, or following
regular coverage effective dates, in
accordance with paragraph (b)(1) of this
section.
This amendment would streamline
Exchange operations and align this
coverage effective date option with the
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accelerated prospective coverage
effective date rule as it applies to other
special enrollment periods, including
the special enrollment period for
gaining or becoming a dependent
through marriage, as described in
(b)(2)(ii) of this section. Thus, at the
Exchange’s option, qualified individuals
who qualify for a special enrollment
period due to gaining or becoming a
dependent through birth, adoption,
placement for adoption, placement in
foster care, or through a child support
or other court order, would be able to
elect from the same coverage effective
date options, including: the date of
qualifying event, the first day of the
month following plan selection, or
regular coverage effective dates in
accordance with paragraph (b)(1). These
amendments would standardize the
coverage effective date options for
qualified individuals who have
experienced similar qualifying events.
We request comments on this
proposal.
iv. Loss of Coverage Special Enrollment
Period (§ 155.420(d)(1)(iii))
Section § 155.420(d)(1) establishes a
special enrollment period for qualified
individuals who lose certain types of
coverage, including minimum essential
coverage. As described in paragraph
(d)(1)(iii), qualified individuals who
lose certain types of Medicaid
pregnancy-related coverage not
considered minimum essential coverage
may also qualify for this special
enrollment period. This is to ensure that
women losing eligibility for coverage of
pregnancy-related services that often
meet their primary and specialty
healthcare needs are not left without the
option to enroll in a QHP through an
Exchange after they lose access to those
services.
We propose to revise paragraph
(d)(1)(iii) to include women who lose
access to healthcare services that they
were receiving through CHIP coverage
for their unborn child. While CHIP
coverage for unborn children, provided
based on the definition of a child
described in 42 CFR 457.10, is
considered minimum essential coverage
for the unborn child, it is not considered
minimum essential coverage for the
pregnant woman. Nonetheless, these
pregnant women may receive a set of
health services comparable to those
available to women enrolled in
Medicaid pregnancy-related coverage.
For this reason, pregnant women who
have received prenatal care as part of
CHIP coverage for their unborn child
may apply and be determined eligible
for a hardship exemption from the FFEs
so that they are not required to also
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maintain minimum essential coverage
during that time.
The proposed revision to paragraph
(d)(1)(iii) would provide a pathway to
coverage for new mothers who lose
access to healthcare services provided
through unborn child CHIP coverage
following the birth of their child, and
who are otherwise eligible to enroll in
a QHP through the Exchange. Under
paragraph (c)(2) of this section, these
qualified individuals would have up to
60 days before or after the loss of access
to CHIP unborn child coverage to
qualify for the loss of coverage special
enrollment period and enroll in a QHP.
If they select a plan prior to their loss
of CHIP unborn child coverage, their
Exchange coverage would begin as soon
as the first day of the month following
the loss of coverage. If they select a plan
after the loss of CHIP unborn child
coverage, their Exchange coverage
would begin either the first of the
following month or following regular,
prospective coverage effective dates at
the option of the Exchange, as provided
under paragraph (b)(2)(iv). We believe
that this revision is needed to ensure a
pathway to coverage for women in the
17 states that offer unborn child CHIP
coverage, so that they may maintain
access to continuous coverage after the
birth of their child.
We request comments on this
proposal.
iv. Technical Amendment
(§ 155.420(d)(10)(i))
We propose to make a technical
amendment to update the cross
reference to 26 CFR 1.36B–2T in
§ 155.420(d)(10)(i), regarding the special
enrollment period for victims of
domestic abuse or spousal
abandonment. The temporary regulation
under section 36B of the Code originally
cited has now been finalized without
change to the definition cited in this
special enrollment period. Therefore,
this technical correction would not in
any way alter the parameters of this
special enrollment period.
b. Effective Dates for Terminations
(§ 155.430)
Section 155.430 specifies the
termination dates for Exchange
enrollees. Paragraph (d)(1)(i) of
§ 155.430 defines ‘‘reasonable notice’’ as
at least 14 days before the requested
effective date of termination. Paragraph
(d)(2) sets forth three possible effective
dates for enrollee-initiated terminations
made in accordance with paragraph
(b)(1): (1) The termination date specified
by the enrollee, if the enrollee provides
reasonable notice; (2) 14 days after the
termination is requested by the enrollee,
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if the enrollee does not provide
reasonable notice; or (3) on a date on or
after the date on which the termination
is requested by the enrollee, if the
enrollee’s QHP issuer agrees to
effectuate termination in fewer than 14
days, and the enrollee requests an
earlier termination effective date.
Further, current paragraph (d)(2)(iv) sets
the QHP termination effective date for
enrollees newly eligible for Medicaid,
CHIP, or the basic health program as the
day before the individual is determined
eligible for Medicaid, CHIP, or the basic
health program.
While the 14-day ‘‘reasonable notice’’
rule was created to provide issuers
ample termination transaction
processing time, we believe that most
Exchanges and issuers have the
operational capability to make enrolleeinitiated terminations effective in fewer
than 14 days—and often do so on the
same day of enrollee request. When
asked, issuers have not informed HHS of
any challenges in processing these
same-day transactions. Therefore, we
propose to remove paragraphs (d)(2)(i)
through (d)(2)(iii) and align the effective
dates for all enrollee-initiated
terminations on the date on which the
termination is requested by the enrollee
or on another prospective date selected
by the enrollee.
To further align termination effective
dates, we also propose removing
existing paragraph (d)(2)(iv), which
states that the QHP termination date for
an enrollee newly determined eligible
for Medicaid, CHIP or a basic health
program is the date before the Medicaid,
CHIP, or basic health program eligibility
determination. We do not provide QHP
termination dates according to
eligibility for other forms of coverage,
such as Medicare or employersponsored coverage. This rule singles
out the Medicaid/CHIP/basic health
program enrollee population for an
earlier termination date than other
Exchange consumers, causing
unnecessary confusion for consumers
and issuers. Consumers may also be
determined eligible through the State
Medicaid agency, instead of the
Exchange, resulting in challenges in
coordinating effective dates through the
State and the Exchange and its issuers.
The removal of paragraph (d)(2)(iv) may
limit enrollees’ ability to retroactively
terminate QHP coverage when it
overlaps with Medicaid or CHIP, which
could result in consumers being unable
to recoup premiums paid for periods
when the enrollee was enrolled in QHP
coverage through the Exchange and
gains retroactive eligibility for Medicaid
or CHIP. However, these types of
retroactive terminations can lead to
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major challenges for consumers as
Medicaid/CHIP providers may not cover
claims reversed by the QHP—leading to
unexpected out-of-pocket costs for
consumers.
Consolidating these termination
effective date scenarios—based on
reasonable notice or the reason for
termination—into one option for
consumers would help streamline
operations for Exchanges and issuers.
Allowing enrollees to terminate their
coverage immediately or on a future
date of their choosing also would
provide consumers with greater control
over ending their QHP coverage and
would help minimize or eliminate
overlaps in coverage. Such flexibility
would also allow Exchanges to send
termination transactions to issuers that
do not need subsequent adjustment,
reducing the need for casework or direct
consumer contact with issuers to
request earlier termination dates as
permitted under paragraph (d)(2)(iii).
We believe that streamlining these
termination dates would not negatively
affect issuer or Exchange operations, but
we invite comment from Exchanges,
issuers, and other stakeholders on any
burdens these rule changes may impose,
as well as whether we should make the
changes at the option of the Exchange or
the issuer.
6. Definitions (§ 155.500)
This section defines terms that are
relevant to this subpart. We propose to
amend the definitions of ‘‘Appeal
request’’ and ‘‘Appeals entity’’ by
adding a cross reference to proposed
section § 155.716(e)’’ to align with the
other proposals discussed throughout
this proposed rule.
7. Eligibility Standards for Exemptions
(§ 155.605)
a. Hardship Exemptions (§ 155.605(d))
Section 1311(d)(4)(H) of the PPACA
and section 5000A(e)(5) of the Code
allow individuals to seek an exemption
from the individual shared
responsibility provision due to a lack of
affordable coverage based on an
individual’s projected income. Section
155.605(d)(2) establishes the
circumstances under which an
Exchange must determine an applicant
eligible for an exemption due to lack of
affordable coverage based on projected
income. For determining whether
affordable coverage is available,
paragraph (d)(2) states that the Exchange
should use the standards specified in
section 5000A(e)(1) of the Code which,
among other things, specifies that the
Exchange should use, for individuals
not eligible for employer-sponsored
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51091
coverage, the annual premium for the
lowest-cost bronze plan available in the
individual market through the Exchange
in the State in the rating area in which
the individual resides.
However, market instability has
resulted in limited offerings of plans on
the Exchanges in many regions, and
there may be individuals who live in a
rating area without a bronze plan. Under
the current regulation, the Exchange
would not be able to make a
determination as to whether an
individual not eligible for employersponsored coverage who lives in a rating
area without a bronze plan is eligible for
the exemption due to lack of affordable
coverage based on projected income. We
propose to amend paragraph
§ 155.605(d)(2)(iv), to allow an
Exchange to make a determination of
lack of affordable coverage based on
projected income for individuals not
eligible for employer-sponsored
coverage using the annual premium for
the lowest cost Exchange metal level
plan available in the individual market
through the Exchange in the State in the
rating area in which the individual
resides if there is no bronze level plan
sold through the Exchange in that rating
area. Absent this proposed change,
individuals may lack access to
affordable coverage, but be unable to
qualify for an exemption determination
from the Exchange due to the
Exchange’s inability to calculate
whether coverage is unaffordable due to
the absence of a bronze plan in that
rating area. Under the proposed
amendment to § 155.605(d)(2),
Exchanges would use the amount of the
lowest cost Exchange metal level plan
available to the individual when no
bronze level plan is available.
We invite comment on this proposal.
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 an
individual shared responsibility
payment. 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
§ 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(d)(2)(iv), certain
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employed individuals are exempt if, on
an individual basis, the cost of self-only
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 of HHS 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.
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 in the
2015 Market Standards Rule (79 FR
30302), and we stated that 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.38
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
CMS Office of the Actuary.39 (As
discussed elsewhere in this preamble,
we are proposing the 2019 premium
adjustment percentage to be
1.2516634051, (or an increase of about
38 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.
39 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
preceding year exceeds the most recent NHEA
estimate of per enrollee employer-sponsored
insurance premiums for 2013.
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25 percent over the period from 2013 to
2018). This reflects an increase of about
7.7 percent over the 2018 premium
adjustment percentage (1.2516634051/
1.1617303196).
As the measure of income growth for
a calendar year, we established in the
2017 Payment Notice that we would use
per capita personal income (PI). Under
the approach finalized in the 2017
Payment Notice, and using the NHEA
data, the rate of income growth for 2019
is the percentage (if any) by which the
most recent projection of per capita PI
for the preceding calendar year ($53,729
for 2018) exceeds per capita PI for 2013
($44,555), carried out to ten significant
digits. The ratio of per capita PI for 2018
over the per capita PI for 2013 is
estimated to be 1.2059028167 (that is,
per capita income growth of about 20.6
percent). This reflects an increase of
about 4.5 percent relative to the increase
for 2013 to 2017 (1.2059028167/
1.1540603665) used in last year’s rule.
Thus, using the 2019 premium
adjustment percentage proposed in this
rule, the excess of the rate of premium
growth over the rate of income growth
for 2013 to 2018 is 1.2516634051/
1.2059028167, or 1.0379471610. This
results in a proposed required
contribution percentage for 2019 of
8.00*1.0379471610 or 8.30 percent,
when rounded to the nearest onehundredth of one percent, an increase of
0.25 percentage point from 2018
(8.30358¥8.05317). The excess of the
rate of premium growth over the rate of
income growth also is used for
determining the applicable percentage
in section 36B(b)(3)(A) of the Code and
the required contribution percentage in
section 36B(c)(2)(C) of the Code.
We seek comment on whether there
are other measures of premium growth
or income growth that we could use to
calculate the required contribution
percentage.
8. Eligibility Process for Exemptions
Paragraph 155.610(h)(2) describes the
timeframe during which the Exchange
will accept an individual’s application
for a hardship exemption. We are
proposing to make a technical
correction to paragraph 155.610(h)(2) to
reflect the prior redesignation of
paragraph 155.605(g)(1), which
describes the criteria for a hardship
exemption, to paragraph 155.605(d)(1)
in the 2017 Payment Notice.40
We seek comment on this proposal.
40 81
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9. Exchange Functions: Small Business
Health Options Program
We previously interpreted the
PPACA’s provisions regarding the
SHOPs to require that all SHOPs
provide for employer eligibility,
employee eligibility, and certain
enrollment functions, including
premium aggregation services.
We recognize that SHOPs, including
SBE–FP for SHOP and FF–SHOPs,
continue to face challenges and, to
accommodate those challenges and to
provide SHOPs with more flexibility in
operating their programs, we propose to
allow SHOPs to operate in a leaner
fashion beginning for plan years
beginning on or after January 1, 2018. If
the proposals of this rule are finalized,
the changes would become effective as
of the effective date of the final rule. In
the 2018 Payment Notice, HHS finalized
the removal of a participation provision
that had required certain QHP issuers to
participate in an FF–SHOP in order to
participate in an FFE. As a result, HHS
expects that there will be a significant
decrease in the number of issuers in the
FF–SHOPs in the 2018 plan year and
therefore, also expects fewer
enrollments in the FF–SHOPs and SBE–
FPs utilizing the Federal platform for
SHOP. With the anticipated significant
decreases in QHP issuer participation
and enrollment beginning in 2018, it is
not cost effective for the Federal
government to continue to maintain
certain FF–SHOP functionalities, collect
significantly reduced user fees on a
monthly basis, maintain the
technologies required to maintain an
FF–SHOP Web site and payment
platform, generate enrollment and
payment transaction files, and perform
enrollment reconciliation. Specifically,
as previously signaled,41 we are
proposing to remove regulatory burden
on SHOPs by removing several of the
existing requirements imposed upon the
SHOPs, focusing on removing
requirements to provide certain
functionality that is not expressly
required by the PPACA, while still
ensuring appropriate implementation of
statutorily required functions of the
SHOP. Under this proposal, employer
groups that are currently enrolled, or
will enroll in a SHOP QHP for plan
years that begin prior to January 1, 2018,
would enroll in a SHOP QHP consistent
with the current SHOP regulations. If
this rule is finalized as proposed, the
41 Centers for Medicare & Medicaid Services
Offers New Health Coverage Enrollment Option for
Small Business (May 15, 2017), available at https://
www.cms.gov/Newsroom/MediaReleaseDatabase/
Press-releases/2017-Press-releases-items/2017-0515.html.
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changes would take effect for plan years
beginning on or after January 1, 2018 as
of the effective date of the final rule.
Under the proposed approach, SHOPs
would no longer be required to provide
employee eligibility, premium
aggregation, and online enrollment
functionality for plan years beginning
on or after January 1, 2018, effective on
the effective date of the final rule, if
finalized as proposed. If these proposals
are finalized as proposed, the FF–
SHOPs and the SBE–FP for SHOPs
would take advantage of this flexibility,
and SBEs would continue to have the
flexibility to operate a SHOP in the way
that they choose in accordance with
applicable Federal and State law.
Notably, we received comments to the
Request for Information that provided
support for this proposed enrollment
approach. Moreover, few SBEs currently
utilize a similar enrollment approach as
is being proposed as a transitional
measure that was expected to extend
through plan years beginning in 2018.
These SBEs have already inquired about
the possibility to continue permitting
enrollment of their SHOP consumers
through a participating QHP SHOP
issuer, or a SHOP-registered agent or
broker, for plan years beginning in 2019
and beyond.42 Additionally, these SBEs
have each indicated that this enrollment
method has contributed to reduced
SHOP Exchange programmatic
expenses, which is critical for SBEs to
maintain financial sustainability as
required by section 1311(d)(5)(A) of the
PPACA.
To reflect the proposed changes for
plan years beginning on or after January
1, 2018, effective on the effective date of
the final rule, if finalized as proposed,
we are proposing modifications
throughout the requirements applicable
in the SHOPs. However, because some
groups’ plan years that begin prior to the
effective date of the rule finalizing this
proposal will continue beyond the
effective date of the rule finalizing this
proposal, both the existing requirements
and the proposed requirements would
need to be in place simultaneously. For
this reason, we propose to make many
of the existing regulatory sections
regarding SHOP applicable for plan
years beginning prior to January 1, 2018
only, and propose new regulatory
sections applicable for plan years
beginning on or after January 1, 2018.
After the effective date of this rule, the
new regulatory sections will be effective
for all 2018 plans, regardless of whether
42 Extension of state-based SHOP Direct
Enrollment Transition (April 18, 2016), available at
https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/1332-and-SHOPGuidance-508-FINAL.pdf.
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they started prior to the effective date of
the rule. Except as described in this
rule, we propose that these new
regulatory sections would mirror the
existing regulatory sections.
Specifically, we propose to amend
§§ 155.705, 155.715, 155.720, 155.725,
155.730, 155.735, 155.740, 156.285 and
157.205 to make each section applicable
only to plan years beginning prior to
January 1, 2018. Additionally, we
propose to introduce mirroring new
sections, applicable for plan years
beginning on or after January 1, 2018, at
§§ 155.706, 155.716, 155.721, 155.726,
155.731, 155.741, 156.286 and 157.206.
We do not propose a new section
mirroring current § 155.735, as further
explained later in this preamble. We
also propose minor changes to
§ 155.700. These are described in the
sections that follow. We also propose
additional changes related to the
proposed new approach to SHOP in
§§ 155.106, 155.200, and 156.350, to
define the streamlined enrollment
approach that groups enrolling in a
SHOP QHP in a SBE–FP would take, if
the proposals in this rule were to
become finalized. In light of the
substantial changes proposed
throughout this document, we intend to
make conforming amendments and to
update all applicable cross references in
these and other regulations, including
§§ 147.102, 147.104, 155.500, 156.200,
and 156.340. We solicit comment on
any additional cross-references that
should be amended.
If this proposal is finalized, SHOPs
that opt to operate in a leaner fashion,
such as the FF–SHOPs, would still
assist qualified employers who are small
employers in facilitating the enrollment
of their employees in QHPs offered in
the small group market in the State,
consistent with section 1311(b)(1)(B) of
the PPACA, because the basic
functionalities of an Exchange would
still be provided. Under the proposed
approach, SHOPs would continue to be
required to certify plans for sale through
the SHOP, and the following features
would still be available: An Internet
Web site that displays and provides
QHP information, a premium calculator
that generates estimated prices of the
available QHPs, and a call center to
answer questions related to the SHOP.
Further, small employers would
continue to obtain an eligibility
determination from the SHOP Web site
but would enroll in a SHOP QHP by
working with a SHOP-registered agent
or broker, or with a QHP issuer
participating in a SHOP to complete the
enrollment process.
An enrollment completed by working
with a SHOP-registered agent or broker,
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or with a QHP issuer participating in a
SHOP under the proposed flexibilities,
would be considered to be an
enrollment through the SHOP, and an
employer would be considered to have
offered its employees coverage through
a SHOP for purposes of section 45R of
the Code (the Small Business Health
Care Tax Credit), if the employer: (1)
Obtains from the SHOP a favorable
determination of eligibility to
participate in the SHOP; (2) enrolls in
a SHOP QHP offered by an issuer; and
(3) chooses to have the enrollment
identified as being through the SHOP. If
an enrollment meets this definition, the
QHP issuer would be required to
conduct enrollment with all applicable
SHOP rules and policies.
Because the SHOP would be required
to determine employer eligibility to
participate in the SHOP only, and not be
required to determine employer group
members’ eligibility to enroll, it would
only be responsible for handling appeals
as they relate to an employer’s eligibility
in the SHOP, as currently described in
§ 155.740. If, under the flexibilities
described here, employer group
members enrolled in a SHOP QHP
needed to file an appeal related to their
SHOP coverage, they generally would
file the appeal directly with the
insurance company, or could take
advantage of other appeals mechanisms
under applicable State and Federal law.
If an employer group member, under the
approach proposed throughout this
document, believed that he or she were
entitled to a SHOP special enrollment
period, but was denied that special
enrollment period, the employer group
member could file a complaint with the
SHOP and the SHOP would investigate.
SHOP special enrollment periods would
continue to be available to enrollees
who experience specified qualifying
events. If the proposed changes are
finalized, SHOPs that use the new
flexibilities, such as the FF–SHOPs,
would no longer have the information
required to determine employer group
members’ eligibility for special
enrollment periods. Therefore, issuers
wishing to participate in such a SHOP
would be required to administer special
enrollment periods.
SHOPs opting to operate in a leaner
fashion, like the FF–SHOPs, would
continue to provide employers with the
option to offer a choice of plans,
consistent with section 1312(a)(2) of the
PPACA, by continuing to allow
employers to offer their employees a
choice of plans, either by coverage level,
or, in some States, by participating QHP
issuer. Employers would be able to see
the SHOP plans available, by coverage
level and issuers, in their area using the
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plan comparison tool available on a
SHOP Web site. To streamline
enrollment through a SHOP, the
employer would maintain the ability to
offer their employees a choice of plans
across issuers. Employers who choose to
offer a choice of plans to employees
would contact the participating QHP
issuers, whose plans they would like to
offer to their employees, to obtain the
application information necessary in
order to enroll in coverage.
Once the necessary information
required to enroll is obtained from the
QHP issuer or issuers or from the SHOPregistered agent or broker, the employer
could disseminate the application
information to its employees. The
employer could later collect the
information from its employees and
send it to the applicable QHP issuer or
issuers or the SHOP-registered agent or
broker. Employers generally would also
be responsible for collecting monthly
premium payments from employees and
sending them to the appropriate issuers.
While initially offered to support
employers’ option to offer a choice of
plans across issuers, premium
aggregation services are not a service
mandated by the PPACA and therefore
may be altered or removed, as proposed
in this proposed rule. SHOP-registered
agents and brokers would be able to
assist employers perform these tasks, if
the employer chooses to work with a
SHOP-registered agent or broker.
Additionally, to further support
employers’ option to offer a choice of
plans across issuers, under the proposed
approach, an employer’s minimum
participation rate would continue to be
calculated at the employer level, though
the SHOPs would not be involved in
calculating it, and the FF–SHOPs would
no longer calculate it. Participating QHP
issuers would not be permitted to deny
enrollment on the basis of failure to
meet minimum participation
requirements to employers who have
been determined eligible to participate
in the SHOP, and who have met the
applicable minimum participation rate,
as specified by the SHOP, even if only
one employee in a group wishes to
enroll with a particular issuer.
Under the proposed approach, SHOPs
would also still be able to administer
the provision at section 1304(b)(4)(D) of
the PPACA that guarantees continuing
eligibility for growing small employers
by limiting the validity of an employer’s
eligibility determination such that it
terminates when the employer makes a
change that could end its eligibility
under § 155.710(b), by requiring the
employer to submit a new single
employer application to the SHOP if the
employer makes a change that could
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end its eligibility under § 155.710, and
by requiring issuers to be able to
distinguish SHOP enrollments from
non-SHOP enrollments. Under the
proposed flexibilities, issuers would be
expected to rely on the determination of
eligibility to reflect the employer’s
ongoing eligibility to participate in the
SHOP and the IRS would have the
option to follow up with an employer
for additional information if necessary.
HHS understands that the changes
outlined in this proposed rule, if
finalized, would allow SHOPs to adopt
changes (and we propose that the FF–
SHOPs would adopt such changes) that
result in a substantial departure from
current operations for participating
SHOP QHP issuers, employers, and
enrollees. We recognize that if this
proposed rule is finalized, it would be
effective on the effective date of the
final rule, and thus could take effect
after the first date that employers can
complete an enrollment that takes effect
on or after January 1, 2018. It is
important to note that employer groups
currently enrolled in a SHOP plan that
began in 2017 in a SHOP that would opt
to operate in a leaner fashion would not
be affected until their plan year ends, as
the current regulations will be in effect
for the entirety of a plan that began in
2017. The current regulations will also
be in place for the beginning of plan
year 2018 for those plans that start
before the effective date of the rule. But,
after the effective date of the rule, any
finalized regulations pertaining to plan
year 2018 will be effective for all plans
that begin or began in 2018, regardless
of whether they started prior to the
effective date. HHS acknowledges that
this transition will create challenges and
is concerned about employers enrolling
between when rates become available
for plan years beginning in 2018 and
when the proposed flexibilities in this
rule would go into effect. We seek
comment on how to best ease this
transition.
HHS also recognizes that if the
proposals are finalized and take effect
after rates become available for plan
years beginning in 2018, employers
participating in an FF–SHOP that
complete the enrollment process for a
plan that would take effect on or after
January 1, 2018, but prior to the
effective date of the final rule could
begin the enrollment process on the
existing SHOP Web site, and might
receive billing and premium aggregation
services through the SHOP Web site for
only a short time period in 2018 before
any final version of these proposals
could take effect. If SHOP enrollment
processes that would no longer be
required to be provided by the SHOP
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were discontinued when the rule took
effect, issuers and small employers
could experience a disruption in the
processing of payments or subsequent
enrollments, which could result in loss
of coverage due to non-payment of
premiums that might affect an
employer’s ability to claim the Small
Business Health Care Tax Credit. This
approach would also result in complex
data transfers between a SHOP and
issuers. Nonetheless, not allowing
SHOPs to operate in a leaner fashion as
soon as possible would cause SHOPs to
continue to incur substantial financial
and operational burdens, and would
undermine the goal of achieving
financial sustainability, as referenced
above. This is why the proposals in this
proposed rule would apply as of the
effective date of the final rule, and any
finalized regulations pertaining to plan
year 2018 will be effective for all plans
that begin or began in 2018, regardless
of whether they started prior to the
effective date. Issuers that intend to use
the FF–SHOP and SBE–FP for SHOP
systems that will no longer be required
under the new regulations are
encouraged to inform HHS of their
intention to do so as soon as possible,
so that HHS may work through the
necessary operational, technology, and
transition issues to establish manual
procedures to accommodate them.
Manual procedures could include
premium aggregation services and
processing of enrollments in SHOP
QHPs.
We seek comment on these proposals,
including on any other regulatory
provisions that should be changed to
reflect the changes described here.
a. Standards for the Establishment of a
SHOP (§ 155.700)
Section 155.700 outlines the general
requirements to establish a SHOP and
defines certain terms specific to SHOPs.
We propose to amend § 155.700(a) by
adding paragraph (a)(1) to make the
current requirements applicable for only
plan years beginning prior to January 1,
2018. We propose to add paragraph
(a)(2) to describe the general
requirements applicable for plan years
beginning on or after January 1, 2018.
Proposed paragraph (a)(2) more closely
aligns with the statutory language in
section 1311(b)(1)(B) of the PPACA than
existing paragraph (a), and would
specify that SHOPs must assist qualified
employers in facilitating the enrollment
of their employees in small group
market QHPs. We believe that the
PPACA does not have to be interpreted
to require SHOPs to facilitate the
enrollment of qualified employees into
QHPs, as is specified by the current
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regulation. Instead, we believe it can
also be interpreted in a less burdensome
way, to require SHOPs to assist
qualified employers in facilitating
employees’ enrollment into QHPs,
which would still be provided for under
our proposals. If finalized, these
changes would become effective as of
the effective date of the final rule. We
seek comment on this proposal.
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b. Functions of a SHOP (§ 155.705) for
Plan Years Beginning Prior to January 1,
2018. (§ 155.705)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding functions of a
SHOP for plan years beginning on or
after January 1, 2018 and to introduce
those requirements in a new § 155.706.
To reflect the proposal that the
requirements currently in § 155.705
would apply only for plan years
beginning before January 1, 2018, we
propose to amend the heading of
§ 155.705 and add paragraph (f), to state
that the section would apply only for
plan years that begin prior to January 1,
2018. We discuss the proposed new
§ 155.706 below.
c. Functions of a SHOP for Plan Years
Beginning on or After January 1, 2018
(§ 155.706)
Section 155.705 describes required
Exchange functions that are specific to
SHOPs. To permit SHOPs to operate in
a leaner fashion for plan years beginning
on or after January 1, 2018, we are
proposing several changes to the
required functions of a SHOP. If
finalized, these changes would become
effective as of the effective date of the
final rule. Under these proposals, which
we propose to introduce in new
§ 155.706, certain functions that are
currently required would become
optional for SHOPs for plan years
beginning on or after January 1, 2018,
and the FF–SHOPs would not provide
them. With the exception of the
proposed changes to the functions
described here, the functions would
remain the same as in § 155.705. The
proposals described in this section
would become effective on the effective
date of the final rule, if finalized as
proposed.
We propose only to include the
paragraphs in current paragraph (b)(3) of
§ 155.705, that would be applicable to
plan years beginning on or after January
1, 2018, maintaining the currently
applicable policy requiring SHOPs to
allow employers to select a level of
coverage and to offer a choice of QHPs
across that level of coverage, and
permitting SHOPs to allow employers to
offer a choice of all QHPs from a single
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issuer, or another method of providing
employer choice. To provide additional
flexibility, we also propose to codify
that State SHOPs may, as the FF–SHOPs
have, offer employers a choice of
SADPs. To reflect the proposals
described in § 156.150(b) of this
document, we propose that SHOPs
could and FF–SHOPs would allow
employers to offer a choice of SADPs
across a selected level of coverage, if
such levels of coverage are available. In
the event that no SADP coverage levels
are available, employers would be able
to offer a choice of all SADPs offered in
an area. We also propose conforming
amendments to the structure of this
paragraph.
Because, as discussed earlier in this
preamble, premium aggregation services
are not mandated by the PPACA and to
maximize the flexibilities associated
with operating a SHOP, we propose to
remove required functions related to
premium aggregation. Specifically, we
propose that the only premium
aggregation function from
§ 155.705(b)(4) that would be applicable
in plan years beginning on or after
January 1, 2018, would be an amended
version of the function in
§ 155.705(b)(4)(ii)(A), relating to the
continuation of coverage. State–based
Exchanges would be permitted to
continue providing remaining premium
aggregation services in their SHOPs
currently described at § 155.705(b)(4) if
they choose to do so. SHOPs electing
not to provide premium aggregation
services, like the FF–SHOPs, would still
be required to provide an opportunity
for employers to offer employees a
choice of plans. In SHOPs not offering
premium aggregation services, we
expect that employers generally would
receive premium bills from each of the
plans or issuers with which an
employee enrolls and would pay
premiums to each such plan or issuer.
Section 155.705(b)(4)(ii)(A) (which we
propose to include in a revised form in
§ 155.706) describes the process through
which the SHOP may enter into an
agreement with a qualified employer
related to the administration of
continuation coverage. Under the
proposed approach for enrollment in a
SHOP QHP for plan years beginning on
or after January 1, 2018, the FF–SHOPs
would no longer facilitate the collection
of premiums. Therefore, we propose
that § 155.706(b)(4) would mirror
§ 155.705(b)(4)(ii)(A) but would not
include the provision that permits the
FF–SHOPs to limit the service to the
collection of premiums related to the
requirements under 29 U.S.C. 1161, et
seq.
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Paragraph (b)(7) of § 155.705 describes
the SHOP function related to QHP
availability in merged markets and
paragraph (b)(8) describes the function
related to QHP availability in unmerged
markets. We propose to include these
functions in § 155.706(b)(7) and (b)(8).
However, under the proposal to
streamline SHOP enrollment for plan
years beginning on or after January 1,
2018, we propose to change the
references to a ‘‘qualified employee’’ to
an ‘‘employer group’’ in both
paragraphs, as the SHOP would no
longer be required to process employee
enrollments under the proposed
approach.
Paragraph (b)(10) of § 155.705
establishes requirements related to
minimum participation rates and SHOP
coverage; we propose to include these
requirements in § 155.706(b)(10), with
certain modifications. In order to
facilitate employers’ ability to offer
employees a choice of plans through a
SHOP, as is required under section
1312(a)(2) of the PPACA,
§ 155.705(b)(10) requires that any
minimum participation rate applicable
in a SHOP be calculated based on the
rate of employee participation in the
SHOP, rather than on the rate of
participation in any particular QHP or
QHPs of any particular issuer. In the
FF–SHOPs, this requirement has been
implemented through the requirements
currently outlined at § 155.705(b)(10)(i)–
(iii). Currently, the Federally-facilitated
SHOPs calculate a group’s minimum
participation rate based on the
information provided by the employer
and the employees during the online
enrollment process. Under the proposed
approach, the SHOP would not be
required to collect the enrollment
information needed to calculate a
group’s minimum participation rate.
Under this proposal, issuers would be
permitted to use their established
practices allowed under State law for
groups enrolling in their certified SHOP
plans for plan years beginning on or
after January 1, 2018, so long as they
comply with § 147.104, and so long as
the minimum participation rate is
calculated based on the level of
participation in the SHOP instead of on
the level of participation in any one
QHP or with any one issuer (that is, so
long as SHOP participation is measured
at the employer group level). Issuers
participating in the FF–SHOPs would be
required to adhere to the level of
participation as would continue to be
specified in § 155.706(b)(10) and issuers
in State SHOPs would be subject to any
minimum participation rate established
by the SHOP, consistent with this
provision. We also propose that
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§ 155.706(b)(10) would not include the
language in § 155.705(b)(10)(i) because
it applies to plan years beginning before
January 1, 2016, and would therefore
not be applicable for the period covered
in § 155.706. We also propose to clarify
that, under the proposed approach, the
reference in proposed § 155.706(b)(10)
to the time the employer submits the
SHOP group enrollment would be
interpreted to mean the time when the
employer submits a complete group
enrollment or renewal to the QHP issuer
or SHOP-registered agent or broker,
applicable.
Section 155.705(b)(11) specifies the
requirements related to an online
premium calculator. For plan years
beginning on or after January 1, 2018,
we propose to modify these
requirements and include the modified
requirements in § 155.706(b)(11).
Specifically, § 155.706 (b)(11) would
specify that the premium calculator
described in § 155.205(b)(6) must
facilitate the comparison of available
QHPs. This would reflect that SHOPs
would no longer be required to maintain
enrollment and premium payment
information or administer premium
billing, and therefore, would no longer
necessarily have employer contribution
information. If this proposal is finalized,
the SHOPs would be required to
maintain a calculator that facilitates the
comparison of available QHPs and
would generate premium estimates, but
would no longer be required to reflect
any employer contribution. Therefore,
we propose to not include the
requirements in § 155.705(b)(11)(i) or
(ii) in § 155.706(b)(11), since these
reflect methods SHOPs would use for
determining employer contributions. In
the FF–SHOPs and SBE–FPs for SHOP,
this premium calculator would be
where an employer or SHOP–registered
agent or broker could go to see a
complete listing of all the QHPs
available in a given area. The tool has
served and would continue to serve as
a resource for employers and SHOP–
registered agents and brokers. Because
we believe the premium calculator
requirement at section 1311(d)(4)(G) of
the PPACA could be interpreted to
apply to only individual market
Exchanges based on its reference to
APTCs and CSRs, which are not
available through SHOPs, we believe
that this proposal is consistent with the
statute.
Section 155.705(c) generally requires
a SHOP to provide data related to
eligibility and enrollment of a qualified
employee to the applicable individual
market Exchange. For plan years
beginning on or after January 1, 2018,
we propose that this requirement would
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apply only in SHOPs that collect
employee enrollment data related to
eligibility and enrollment of a qualified
employee, unless the SHOP is operated
pursuant to § 155.100(a)(2).
Finally, we propose in paragraph (e)
that the provisions of the section would
be applicable for plan years beginning
on or after January 1, 2018, effective on
the effective date of the final rule, if
finalized as proposed.
d. Eligibility Determination Process for
SHOP for Plan Years Beginning Prior to
January 1, 2018 (§ 155.715)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding the eligibility
determination process for SHOP for
plan years beginning on or after January
1, 2018, effective on the effective date of
the final rule, if finalized as proposed,
and to introduce those requirements in
a new § 155.716. To reflect the proposal
that the requirements currently in
§ 155.715 would apply only for plan
years beginning before January 1, 2018,
we propose to amend the heading of
§ 155.715 and add paragraph (h), to state
that the section would apply only for
plan years that begin prior to January 1,
2018.
e. Eligibility Determination Process for
SHOP for Plan Years Beginning on or
After January 1, 2018 (§ 155.716)
Section 155.715 describes the SHOP
eligibility determination process for
employers and employees. We propose
to add new § 155.716 to describe the
eligibility determination process for
SHOPs for plan years beginning on or
after January 1, 2018. With the
exception of the proposed changes to
the process described here, the process
would remain the same as in § 155.715.
However, this new section would
modify and remove some of the
requirements in § 155.715. The
proposals described in this section
would be effective on the effective date
of the final rule, if finalized as
proposed.
Section 155.715(a) requires that before
permitting the purchase of coverage in
a QHP, the SHOP must determine that
the employer or individual who
requests coverage is eligible. Under
current regulations, this requirement
means that employers and employees
must complete an application to
participate in the SHOP. Accordingly,
the FF–SHOPs have established certain
operational requirements related to
submitting an application through the
FF–SHOP Web site, including creating
an account on the FF–SHOP Web site,
(for employers) providing information
on the business (including location,
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Employer Identification Number, and
number of employees), and identity
verification.
To reduce the barriers on employers
to obtain SHOP coverage, we propose in
§ 155.716 that SHOPs must determine
that the employer who requests
coverage is eligible, but that SHOPs
generally would not always need to do
so before the issuer permits the
purchase of coverage in a QHP through
a SHOP, for plan years beginning on or
after January 1, 2018. This would
generally permit an employer to
purchase a QHP before obtaining a
determination of SHOP eligibility and
confirming with the issuer the status of
the enrollment as being through the
SHOP. As further explained in the
preamble to § 156.286, issuers would be
expected to establish processes to
ensure that they can accurately identify
which enrollments are considered
SHOP enrollments and which are not
considered SHOP enrollments. We
would encourage employers to obtain an
eligibility determination from the SHOP
as close to the date in which they
purchase a SHOP QHP. We also are
considering establishing a limit on how
long an employer can wait between
purchasing the QHP and obtaining the
determination of eligibility for that QHP
to be considered purchased through the
SHOP. We solicit comments on whether
to establish such a limit, and how long
it should be.
As a condition of claiming the Small
Business Health Care Tax Credit, small
employers must be prepared to provide
sufficient proof that they meet
applicable criteria. Part of the
employer’s responsibility in providing
evidence that it is a small employer
eligible for the Small Business Health
Care Tax Credit includes the ability to
verify not only the purchase of a SHOP
QHP, but the ability to produce a
favorable eligibility determination from
a SHOP. Therefore, employers applying
for the Small Business Health Care Tax
Credit are also encouraged to obtain an
eligibility determination from the SHOP
in the taxable year in which they intend
to apply for the credit.
Section 155.715(b) requires the SHOP
to accept SHOP applications from both
employers and employees, and
§ 155.715(c) provides for the verification
of both employer and employee
eligibility. For plan years beginning on
or after January 1, 2018, we propose to
provide SHOPs flexibility to forgo
providing for employee eligibility
determinations and related functionality
and obligations (and the FF–SHOPs
would pursue this flexibility). If
finalized, these changes would become
effective as of the effective date of the
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final rule. We propose that SHOPs
would not be required to accept
applications by employees or determine
eligibility of employees because, under
the proposed approach to enrollment in
a SHOP, SHOPs would not be required
to interact with employees. Proposed
paragraphs (b) and (c) of § 155.716
would still require SHOPs to accept a
SHOP single employer application form
from employers, and to verify employer
eligibility subject to provisions like
those currently in § 155.715(c)(2)
through (4). We intend to update the
single employer applications that
employers applying to participate in
SHOPs would use to reflect our
proposed changes to § 155.730
described elsewhere in this preamble.
Employee information is primarily
collected for purposes of enrollment,
and therefore would not be necessary to
the operation of a leaner SHOP under
our proposed approach. State-based
SHOPs that intend to maintain more
robust SHOP functionalities, in lieu of
the flexibilities in this proposal, would
be permitted to continue to determine
employee eligibility. We believe this
proposal is consistent with the statute
because, as noted above, the PPACA
does not have to be interpreted to
require SHOPs to provide for employee
enrollment functionality, and does not
define qualified employees.
Paragraph (d) of § 155.715 describes
the eligibility adjustment period. We
propose to include in § 155.716(d) these
requirements as they relate to eligibility
for employers. However, because SHOPs
would not be required to accept
applications from employees, we
propose not to include the requirements
in § 155.715(d)(2), relating to eligibility
for employees, in new § 155.716. We
also propose to add language to reflect
that SHOPs also must address
inconsistencies in employer eligibility
information received from sources other
than those used in the employer
eligibility process described in
§ 155.715(c).
To reflect our proposed changes to the
employer eligibility verification process,
as further described in this section and
in the preamble to § 157.205, and our
proposal not to include a section
mirroring § 155.735 regarding
terminations, we are adding a
requirement in the paragraphs mirroring
paragraphs (d)(3)(i) and (e) of § 155.715
to require the SHOP to notify employers
not only of a denial of the employer’s
eligibility to participate in the SHOP,
but also of a termination of the
employer’s eligibility to participate in
the SHOP.
Paragraph (f) of § 155.715 specifies the
requirement that the SHOP notify an
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employee of his or her eligibility to
enroll in a SHOP. Because we would not
be requiring SHOPs to determine
employee eligibility for plan years
beginning on or after January 1, 2018,
we propose not to include this
requirement in § 155.716. SHOPs that
continue to provide employee eligibility
functionality should continue notifying
employees of their eligibility. Under the
proposed approach for SHOP
flexibilities for plan years beginning on
or after January 1, 2018, we anticipate
that the participating QHP issuer or
employer would determine the method
of employee enrollment and
notification, consistent with otherwise
applicable Federal or State law.
Paragraph (g) of § 155.715 describes
the requirements surrounding
communication between the SHOP and
QHP issuers in the event of an employer
withdrawing from the SHOP and the
notification of qualified employees of an
employer’s withdrawal from SHOP.
Under the proposed approach for
SHOPs beginning for plan years that
begin on or after January 1, 2018, the
enrollment and disenrollment processes
would be addressed between the
employer and the issuer or the agent or
broker. Therefore, we are not proposing
to include these requirements in
§ 155.716.
We further propose in paragraph (f) of
§ 155.716 that an employer’s
determination of eligibility to
participate in the SHOP obtained under
paragraph (a) remains valid until the
employer makes a change that could
end its eligibility under § 155.710(b).
This could include terminating offers of
coverage to employees maintaining fulltime status, growing to be a large
employer without having maintained
continuous SHOP coverage, or moving
its principal business address or eligible
employee worksites out of the SHOP
service area. The employer would be
required under new regulations
proposed in part 157 to take further
action upon termination of the validity
of the determination of eligibility to
participate in a SHOP to submit a new
application for determination of
eligibility or to withdraw from
participation in the SHOP. We are
considering requiring SHOPs to
acknowledge an employer’s withdrawal
from participation in the SHOP within
a reasonable time. Alternatively, we are
considering requiring that employers
reapply to determine their SHOP
eligibility on an annual basis. We seek
comment on these proposals. Under the
proposals described herein, a SHOP
would no longer be required to operate
an enrollment system, where
information such as an employee roster
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or employee worksite would generally
be collected and stored. Because
employers would no longer use a
SHOP’s systems to report and document
these changes, employers must inform
the SHOP if their business status
changes.
We propose to specify in paragraph
(g) that the provisions in § 155.716
would be applicable for plan years
beginning on or after January 1, 2018. If
finalized as proposed, these changes
would become effective as of the
effective date of the final rule.
We seek comment on these proposals.
f. Enrollment of Employees Into QHPs
Under SHOP for Plan Years Beginning
Prior to January 1, 2018 (§ 155.720)
Section 155.720 contains
requirements related to the enrollment
of employees into QHPs under SHOP.
To reflect that our proposed approach
would no longer require SHOPs to
provide functionality related to
enrollment of employees for plan years
beginning on or after January 1, 2018,
effective on the effective date of the
final rule, if finalized as proposed, we
propose to amend the heading of
§ 155.720 and add paragraph (j), to state
that the section would apply only for
plan years that begin prior to January 1,
2018.
Specifically, we propose that the
requirement in paragraph (b) of
§ 155.720 that SHOPs establish a
timeline and process for QHP issuers
and employers to follow regarding
purchasing coverage and processing of
enrollment would not be applicable for
plan years that begin on or after January
1, 2018. SBEs that choose to maintain
their current operations may continue
establishing enrollment timelines, as
State law and SHOP technology permit.
We also propose that the requirements
to transmit enrollment information on
behalf of qualified employers and
employees to QHP issuers as described
in current paragraph (c), and to process
payments as described in current
paragraph (d) would not apply after
plan year 2017, since SHOPs may not
have enrollment or payment
information to transmit. We propose
that the requirement in paragraph (e)
that SHOPs ensure a QHP issuer notifies
a qualified employee enrolled in a QHP
of the effective date of his or her
coverage would not apply for plan years
beginning on or after January 1, 2018
because SHOPs may not have the
enrollment information necessary to
enforce this requirement, if the
proposed approach became final. We
anticipate QHP issuers would notify
employees in accordance with
applicable State law. Additionally, after
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plan year 2017 plans have ended, we
propose not to require SHOPs to
reconcile enrollment information as
described in paragraph (g), as SHOPs
would not have enrollment files to
reconcile with issuers. We also propose
that the requirements described in
current paragraph (h), which requires a
SHOP to notify a qualified employee’s
employer in the event the qualified
employee terminates his or her SHOP
coverage, would no longer apply for
plan years beginning on or after January
1, 2018. If finalized, these changes
would become effective as of the
effective date of the final rule. Under the
proposed approach, SHOPs may not
have that information to communicate
to the qualified employee’s employer.
g. Record Retention and IRS Reporting
for Plan Years Beginning on or After
January 1, 2018 (§ 155.721)
Our proposed approach would not
require SHOPs to provide functionality
related to enrollment of employees for
plan years beginning on or after January
1, 2018, and we are therefore proposing
that § 155.720 would be inapplicable for
those plan years, effective on the
effective date of the final rule, if
finalized as proposed. However, there
are requirements in that section related
to record retention and IRS reporting
that would continue to be applicable
with some modifications. We propose to
include modified versions of these
requirements in a new § 155.721, titled
‘‘Record retention and IRS Reporting for
plan years beginning on or after January
1, 2018.’’
We propose that all SHOPs would
still be required to maintain records of
employer eligibility for 10 years, as
described in paragraph (f). Because
SHOPs utilizing the proposed
flexibilities, like the FF–SHOPs, would
not have information on employees, we
do not propose to continue requiring
that SHOPs maintain information on
employees.
Section 155.720(i) describes the
information the SHOP is currently
required to communicate to the IRS for
purposes of the Small Business Health
Care Tax Credit. We propose to modify
the reporting for plan years beginning
on or after the effective date of the rule
finalizing this proposal to require
SHOPs to send the IRS information
about the employers determined eligible
to purchase a SHOP QHP only upon the
request of the IRS. We believe providing
the IRS with a list of employers
determined eligible to participate in a
SHOP, at the IRS’s request, fulfills
HHS’s reporting responsibility. SBEs
that currently report all the information
required by existing § 155.720(i) and
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will continue to collect such
information related to an employer’s
eligibility and enrollment in a SHOP are
encouraged to continue reporting this
information to assist the IRS in
administering the Small Business
Health Care Tax Credit. As mentioned
earlier in this document, employers in
all States must be able to provide
sufficient evidence that they meet all
the necessary eligibility requirements
for the Small Business Health Care Tax
Credit, if they intend to apply for it. The
IRS may ask employers to produce the
aforementioned evidence and employers
have a responsibility to produce it.
Further, employers may work with their
issuer to verify their contribution
information, employee enrollment
information and any other applicable
information required to apply for the
Small Business Health Care Tax Credit
through their tax filings.
h. Enrollment Periods Under SHOP for
Plan Years Beginning Prior to January 1,
2018 (§ 155.725)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding enrollment
periods under a SHOP for plan years
beginning on or after January 1, 2018,
and to introduce those requirements in
a new § 155.726. To reflect the proposal
that the requirements currently in
§ 155.725 would apply only for plan
years beginning before January 1, 2018,
we propose to amend the heading of
§ 155.725 and add paragraph (l), to state
that the section would only apply for
plan years that begin prior to January 1,
2018. If finalized, these changes would
become effective as of the effective date
of the final rule. We discuss the
proposed new § 155.726 below.
i. Enrollment Periods Under SHOP for
Plan Years Beginning on or After
January 1, 2018 (§ 155.726)
Section 155.725 describes enrollment
periods under SHOP, including the
timeline under which employer groups
must enroll in SHOP coverage, and the
notices the SHOP is required to send
related to enrollment periods. We
propose to introduce a new § 155.726,
which would retain the rolling
enrollment and minimum participation
rate provisions of § 155.725(b) and (k),
but would remove the requirements
applicable to enrollment periods under
SHOP other than those related to special
enrollment periods for plan years
beginning on or after January 1, 2018, to
reflect the increased flexibility we are
proposing. The proposals described in
this section would be effective on the
effective date of the final rule, if
finalized as proposed.
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Section § 155.725(a) requires that
SHOPs ensure that enrollment
transactions are sent to QHP issuers and
that such issuers adhere to coverage
effective dates in accordance with this
section. We propose that many
previously required enrollment and
election periods would no longer apply
for plan years beginning on or after
January 1, 2018. State-based SHOPs that
continue to provide online enrollment
functionality would be able to continue
to adhere to these requirements.
However, under the proposed approach,
some SHOPs (including the FF–SHOPs)
may not have enrollment information to
communicate to the issuers and may not
want to continue setting and enforcing
coverage effective dates under the
previously specified requirements. In
SHOPs, like the FF–SHOPs, that pursue
the proposed approach, we anticipate
that most enrollment timelines,
deadlines, and coverage effective dates
in SHOPs would be set by employers
and issuers consistent with applicable
State law and otherwise applicable
Federal law. We do, however, believe
that, under the proposed approach, the
SHOP should be responsible for
ensuring that QHP issuers adhere to the
remaining required enrollment periods
and their corresponding coverage
effective dates. Therefore, we propose to
include this requirement in § 155.726(a).
Paragraph (c) of § 155.725 states that
the SHOP must provide qualified
employers with an annual election
period prior to completion of the
employer’s plan year and paragraph (d)
of § 155.725 requires the SHOP to
provide notice of that period in advance
of that period. Given that, under the
proposed approach for SHOPs for plan
years beginning on or after January 1,
2018, SHOPs would not be required to
process enrollments, we propose that
these requirements would not apply for
plan years beginning on or after January
1, 2018. We anticipate that participating
QHP issuers in SHOPs pursuing the
proposed approach, like in the FF–
SHOPs, would be responsible for setting
any requirements around renewals,
annual employer election periods, and
annual employee open enrollment
periods, based on their current
practices, and subject to applicable State
law and otherwise applicable Federal
law, including §§ 147.104 and 147.106.
For similar reasons, we propose that the
requirements in § 155.725(e), which
requires the SHOP to set a standard
open enrollment period for qualified
employees, and § 155.725(f), which
requires the SHOP to send a notice to
the employee about the open enrollment
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period, would not apply for plan years
beginning on or after January 1, 2018.
Section 155.725(g) requires SHOPs to
establish and maintain enrollment and
coverage effective dates, including
waiting periods, for newly qualified
employees. However, our proposed
amendments at paragraphs (b), (c)(1),
and (d)(2) of § 155.715 would remove
the requirement for SHOPs to perform
employee eligibility determinations,
accept and process single employee
SHOP application forms, as well as
verify employee eligibility for plan years
beginning on or after January 1, 2018.
Furthermore, our proposed amendments
to remove paragraphs (c) and (d) of
§ 155.725 would remove the
requirement for SHOPs to maintain
enrollment records for plan years
beginning on or after January 1, 2018.
SHOPs that utilize these proposed
flexibilities, like the FF–SHOPs, may be
unable to satisfy the requirements in
§ 155.725(g). To align with these
proposed amendments, we propose that
the requirements in § 155.725(g) would
not apply for plan years beginning on or
after January 1, 2018. Instead, we
anticipate that enrollment timelines,
deadlines, and coverage effective dates
for newly qualified employees in SHOPs
that pursue the proposed approach
would be set by employers and issuers
consistent with applicable State law and
otherwise applicable Federal law,
including § 147.116. Further, as noted
above, issuers offering plans in SHOPs
would still be required to adhere to the
guaranteed availability requirements set
in § 147.104(b)(1)(i) and the special
enrollment period requirements in
proposed § 155.726(c).
We also propose that the requirement
in § 155.725(h)(1) that a SHOP establish
the effective dates of coverage for initial
and annual group enrollments would
not apply for plan years beginning on or
after January 1, 2018. Because SHOPs
utilizing the proposed flexibilities, like
the FF–SHOPs, would no longer be
involved in processing group
enrollments, and would therefore not be
able to hold issuers accountable to these
enrollment deadlines, we believe it is
more appropriate to permit QHP issuers
in SHOPs to set their own enrollment
timelines. However, SBEs would be
permitted to continue establishing these
effective dates. We are also proposing to
remove paragraph (h)(2) for plan years
beginning on or after January 1, 2018,
which establishes the effective dates for
initial and annual group enrollments in
FF–SHOPs, because the FF–SHOPs
intends to utilize the proposed
flexibilities. We anticipate that issuers
in SHOPs that pursue this approach,
like in FF–SHOPs, would set enrollment
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timelines for employer groups
participating in these SHOPs, based on
their current practices, and consistent
with the market rules set forth in
§§ 147.104 and 147.106, and otherwise
applicable State law.
We propose that the special
enrollment periods specified in
§ 155.725(j) would continue to be
applicable in the SHOPs for plan years
beginning on or after January 1, 2018,
and propose to include these in
§ 155.726(c). We also propose that the
requirements regarding special
enrollment periods in § 155.725(j)(3)
would apply for plan years beginning on
or after January 1, 2018. However, we
propose to modify the SHOPs’
responsibilities with respect to special
enrollment periods. As stated earlier in
this preamble, under our proposed
approach for SHOPs beginning in plan
years starting on or after January 1,
2018, SHOPs would no longer be
required to provide functionality related
to enrollment of employees. For SHOPs
that pursue the proposed approach, like
the FF–SHOPs, issuers would
preliminarily be responsible for
completing enrollments, and so we
expect issuers would implement
enrollment periods. We are therefore
proposing to modify the requirements to
reflect that the SHOP’s proposed role is
not to provide special enrollment
periods, but to ensure that QHP issuers
offering coverage through the SHOP
provides the special enrollment periods
set forth in regulation.
We seek comment on these proposals.
j. Application Standards for SHOP for
Plan Years Beginning Prior to January 1,
2018 (§ 155.730)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding application
standards of a SHOP for plan years
beginning on or after January 1, 2018
and to introduce those requirements in
a new § 155.731. To reflect the proposal
that the requirements currently in
§ 155.730 would apply only for plan
years beginning before January 1, 2018,
we propose to amend the heading of
§ 155.730 and add paragraph (h), to state
that the section would apply for only
plan years that begin prior to January 1,
2018, effective on the effective date of
the final rule, if finalized as proposed.
k. Application Standards for SHOP for
Plan Years Beginning on or After
January 1, 2018 (§ 155.731)
Section 155.730 describes the
requirements for employer and
employee applications in the SHOPs.
We propose to modify these
requirements for plan years beginning
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on or after January 1, 2018, and to
introduce these modified requirements
in § 155.731. With the exception of the
proposed changes to the requirements
described here, the requirements would
remain the same as in § 155.730. The
proposals in this section would be
effective on the effective date of the
final rule, if finalized as proposed.
Because under the proposed approach
to SHOP enrollment for plan years
beginning on or after January 1, 2018,
QHP issuers would complete the
process of enrolling qualified employees
into coverage in SHOPs, it would not be
necessary for a SHOP to collect
information necessary for purchasing
coverage. Therefore, we propose to
modify the information collection
requirements related to the single
employer application to require SHOPs
to collect only information that would
be necessary for SHOPs to determine
employer eligibility to participate in the
SHOP under § 155.710(b). To more
closely align the description of the data
elements collected with those standards
for eligibility to participate, we propose
to require the SHOP to collect the
employer name and address of the
employer’s locations; information
sufficient to confirm that the employer
is a small employer; the Employer
Identification Number; and information
sufficient to confirm that the employer
is offering, at a minimum, all full-time
employees’ coverage in a QHP through
a SHOP. SHOPs could collect other
information, at their option subject to
the limitations in § 155.716(c)(2) and
§ 155.731(f).
Paragraph (c) of 155.730 requires the
use of a single employee application.
We propose that this requirement would
not apply for SHOP beginning for plan
years starting on or after January 1,
2018, as the information collected in
this application would no longer be
necessary, since the SHOP would no
longer process employees’ enrollment.
Section 155.730(d) permits a SHOP to
use a model single employer application
and model single employee application
provided by HHS and § 155.730(e)
permits the use of HHS–approved
alternatives to these model applications.
We also propose to maintain these
options, but for consistency with the
proposal described throughout this
preamble, we propose not to reference a
model single employee application. We
expect to update the model single
employer application for consistency
with the elements described in
proposed § 155.731(b).
Paragraph (g) of § 155.730 describes
additional application safeguards for
SHOP employer and employee
applications, which we propose to
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maintain in § 155.731(f) with minor
amendments to reflect the proposal to
eliminate the requirement to collect a
single employee application. We also
propose in new paragraph (g) to state
that § 155.731 is only applicable for
plan years beginning on or after January
1, 2018. If finalized, these changes
would become effective as of the
effective date of the final rule.
We seek comment on these proposals.
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l. Termination of SHOP Enrollment or
Coverage (§ 155.735)
Section 155.735 outlines requirements
related to terminations of SHOP
coverage or enrollment. Under our
proposed approach, described in detail
in the preamble to earlier sections of
this proposed rule, the process of
completing enrollments, as well as
terminating coverage, could be
completed by issuers, and would not be
required to be completed by the SHOPs.
Issuers would be expected to comply
with otherwise applicable State and
Federal law regarding terminating
coverage, the timelines and effective
dates for termination, and any notice
requirements, including those at
§§ 147.106 and 156.285. Accordingly,
we propose that this section would be
applicable for only plan years beginning
prior to January 1, 2018, as described in
the proposed amendment to the heading
and new paragraph (h), effective on the
effective date of the final rule, if
finalized as proposed. SHOPs
maintaining current enrollment
functions would be encouraged to set
termination guidelines and distribute
notices for terminations based on
nonpayment of premiums or loss of
employee eligibility, unless State law
requires QHP issuers to send the
notices. Because SHOPs, such as the
FF–SHOPs, would no longer be required
to enroll groups into a SHOP QHP, they
would no longer be required to maintain
the ability to terminate coverage. We
believe proposed new §§ 155.716 and
157.206 sufficiently address
terminations of eligibility for
participation in a SHOP. We seek
comments on this proposal.
m. SHOP Employer and Employee
Eligibility Appeals Requirements for
Plan Years Beginning Prior to January 1,
2018 (§ 155.740)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding employer and
employee eligibility appeals in SHOP
for plan years beginning on or after
January 1, 2018, and to introduce those
modified requirements in a new
§ 155.741. To reflect the proposal that
the requirements currently in § 155.740
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would apply only for plan years
beginning before January 1, 2018,
effective on the effective date of the
final rule, if finalized as proposed, we
propose to amend the heading of
§ 155.740 and add paragraph (p), to state
that the section would apply only for
plan years that begin prior to January 1,
2018.
n. SHOP Employer and Employee
Eligibility Appeals Requirements for
Plan Years Beginning on or After
January 1, 2018 (§ 155.741)
Section 155.740 describes the SHOP
eligibility appeals process for employers
and employees. These provisions
describe the applicable definitions, the
general requirements to provide for
appeals, and employers’ and employee’s
rights to appeal an eligibility
determination from the SHOP.
To continue to provide for employer
eligibility appeals, we propose to add
new § 155.741, mirroring § 155.740,
with the following exceptions. Because
we propose elsewhere that the
requirement to provide employees with
eligibility determinations and the
requirement in § 155.715(f) regarding
notification of employee eligibility
would no longer apply in plan years
beginning on or after January 1, 2018,
we propose not to include a paragraph
mirroring § 155.740(d), which describes
employees’ rights to appeal. We also
propose to omit other references to
employee appeal rights, to add
references to provide for appeals of
terminations of eligibility to participate
in a SHOP, and to update crossreferences as applicable.
We propose in paragraph (o) that the
provisions of § 155.741 would only be
applicable to plan years beginning on or
after January 1, 2018, effective on the
effective date of the final rule, if
finalized as proposed.
We seek comments on these
proposals.
E. Part 156—Health Insurance Issuer
Standards Under the Affordable Care
Act, Including Standards Related to
Exchanges
1. FFE and SBE–FP User Fee Rates for
the 2019 Benefit Year (§ 156.50)
Section 1311(d)(5)(A) of the PPACA
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)
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of the PPACA directs HHS to operate an
Exchange within the State. Accordingly,
in § 156.50(c), we specified that a
participating issuer offering a plan
through an FFE or SBE–FP 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 and SBE–FPs 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 or SBE–
FP.
OMB Circular No. A–25R establishes
Federal policy regarding user fees; it
specifies that a user fee 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 through 2018, issuers
seeking to participate in an FFE in the
2019 benefit year 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
for the 2019 benefit year 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; and
• Certification processes for QHPs
(including ongoing compliance
verification, recertification and
decertification).
OMB Circular No. A–25R further
states that user fee charges should
generally be set at a level that is
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).
Activities performed by the Federal
government that do not provide issuers
participating in an FFE with a special
benefit are not covered by this user fee.
Based on estimated contract costs,
enrollment and premiums for the 2019
benefit year, we propose to maintain the
2019 benefit year user fee rate for all
participating FFE issuers at 3.5 percent
of total monthly premiums. We seek
comment on this proposal.
State-based Exchanges on the Federal
platform enter into a Federal platform
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agreement with HHS to leverage the
systems established for the FFEs to
perform certain Exchange functions, and
to enhance efficiency and coordination
between State and Federal programs.
Accordingly, in § 156.50(c)(2), we
specified that an issuer offering a plan
through an SBE–FP must remit a user
fee to HHS, in the timeframe 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
SBE–FPs for the applicable benefit year,
unless the SBE–FP and HHS agree on an
alternative mechanism to collect the
funds from the SBE–FP or State instead
of direct collection from the SBE–FP
issuers. The benefits provided to issuers
in SBE–FPs by the Federal government
will include use of 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 PPACA, and enrollment
in QHPs under § 155.400. As previously
discussed, OMB Circular No. A–25R
established Federal policy regarding
user fees, and specified 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 user fee rate for SBE–FPs is
calculated based on the proportion of
FFE costs that are associated with the
FFE information technology
infrastructure, the consumer call center
infrastructure, 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 eligibility determinations for
enrollment in QHPs and other
applicable State health subsidy
programs as defined at section 1413(e)
of the PPACA, and personnel who
perform the functions set forth in
§ 155.400 to facilitate enrollment in
QHPs. Based on this methodology, 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 plans offered through an SBE–FP.
This fee would support FFE operations
associated with providing the services
described above. We seek comment on
this proposal.
We will continue to examine contract
cost estimates for the special benefits
provided to issuers offering QHPs on the
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FFEs and SBE–FPs for the 2019 benefit
year as we finalize the FFE and SBE–FP
user fee rates, which will be reflected in
the final rule. Additionally, outreach
and education efforts will be evaluated
annually and funded at the appropriate
level. We seek comment on the
proposed FFE and SBE–FP user fee
rates.
As we describe elsewhere in this
proposed rule, for plan years beginning
on or after January 1, 2018, effective on
the effective date of the final rule, if
finalized as proposed, we are proposing
to remove employee eligibility,
premium aggregation, and online
enrollment functionality through the
FF–SHOPs for FFE and SBE–FP SHOP
issuers. Given the changes to the
functionality for the FF–SHOPs, HHS
would not provide these special benefits
through the FF–SHOPs after the
effective date of the rule finalizing this
proposal. Therefore, HHS would not
assess a user fee on issuers offering
QHPs through FF–SHOPs for FFE or
SBE–FP SHOP issuers because these
user fees are currently only charged to
issuers who receive special benefits
from enrolling individuals through the
FF–SHOPs’ platform. In instances where
enrollment did occur through the
Federal platform, for example, for plan
years beginning prior to the effective
date of the final rule, HHS will continue
charging SHOP issuers monthly FFE or
SBE–FP user fees, as applicable.
2. Essential Health Benefits Package
Section 2707(a) of the PHS Act, as
added by the PPACA, directs health
insurance issuers that offer nongrandfathered health insurance coverage
in the individual or small group market
to ensure that such coverage includes
the EHB package, which is defined
under section 1302(a) of the PPACA to
include coverage that provides for the
EHB defined by the Secretary under
section 1302(b) of the PPACA; limits
cost sharing in accordance with section
1302(c) of the PPACA; and provides
either the bronze, silver, gold, or
platinum level of coverage, or is a
catastrophic plan under sections
1302(d) and (e) of the PPACA. Section
1302(b) of the PPACA states that the
Secretary is to define EHB, except that
EHB must include at least the following
general categories and the items and
services covered within the categories:
(1) Ambulatory patient services; (2)
emergency services; (3) hospitalization;
(4) maternity and newborn care; (5)
mental health and substance use
disorder services including behavioral
health treatment; (6) prescription drugs;
(7) rehabilitative and habilitative
services and devices; (8) laboratory
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services; (9) preventive and wellness
services and chronic disease
management; and (10) pediatric
services, including oral and vision care.
Additionally, section 1302(b)(2) of the
PPACA states that the Secretary must
ensure that the scope of EHB for the 10
EHB categories be equal to the scope of
benefits provided under a typical
employer plan, as determined by the
Secretary. Furthermore, section
1302(b)(2) of the PPACA states, in
defining and revising EHB, that the
Secretary is to submit a report to the
appropriate committees of Congress
containing a certification from the CMS
Chief Actuary that such EHB are equal
in scope to the benefits provided under
a typical employer plan. In defining and
revising the 10 EHB categories, the
Secretary must also provide notice and
an opportunity for public comment.
Additionally, section 1302(b)(4)(G) and
(H) of the PPACA require the Secretary
to periodically review and update the
definition of EHB and provide a report
to Congress that contains assessments
related to the need to update the
definition of EHB.
Section 1302(b)(4) of the PPACA
requires the Secretary, in defining the
EHB, to: (1) Ensure that such EHB
reflect an appropriate balance among
the categories so that benefits are not
unduly weighted toward any category;
(2) not make coverage decisions,
determine reimbursement rates,
establish incentive programs, or design
benefits in ways that discriminate
against individuals because of their age,
disability, or expected length of life; (3)
take into account the healthcare needs
of diverse segments of the population,
including women, children, persons
with disabilities, and other groups; (4)
ensure the health benefits established as
essential not be subject to denial to
individuals against their wishes on the
basis of the individuals’ age or expected
length of life or of the individuals’
present or predicted disability, degree of
medical dependency, or quality of life;
and (5) provide that a QHP shall not be
treated as providing coverage for EHB
unless it meets certain requirements for
coverage of emergency services.
To implement section 1302(b) of the
PPACA, HHS defined EHB based on a
benchmark plan approach, which
provided at § 156.100 for the States’
selection from one of 10 basebenchmark plans, including the largest
health plan by enrollment in any of the
three largest small group insurance
products by enrollment, any of the
largest three employee health benefit
plan options by enrollment offered and
generally available to State employees
in the State, any of the largest three
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national Federal Employees Health
Benefits Program (FEHBP) plan options
by aggregate enrollment that is offered
to all health-benefits-eligible Federal
employees under 5 U.S.C. 8903, or the
coverage plan with the largest insured
commercial non-Medicaid enrollment
offered by a health maintenance
organization operating in the State.
States were required at § 156.110 to
supplement their base-benchmark plan
from § 156.100 to ensure the 10 EHB
categories were being covered to
establish the State’s EHB-benchmark
plan. Section 156.110 also ensures that
the EHB-benchmark plan meets the
standards of nondiscrimination and
balance of benefits, and allows
habilitative services to be determined by
the State.
We believe that States should have
additional choices with respect to
benefits and affordable coverage. As
such, we are proposing to provide States
with additional flexibility in their
selection of an EHB-benchmark plan for
plan year 2019 and later plan years. In
addition to granting States more
flexibility regulating their markets, we
believe these changes would permit
States to modify EHB to increase
affordability of health insurance in the
individual and small group markets
beginning in 2019. We propose that the
current EHB-benchmark plan selection
would continue to apply for any year for
which a State does not select a new
EHB-benchmark plan under this
proposal. We seek comment on all
aspects of this proposal. We also seek
comment on the timing of this proposed
policy, and specifically whether this
policy should start with the 2019 plan
year, as proposed, or with the 2020 plan
year.
For plan years further in the future,
we are considering establishing a
Federal default definition of EHB that
would better align medical risk in
insurance products by balancing costs to
the scope of benefits. The benefits of a
Federal default could outweigh the
potential impact on flexibility afforded
to States, but we are also considering
allowing States continued flexibility to
adopt their own EHB-benchmark plans,
provided they defray costs that exceed
the Federal default. The National
Academy of Medicine previously
recommended a similar approach to
HHS in their report on Essential Health
Benefits: Balancing Costs and
Coverage.43 We understand that in
43 Institute of Medicine, ‘‘Essential Health
Benefits: Balancing Coverage and Cost.’’ October 6,
2011. Available at https://
www.nationalacademies.org/hmd/Reports/2011/
Essential-Health-Benefits-Balancing-Coverage-andCost.aspx.
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developing this type of default
definition there are trade-offs in
adjusting benefits and services. For
instance, as part of this approach, we
could establish a national benchmark
plan standard for prescription drugs that
could balance these tradeoffs and
provide a consistent prescription drug
default standard across States. We
anticipate publishing further details on
such an approach and gathering
stakeholder input as we explore this
longer-term approach. For now, we
solicit initial comments on this longerterm approach, particularly with regards
to setting a national prescription drug
benefit standard under a Federal default
EHB definition and the trade-offs in
adjusting benefits from the current
EHBs.
this third option, the comparison plans
would be the State’s EHB-benchmark
plan used for the 2017 plan year and the
plans described in § 156.100(a)(1) for
the 2017 plan year, supplemented as
necessary under § 156.110. These plans
would include the largest health plan by
enrollment in each of the three largest
small group insurance products by
enrollment from the State’s 2017 EHBbenchmark plan options.45 The
intention of this proposal is to provide
flexibility and the option for stability.
Specifically, the proposal would allow
States the flexibility to change their
EHB-benchmark plans annually. At the
same time, this proposed policy would
also allow States that prefer to maintain
their current EHB-benchmark plans to
do so without action.
a. State Selection of Benchmark Plan for
Plan Years Beginning Prior to January 1,
2019 (§ 156.100)
To reflect the proposed options in
§ 156.111 for States to adopt new EHBbenchmark plans for plan years 2019
and later, we propose to make
conforming changes to § 156.100 to
explicitly state that this selection
applies only through plan years
beginning in 2018, and § 156.111
applies for plan years beginning after
2018.
Option 1: Select Another State’s EHBBenchmark Plan
The first option proposed in
paragraph (a)(1) would permit a State to
select one of the EHB-benchmark plans
used for the 2017 plan year by another
State. This option would increase the
number of selection options for each
State without necessarily requiring
extensive analysis on the part of a State
because all States’ current benchmark
plan documents are publicly
available.46 We are not proposing to
change the State mandate policy at
§ 155.170 under this option. Under this
proposed policy, we propose that
benefits mandated by State action prior
to or on December 31, 2011, could
continue to be considered EHB under
§ 155.170, and would not require the
State to defray the costs. However, if a
State selects an EHB-benchmark plan
b. State Selection of EHB-Benchmark
Plan for Plan Years Beginning on or
After January 1, 2019 (§ 156.111)
i. States’ EHB-Benchmark Plan Options
(§ 156.111(a))
We propose adding new § 156.111,
which would provide States with the
flexibility to update their EHBbenchmark plans more frequently and to
select among more options. Specifically,
we propose that a State may change its
EHB-benchmark plan by: (1) Selecting
the EHB-benchmark plan that another
State used for the 2017 plan year 44
under § 156.100 and § 156.110; (2)
replacing one or more EHB categories of
benefits under § 156.110(a) in its EHBbenchmark plan used for the 2017 plan
year with the same categories of benefits
from another State’s EHB-benchmark
plan used for the 2017 plan year under
§ 156.100 and § 156.110; or (3)
otherwise selecting a set of benefits that
would become the State’s EHBbenchmark plan, provided that the EHBbenchmark plan does not exceed the
generosity of the most generous of
among a set of comparison plans. Under
44 The State’s EHB-benchmark plans used for the
2017 plan year are based on plans from a previous
plan year, but we occasionally refer to them as 2017
plans because these plans are applicable as the
State’s EHB-benchmark plans in 2017.
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45 The Essential Health Benefits: List of the
Largest Three Small Group Products by State for
2017 is available at https://www.cms.gov/CCIIO/
Resources/Regulations-and-Guidance/Downloads/
Top3ListFinal-5-19-2015.pdf. States’ EHBbenchmark plans used for the 2017 plan year are
able at https://www.cms.gov/;CCIIO/Resources/
Data-Resources/Downloads/Final-List-of-BMPs_
4816.pdf.
46 Benefits and limits described in the available
benchmark plan documents on CMS’s Web site may
not be fully applicable due to other laws and
regulations. For instance, under section 2711 of the
PHS Act, as added by the PPACA, issuers may not
impose dollar limits on EHBs. When dollar limits
are specified in available benchmark plan
documents, States would have removed the dollar
limits or converted them to non-dollar limits when
interpreting and applying EHB policy. CMS
recognizes States as the primary enforcers of EHB
policy. Thus, when a State would use a benchmark
plan that originated in another State under any
proposals under § 156.111, we would defer to the
selecting State’s implementation of the benefits and
limits consistent with otherwise applicable law,
even when such interpretation differs from the
originating State’s interpretation. This applies
throughout the proposals under § 156.111. All
States’ current benchmark plan documents are
posted on CCIIO’s Web site at https://www.cms.gov/
CCIIO/Resources/Data-Resources/ehb.html.
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from another State using this option, the
selecting State would still be required to
defray the cost of any benefits included
in that State’s EHB-benchmark plan that
are benefits mandated by the selecting
State after December 31, 2011, and that
are subject to defrayal under the current
regulations.47 For example, if State A
selects the EHB-benchmark plan of State
B, State A would be required to defray
the cost of any benefits included in
State B’s EHB-benchmark plan that are
required to be provided by State A’s
action after December 31, 2011, and that
are subject to defrayal under current
regulations. We solicit comments on
this proposal, including on the
application of the State mandate policy
under this proposal and on whether
other flexibilities are needed by States
under this proposed option, such as
allowing a State to select its EHBbenchmark plan from any of the 10
previous base-benchmark plan options
available to the State or other States
under § 156.100, supplemented as
necessary under § 156.110.
Option 2: Replace Category or
Categories From Another State’s EHBBenchmark Plan
Paragraph (a)(2) would allow a State
to partially replace its current EHBbenchmark plan, using EHB-benchmark
plans used by other States for the 2017
plan year. Under this option, we
propose that a State may replace any
EHB category or categories of benefits in
its EHB-benchmark plan from the 10
required EHB categories with the same
category or categories of benefits from
another State’s EHB-benchmark plan
used for the 2017 plan year. For
example, a State may select the
prescription drug coverage from another
State’s EHB-benchmark plan (which
might include a different formulary drug
count) and a third State’s EHBbenchmark plan hospitalization
category. This option would allow
States to make precise changes to their
EHB-benchmark plans by adjusting
specific categories of benefits.
Similar to the option proposed in
paragraph (a)(1), we also propose that
benefits mandated by State action prior
to or on December 31, 2011, could
continue to be considered EHB under
this proposal in accordance with
§ 155.170, and would not require the
State to defray their costs. However, if
a State uses this option to replace one
or more categories of its EHBbenchmark plan used for the 2017 plan
47 Pursuant to 45 CFR 155.170, the State must
make payments to defray the cost of additional
required benefits either to an enrollee, as defined
in 45 CFR 155.20, or directly to the QHP issuer on
behalf of the enrollee.
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year with a category or categories of
benefits from another State’s EHBbenchmark plan used for the 2017 plan
year, the selecting State would be
required to defray the cost of any
benefits included in the categories of
benefits from the other State’s EHBbenchmark plan that are mandated by
the selecting State’s action after
December 31, 2011 and that are subject
to defrayal under current regulations.
For example, if State A replaces a
category of benefits in its EHBbenchmark plan with a category of
benefits from State B’s EHB-benchmark
plan, State A must defray the cost of any
benefits in that category mandated by
State A after December 31, 2011 that are
included in the replacement category of
benefits and that are subject to defrayal
under current regulations. We solicit
comments on this proposed option,
including on the application of the State
mandate policy under this proposal and
on whether other flexibilities are needed
by States under this proposed option,
such as allowing States to select their
categories of benefits from any of the 10
previous base-benchmark plan options
available to the State or other States
under § 156.100, supplemented as
necessary under § 156.110.
Option 3: Select a Set of Benefits To
Become the State’s EHB-Benchmark
Plan
Lastly, under paragraph (a)(3), we
propose that the State could select a set
of benefits that would become its EHBbenchmark plan using a different
process, so long as the new EHBbenchmark plan does not exceed the
generosity of the most generous among
a set of comparison plans. Under this
option, the set of comparison plans
would be the State’s EHB-benchmark
plan used for the 2017 plan year and the
plans described in § 156.100(a)(1) that
were available as base-benchmark plan
options for the 2017 plan year,
supplemented as necessary under
§ 156.110. These plans would include
the largest health plan by enrollment in
each of the three largest small group
insurance products by enrollment from
the State’s base-benchmark options for
the 2017 plan year. We believe this
proposed limit on the generosity of the
plan benefits would help to ensure that
States select EHB in a manner that is
equal to the scope of benefits provided
under a typical employer plan, while
minimizing the opportunity for a State
to select EHB in a manner that would
significantly decrease affordability for
patients. While this proposed option
would allow more flexibility to States in
establishing an EHB-benchmark plan
than other proposed options, this option
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51103
would be the most resource intensive
for the State. For example, a State
selecting this option would need to have
a formulary drug list that would be used
to establish the State’s EHB-benchmark
plan drug count for the purposes of
§ 156.122(a)(1), which could be more
labor intensive for the State than
selecting another State’s EHBbenchmark plan prescription drug
category of benefits that already exists
and is publicly available for review.
Furthermore, this option requires that
the State determine an EHB-benchmark
plan’s generosity, and we propose that
the State would determine if its
proposed EHB-benchmark plan does not
exceed the generosity of the most
generous of a set of comparison plans
using an actuarial certification,
developed by an actuary who is a
member of American Academy of
Actuaries, in accordance with generally
accepted actuarial principles and
methodologies. For this actuarial
certification, we propose that the State
could determine generosity in the same
manner as we would use to measure
whether the plan is equal in scope of
benefits provided under a typical
employer plan, described later in this
section. We solicit comments on this
proposed standard and approach to
calculating the generosity of plans’
benefits.
We also recognize that the increased
flexibility offered to States under this
proposed option to define an EHBbenchmark plan for 2019 and later years
could allow a State to embed any
desired benefit mandate into the EHBbenchmark plan, without any
requirement to defray the obligation. For
this reason, we propose to apply the
benefit mandate defrayal policy under
§ 155.170 to this option. Specifically, we
propose that benefits mandated by State
action prior to or on December 31, 2011
could continue to be considered EHB
under this proposal according to
§ 155.170, and would not require State
defrayal. However, if a State selects its
EHB-benchmark plan using this option,
the State must continue to defray the
cost of any benefits mandated by State
action after December 31, 2011 that are
subject to defrayal under current
regulations. For example, if the State
selects a set of benefits to become its
EHB-benchmark plan under paragraph
(a)(3), any benefits mandated by that
State after December 31, 2011 that are
subject to defrayal under current
regulations would not be considered
EHB, and the State would be required to
defray the cost of any such benefits
included in the State’s EHB-benchmark
plan under this proposed option.
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We solicit comments on this proposal
and all of the proposed options in this
section, including whether a different
approach is needed to defray the cost of
any benefits mandated by State action,
on our proposed approach to limit a
State’s new EHB-benchmark plan such
that it does not exceed the generosity of
the comparison plans and on whether
other options should be provided to
States to select their EHB-benchmark
plans beyond the three proposed
options.
ii. The Requirements for States’ EHBBenchmark Plans (§ 156.111(b)–(d))
For all of the proposed options for
States to select a new EHB-benchmark
plan, we also propose that a State’s
EHB-benchmark plan must meet certain
requirements established under the
PPACA with regard to EHB coverage,
scope of benefits, and notice and
opportunity for public comment. In
paragraph (b)(1), we propose to require
that the State’s EHB-benchmark plan
provide an appropriate balance of
coverage for the 10 EHB categories of
benefits as established at § 156.110(a)
and under section 1302(b)(1) of the
PPACA. The intention of this proposed
requirement is to ensure that the State’s
EHB-benchmark plan selection meets
the requirement to cover at least the 10
EHB categories, including the items and
services covered in those categories.
In paragraph (b)(2), we propose to
define requirements regarding the scope
of benefits that must be provided by a
State’s EHB-benchmark plan. In
paragraph (b)(2)(i), we propose that the
State’s EHB-benchmark plan must be
equal in scope of benefits to what is
provided under a typical employer plan.
This proposed requirement reflects
section 1302(b)(2) of the PPACA, which
requires the Secretary to ensure that the
scope of the EHB is equal to the scope
of benefits provided under a typical
employer plan, as determined by the
Secretary. We recognize that the scope
of benefits covered by employer plans
varies, including variations based on
State laws, consumers’ purchasing
preferences, and local markets. We
believe it is appropriate to recognize
this variation in the definition of a
typical employer plan. We also believe
that, although State laws (for example,
laws with benefit mandates) may affect
the scope of benefits in plans available
in a given State, it is important that a
Federal definition of a typical employer
plan maximize States’ flexibility to
choose an EHB-benchmark plan, so that
States are not constrained in their
selection. Therefore, we propose to
define a typical employer plan as an
employer plan within a product (as
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these terms are defined in § 144.103 of
this subchapter) with substantial
enrollment in the product of at least
5,000 enrollees sold in the small group
or large group market, in one or more
States, or a self-insured group health
plan with substantial enrollment of at
least 5,000 enrollees in one or more
States. We also seek comment on
whether the definition of a typical
employer plan should reflect in
substantial part a plan that would be
typical in the State in question, and
whether an appropriate way to measure
typicality in that case would be to
provide that the typical employer plan
be defined to also have at least 100
enrollees enrolled in that plan or
product in the applicable State. We seek
comment broadly on whether typicality
should be defined in other ways,
including whether it should be based
upon the State’s 10 base-benchmark
plan options for plan year 2017,
supplemented as required to become the
State’s EHB-benchmark plan under
§ 156.110, or on whether the definition
of a typical employer plan for this
purpose should be limited to plans that
already cover all 10 EHB categories. We
also solicit comment on whether the
proposed typical employer plan
definition should exclude self-insured
plans, since States may not have the
ability to obtain the required
information on those plans.
Under the proposed definition of a
typical employer plan as a plan with
enrollment of at least 5,000 enrollees in
one or more States, we believe that the
State’s option to select another State’s
EHB-benchmark plan at proposed
§ 156.111(a)(1) would automatically
meet this requirement because each of
the available options is an employer
plan that had substantial enrollment.
We solicit comment on the proposed
definition of a typical employer plan,
including on whether we should
provide additional guidance or
requirements for the definition of a
typical employer plan, such as requiring
that the plan selected as a typical
employer plan is from a recent year after
December 31, 2013, requiring that the
plan provide minimum value, or
requiring that the plan selected as a
typical employer plan not be an
indemnity plan or an account-based
plan like a health reimbursement
arrangement. We also solicit comment
on whether actuaries could develop a
standard of practice for a benefit
comparison calculation to determine
that a plan is equal to the scope of
benefits provided under a typical
employer plan that could also apply to
determine that a State’s EHB-benchmark
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plan does not exceed the generosity of
the most generous plan in accordance
with Option 3 under proposed
§ 156.111(a)(3).
We specifically seek comment on
CMS’s draft example of an acceptable
methodology for comparing benefits of a
State’s EHB-benchmark plan selection to
the benefits of a typical employer
plan.48 The purpose of this draft
document is to outline an example of
one approach actuaries could follow
when comparing benefits in order to
complete the required actuarial
certification and associated actuarial
report under proposed § 156.111(e)(2)(i)
for typicality described later in this
section. We are particularly interested
in comments on this draft methodology
from the actuarial community. We
further request that commenters submit
comments to this draft document as part
of their comments to this proposed rule.
In paragraph (b)(2)(ii), we propose
that the State’s EHB-benchmark plan
must not have benefits unduly weighted
towards any of the categories of benefits
at § 156.110(a) as established under
section 1302(b)(4)(A) of the PPACA. The
purpose of this proposed provision is to
ensure the State’s EHB-benchmark plan
selection reflects an appropriate balance
among the categories. Additionally, in
paragraph (b)(2)(iii), we propose that the
State’s EHB-benchmark plan must
provide benefits for diverse segments of
the population, including women,
children, persons with disabilities, and
other groups as established under
section 1302(b)(4)(C) of the PPACA.
We propose at paragraph (c), that the
State must provide reasonable public
notice and an opportunity for public
comment on the State’s selection of an
EHB-benchmark plan. We believe that
some States already provided public
notice and an opportunity for public
comment in their current EHBbenchmark plan selection processes
completed for prior plan years.
Recognizing that States have their own
processes in place to provide notice and
opportunity for public comment, we
propose that States would determine
what constitutes a reasonable public
notice and public comment process. We
remind States that any public
participation processes must continue to
comply with applicable Federal civil
rights laws, including national
48 The Draft Example of an Acceptable
Methodology for Comparing Benefits of a State’s
EHB-benchmark Plan Selection to Benefits of a
Typical Employer Plan As Proposed under the HHS
Notice of Benefit and Payment Parameters for 2019
(CMS–9930–P) is available on CCIIO’s Regulation
and Guidance Web page at https://www.cms.gov/
cciio/resources/regulations-and-guidance/
index.html.
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standards that ensure access to
individuals with disabilities. We solicit
comments on whether the State should
be required to post the public notice on
their Web site, whether other
requirements are needed for States’
public notice and comment processes,
and what those requirements should be.
We propose that this process would
apply whenever a State changes its
EHB-benchmark plan in accordance
with proposed § 156.111(a).
Lastly, we propose at paragraph (d)
that a State must notify HHS of the
selection of a new EHB-benchmark plan
by a date to be determined by HHS for
each applicable plan year. We also
propose that if the State does not make
a selection by the annual selection date,
the State’s EHB-benchmark plan for the
applicable plan year would be that
State’s EHB-benchmark plan applicable
for the prior plan year.
Taken together, these proposed
requirements are intended to align with
statutory requirements. With the
exception of the proposed change in this
proposed rule to the substitution
provision at § 156.115(b), we intend to
retain the current issuer requirements
related to EHB at §§ 156.115, 156.122,49
and 156.125 and those requirements
would continue to apply to all plans
subject to the EHB requirements.
In addition to these proposed
requirements in selecting the State’s
EHB-benchmark plan, States may also
wish to consider the impact of the EHBbenchmark plan’s scope of benefits on
the availability of premium tax credits
and cost-sharing reductions for
enrollees in the State, as the premium
tax credit is based on the amount of
premiums allocable to EHB and costsharing reductions provide reduced cost
sharing for EHB only.50 We solicit
49 45 CFR 156.122(a)(1) establishes that,
generally, a health plan does not provide EHB
unless it covers at least the greater of: (1) One drug
in every United States Pharmacopeia (USP) category
and class; or (2) the same number of prescription
drugs in each category and class as the EHBbenchmark plan. Under the current version of the
USP Medicare Model Guidelines (MMG) drug
classification system used for the EHB drug count
at § 156.122(a)(1), this proposal means that all plans
required to comply with EHB will continue to have
to cover at least one drug in the Anti-Addiction/
Substance Abuse Treatment Agents (Opioid
Reversal Agent) class. Naloxone is currently the
only active ingredient in the Opioid Reversal Agent
class, and as a result all plans required to comply
with EHB would be required to continue to cover
at least one form of naloxone under this proposed
policy. This was previously addressed in the 2018
Letter to Issuers in the Federally-facilitated
Marketplaces available at https://www.cms.gov/
CCIIO/Resources/Regulations-and-Guidance/
Downloads/Final-2018-Letter-to-Issuers-in-theFederally-facilitated-Marketplaces-and-February17-Addendum.pdf.
50 The definition of EHB also has an impact on
the annual limitation on cost sharing at section
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comments on these proposals and
whether other requirements are needed.
iii. Data Collection for State’s EHBBenchmark Plans for 2019 Plan Year
and Later (§ 156.111(e))
For States that opt to select a new
EHB-benchmark plan under § 156.111(a)
in any given year, we propose to
establish the data collection
requirements under proposed
§ 156.111(e). We propose a State must
submit documents in a format and
manner specified by HHS by a date
determined by HHS.
Specifically, paragraph (e)(1) would
require documentation that would
confirm that the State’s EHB-benchmark
plan complies with the requirements
under proposed § 156.111(a), (b) and (c),
which includes the requirement that the
10 EHB categories of benefits are
covered under the State’s EHBbenchmark plan. This documentation
would also include information on
which selection option under proposed
§ 156.111(a) the State is using, including
whether the State is using another
State’s EHB-benchmark plan.
For a State selecting an EHBbenchmark plan under proposed
§ 156.111(a)(2) or (3), paragraph (e)(2)
would require the State to submit an
actuarial certification and an associated
actuarial report from an actuary, who is
a member of the American Academy of
Actuaries, in accordance with generally
accepted actuarial principles and
methodologies, affirming that the State’s
EHB-benchmark plan is equal in scope
of benefits provided under a typical
employer plan. We solicit comments on
whether this actuarial certification
should also be required for a State
selecting an EHB-benchmark plan under
proposed § 156.111(a)(1). Additionally,
we also propose that if the State is
selecting its EHB-benchmark plan using
§ 156.111(a)(3) that allows the State to
otherwise select a set of benefits that
would become its EHB-benchmark plan,
that this actuarial certification would
affirm that the new EHB-benchmark
plan does not exceed the generosity of
the most generous among the set of
comparison plans specified in
paragraph (a)(3). Specifically, we
propose that the actuarial certification
and associated actuarial report would be
required to be in accordance with
generally accepted actuarial principles
and methodologies. This would include
complying with all applicable Actuarial
Standards of Practice (ASOP) (including
1302(c) of the PPACA (which is incorporated into
section 2707(b) of the PHS Act) and the prohibition
of annual and lifetime dollar limits at section 2711
of the PHS Act, as added by the PPACA.
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51105
but not limited to ASOP 41 on actuarial
communications). For example, ASOP
41 includes disclosure requirements,
including those that apply to the
disclosure of information on the
methods and assumptions being used.
The purpose of this provision is to
ensure that the scope of EHB is equal in
scope of benefits provided under a
typical employer plan and to provide
the information to support the
certification from the Chief Actuary of
CMS for the Secretary to submit along
with a report to Congress, consistent
with section 1302(b)(2)(B) of the
PPACA. As described previously, we are
seeking comment on a draft
methodology for comparing benefits of a
State’s EHB-benchmark plan selection to
the benefits of a typical employer
plan.51 We solicit comment on this
proposed actuarial certification and
associated actuarial report and on
whether the draft methodology should
be the required approach for the State’s
actuarial certification and associated
actuarial report.
Paragraph (e)(3) would require the
State to submit the State’s EHBbenchmark plan document that reflects
the benefits and limitations, including
the medical management requirements,
a schedule of benefits and, if the State
is selecting its EHB-benchmark plan
using the option in paragraph (a)(3) of
this section, a formulary drug list in a
format and manner specified by HHS
similar to current § 156.120. The
purpose of this provision is to ensure
that the State’s EHB-benchmark plan
has a clearly defined set of covered
benefits and limits. For a State that
chooses an EHB-benchmark plan under
proposed § 156.111(a)(1), the State may
submit the plan document from the
other State’s EHB-benchmark plan used
for the 2017 plan year to fulfill this
proposed requirement. For a State that
selects an EHB-benchmark plan under
proposed § 156.111(a)(2), the State
would create a combined plan
document by pulling parts of the plan
documents from the other State’s or
States’ benchmark plan documents.
States may need to make conforming
edits in the other States’ plan
documents to align language and
terminology when pulling language
from other States’ plan documents. For
a State that chooses the option proposed
51 The Draft Example of an Acceptable
Methodology for Comparing Benefits of a State’s
EHB-benchmark Plan Selection to Benefits of a
Typical Employer Plan As Proposed under the HHS
Notice of Benefit and Payment Parameters for 2019
(CMS–9930–P) is available on CCIIO’s Regulation
and Guidance Web page at https://www.cms.gov/
cciio/resources/regulations-and-guidance/
index.html.
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at § 156.111(a)(3), the State may need to
develop a plan document for this
purpose. Additionally, under proposed
§ 156.111(e)(3), if the State is selecting
its EHB-benchmark plan using the
option in § 156.111(a)(3) of this section,
we propose that the State must also
include a formulary drug list for the
State’s EHB-benchmark plan in a format
and manner specified by HHS.
Specifically, the State would need to
submit a formulary drug list in the
format and manner specified by HHS,
which is a separate template from the
plan document. We also propose for the
purposes of a benefit, such as pediatric
dental, that is defined by another
program under the State’s EHBbenchmark plan, the State may submit
a separate document that reflects the
benefits and limitations, including the
medical management requirements and
a schedule of benefits comparable to
how States that defined their dental
coverage using their State’s CHIP
programs have done previously.
Otherwise, regardless of which option
the State is using to select a new EHBbenchmark plan, the State would be
expected to submit one comprehensive
plan document for the entire State’s
EHB-benchmark plan benchmark
selection.
Lastly, paragraph (e)(4) would require
the State to submit documentation
specified by HHS, which is necessary to
operationalize the State’s EHBbenchmark plan. This documentation
would be used to provide public
resources on a State’s EHB-benchmark
plan and support related templates and
tools. We propose that this
documentation would include having
the State submit a complete and
accurate EHB summary chart that
reflects the State’s EHB-benchmark plan
and aligns with the documentation that
we currently make publicly available on
a State’s EHB-benchmark plan. The
purpose of this provision is to ensure
that State’s EHB-benchmark plan can be
operationalized. For States that choose
§ 156.111(a)(1) or (a)(2) where the State
is developing its benchmark plan based
on another State’s EHB-benchmark plan,
the State could develop this document
utilizing information from the EHB
summary chart that is currently publicly
available.52
Like our current approach to the EHBbenchmark plan policy, we propose that
HHS would post the State’s EHB
summary document and the State’s
EHB-benchmark plan document that
52 All States’ current benchmark plan documents
are posted on CCIIO’s Web site at https://
www.cms.gov/CCIIO/Resources/Data-Resources/
ehb.html.
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reflects the benefits and limitations,
including the medical management
requirements and a schedule of benefits
that may include a new formulary drug
count on CCIIO’s Web site. In addition
to posting those documents, we are also
considering posting the State’s EHBbenchmark plan confirmations proposed
at § 156.111(e)(1). In preparation for the
short timeframes for States to submit
such documents in time for issuers to
design plans for plan years 2019 and
2020, we propose that the deadline for
States’ submission of the required
documents for the State’s EHBbenchmark plan option would be March
16, 2018, for the 2019 plan year and July
1, 2018, for the 2020 plan year.53 Due
to the short timeframes for 2019, we
would not be able to update the Plans
and Benefits Template Add-in file used
in the Plans and Benefits Template for
States for 2019.54 For 2020, we would
plan to update the Add-in file to reflect
the State’s EHB-benchmark plan.
We propose that in order for a State’s
selection of a new EHB-benchmark plan
from the proposed options to be
accepted, the State’s new EHBbenchmark plan must comply with the
associated EHB regulatory and statutory
requirements, including those under
this proposed rule. If a State’s EHBbenchmark plan selection does not meet
these regulatory and statutory
requirements, the State’s current EHBbenchmark plan would continue to
apply. We solicit comments on the
proposed processes and deadlines for
the 2019 and 2020 plan years.55 We also
solicit comments on the proposed data
collection and associated documents
and whether other specifications for
these documents are needed.
c. Provision of EHB (§ 156.115)
We are also proposing additional
flexibility for States by revising the rules
regarding EHB benefit category
substitution. Currently, EHB compliant
plans are required to provide benefits
that are substantially equal to the EHBbenchmark plan, but are allowed to
53 Due
to the proposed tight timeframe for 2019,
we would not be able to allow States to submit
additional documentation or changes to submitted
documents after the deadline. Any questions or
issues that a State has about the EHB-benchmark
plan documents would need to be asked and
resolved prior to the State’s submission deadline.
54 Instead, we would only plan to post the State’s
EHB-benchmark documents, including an updated
drug count, on CCIIO’s Web site. This means that
for 2019 the State would be expected to instruct its
issuers on how to manually change the State’s
current Add-in file to align with the State’s EHBbenchmark plan.
55 For the 2019 plan year, HHS would post States’
EHB-benchmark plan documents after the proposed
State submission deadline, which would likely be
in April 2018.
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substitute benefits within categories, if
allowed by the State, provided that the
benefits are actuarially equivalent to the
benefit that is being replaced.
Substitutions of prescription drug
benefits are not permitted.56 We first
introduced the concept of benefit
substitution in the 2011 EHB Bulletin.57
The EHB Bulletin considered whether to
permit benefit substitution between
benefit categories. Some commenters
supported wide latitude for substitution,
while others opposed substitution both
within and across categories. In the EHB
Rule, we finalized at § 156.115(b)(1) that
substitution could only occur within the
statutorily required benefit categories
(other than prescription drug benefits),
not between different benefit categories.
In an effort to promote greater
flexibility, consumer choice, and plan
innovation through coverage and plan
design options, we propose modifying
paragraph (b)(1)(ii) to allow for
substitution to occur within the same
EHB category and between EHB
categories, as long as the substituted
benefit is actuarially equivalent to the
benefit being replaced and is not a
prescription drug benefit. The plan with
substitutions must still provide benefits
that are substantially equal to the EHBbenchmark plan, must provide an
appropriate balance among the EHB
categories such that benefits are not
unduly weighted towards any category,
and must provide benefits for diverse
segments of the population. It is
generally the State’s responsibility to
assess that EHB compliant plans adhere
to these requirements.
We believe this modification at
§ 156.115(b)(1)(ii) balances the value of
comparability of plan benefits with
opportunities for plan innovation and
provision of benefit choice in the
market. Under this approach, to comply
with the EHB requirements, plans that
exercise the flexibility to substitute
benefits within or between EHB
categories must be able to demonstrate
actuarial equivalency of substituted
56 See § 156.115(b)(1)(iii), as established in the
EHB Rule. Additionally, § 156.122(a)(1) specifies
that plans that provide EHB must cover at least the
greater of: (i) One drug in every United States
Pharmacopeia (USP) category and class; or (ii) The
same number of prescription drugs in each category
and class as the EHB-benchmark plan. Additionally,
as discussed in the HHS Notice of Benefit and
Payment Parameters for 2016 Final Rule (80 FR
10817) preamble for § 156.122, if a plan is covering
drugs beyond the number of drugs covered by the
benchmark, all of these drugs are EHB and must
count towards the annual limitation on cost
sharing.
57 Essential Health Benefits Bulletin, Center for
Consumer Information and Insurance Oversight
(December 16, 2011), available at https://
www.cms.gov/CCIIO/Resources/Files/Downloads/
essential_health_benefits_bulletin.pdf.
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benefit categories in accordance with
the requirements in paragraph (b)(2) of
this section. These protections would
ensure that substitution within or
between benefit categories would
balance adequate coverage for patients
with plan innovation.
We also note that nothing in this
proposal would prohibit plans required
to provide EHB from imposing nondollar limits, unless otherwise
prohibited by Federal law.58 In addition,
we note that the regulation would
continue to defer to States, which would
continue to have the option to set
criteria for benefit substitution, enforce
a stricter standard on benefit
substitution, or prohibit it altogether
consistent with paragraph (b) of this
section. We solicit comments on this
proposed change, including on whether
other flexibilities with regard to
substitution are needed and whether
additional standards are necessary to
assess the scope and quality of benefits
being substituted between categories.
Additionally, we are particularly
interested in comments on this proposal
that provide examples of how issuers
may be able to utilize this additional
proposed flexibility to meaningfully
substitute benefits between categories.
We also seek comment on examples of
substitution that issuers would be
interested in pursuing.
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d. Premium Adjustment Percentage
(§ 156.130)
Section 1302(c)(4) of the PPACA
directs the Secretary of HHS to
determine an annual premium
adjustment percentage, which is used to
set the rate of increase for three
parameters detailed in the PPACA: The
maximum annual limitation on cost
sharing (defined at § 156.130(a)); the
required contribution percentage used
to determine eligibility for certain
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
58 See Frequently Asked Questions on Essential
Health Benefits Bulletin (February 17, 2012), Q9,
available at https://www.cms.gov/CCIIO/Resources/
Files/Downloads/ehb-faq-508.pdf and the EHB rule.
As finalized in the EHB Rule, issuers of QHPs were
permitted to make actuarially equivalent
substitutions within statutory categories under
§ 156.115(b)(1)(ii). Therefore, and as further
explained in the EHB FAQ, plans are permitted to
impose non-dollar limits, consistent with other
guidance, that are at least actuarially equivalent to
the annual dollar limits.
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2013, and that this percentage will be
published in the annual 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 estimates and projections
of average per enrollee employersponsored insurance premiums from the
NHEA, which are calculated by the CMS
Office of the Actuary. Accordingly,
using the employer-sponsored insurance
data, the premium adjustment
percentage for 2019 is the percentage (if
any) by which the most recent NHEA
projection of per enrollee employersponsored insurance premiums for 2018
($6,396) exceeds the most recent NHEA
estimate of per enrollee employersponsored insurance premiums for 2013
($5,110).59 Using this formula, the
proposed premium adjustment
percentage for 2019 is 1.2516634051 or
approximately 25 percent. Based on the
proposed 2019 premium adjustment
percentage, we propose the following
cost-sharing parameters for calendar
year 2019.
i. Maximum Annual Limitation on Cost
Sharing for Calendar Year 2019
Under § 156.130(a)(2), for the 2019
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 2019, 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 dollars. Using the
premium adjustment percentage of
1.2516634051 for 2019 as proposed
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, 2013,60 we
propose that the 2019 maximum annual
limitation on cost sharing would be
$7,900 for self-only coverage and
59 We note that the 2013 premium used for this
calculation has been updated to reflect the latest
NHEA data. See ‘‘NHE Projections 2016–2025—
Tables’’ available at https://www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/
NationalHealthAccountsProjected.html in Tables 1
and 17. A detailed description of the NHE
projection methodology is available at https://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/
NationalHealthExpendData/Downloads/
proj2016.pdf.
60 See https://www.irs.gov/pub/irs-drop/rp-1325.pdf.
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51107
$15,800 for other than self-only
coverage. This represents an
approximately 7 percent increase above
the 2018 parameters of $7,350 for selfonly coverage and $14,700 for other
than self-only coverage.
e. Reduced Maximum Annual
Limitation on Cost Sharing (§ 156.130)
Sections 1402(a) through (c) of the
PPACA 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 part 156, subpart E, we
specified that QHP issuers must provide
cost-sharing reductions by developing
plan variations, which are separate costsharing structures for each eligibility
category that change how the cost
sharing required under the QHP is to be
shared between the enrollee and the
Federal government. At § 156.420(a), we
detailed the structure of these plan
variations and specified that QHP
issuers must ensure that each silver plan
variation has an annual limitation on
cost sharing no greater than the
applicable reduced maximum annual
limitation on cost sharing specified in
the annual HHS notice of benefit and
payment parameters. Although the
amount of the reduction in the
maximum annual limitation on cost
sharing is specified in section
1402(c)(1)(A) of the PPACA, section
1402(c)(1)(B)(ii) of the PPACA states
that the Secretary may adjust the costsharing 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 PPACA (that is, 73 percent, 87
percent, or 94 percent, depending on the
income of the enrollee). Accordingly,
we propose to continue 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 costsharing plan variations. As we proposed
above, the 2019 maximum annual
limitation on cost sharing would be
$7,900 for self-only coverage and
$15,800 for other than self-only
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
2019 benefit year and our proposed
results.
Consistent with our analysis in the
2014 through 2018 Payment Notices, we
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developed three test silver level QHPs,
and analyzed the impact on AV of the
reductions described in the PPACA to
the estimated 2019 maximum annual
limitation on cost sharing for self-only
coverage ($7,900). The test plan designs
are based on data collected for 2017
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 2019, the test silver
level QHPs included a PPO with typical
cost-sharing structure ($7,900 annual
limitation on cost sharing, $2,350
deductible, and 20 percent in-network
coinsurance rate), a PPO with a lower
annual limitation on cost sharing
($5,250 annual limitation on cost
sharing, $3,050 deductible, and 20
percent in-network coinsurance rate),
and an HMO ($7,900 annual limitation
on cost sharing, $3,375 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, $500 emergency
department visit, $25 primary care
office visit, and $55 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 2019 AV Calculator and
observed how the reductions in the
maximum annual limitation on cost
sharing specified in the PPACA affected
the AVs of the plans. We found that the
reduction in the maximum annual
limitation on cost sharing specified in
the PPACA for enrollees with a
household income between 100 and 150
percent 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
levels (94 and 87 percent, respectively).
In contrast, the reduction in the
maximum annual limitation on cost
sharing specified in the PPACA 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.
In prior years, we have found that for
individuals with household incomes of
250 to 400 percent of the FPL, without
any change in other forms of cost
sharing, any reduction in the maximum
annual limitation on cost sharing will
cause an increase in AV that exceeds the
maximum 70 percent level set in the
statute. In the Market Stabilization Rule,
we analyzed the effect of reducing the
maximum annual limitation on cost
sharing based on how we calculated the
2018 reduced maximum annual
limitation on cost sharing. We stated
that we were not certain what the AV
spread of plan designs will be under the
finalized policy, whether issuers will in
fact reduce the AVs of their base silver
plans to the lower end of the de minimis
range, and whether issuers will retain
plan designs above the 70 percent AV
range and that we would monitor 2018
standard silver plan designs. As a result,
we did not reduce the maximum annual
limitation on cost sharing for
individuals with household incomes
between 250 and 400 percent FPL.61
We seek comment on this analysis
and the proposed reductions in the
maximum annual limitation on cost
sharing for 2019.
We note that for 2019, as described in
§ 156.135(d), States are permitted to
submit for approval by HHS Statespecific datasets for use as the standard
population to calculate AV.62 No State
submitted a dataset by the September 1,
2017 deadline.
TABLE 10—REDUCTIONS IN MAXIMUM ANNUAL LIMITATION ON COST SHARING FOR 2019
Reduced maximum
annual limitation
on cost sharing
for self-only
coverage for 2019
Eligibility category
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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) .............................................................................................................................
f. Application to Stand-Alone Dental
Plans Inside the Exchange (§ 156.150)
Section 1302(d)(2) of the PPACA
directs the Secretary to issue regulations
on the calculation of AV and its
application to the levels of coverage. In
61 2014 Payment Notice, 78 FR at 15481; Market
Stabilization Rule. 82 FR at 18370–18371.
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Reduced maximum
annual limitation on
cost sharing
for other than
self-only coverage
for 2019
$2,600
5,200
2,600
5,200
6,300
12,600
the 2013 EHB Rule, HHS finalized the
requirements for the calculation of AV
for stand-alone dental plans.
Specifically, § 156.150 prohibits SADPs
from using the AV Calculator used by
other individual and small group market
plans and requires SADPs to cover the
pediatric dental EHB at one of two AV
levels, within an allowable de minimis
variation of ± 2 percentage points.
We are proposing to remove the
requirement for SADP issuers to meet
62 The annual deadline for submitting State
specific data for the AV Calculator was announced
August 15, 2014. See https://www.cms.gov/CCIIO/
Resources/Regulations-and-Guidance/Downloads/
final-state-avc-guidance.pdf.
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the low (70 percent ± 2 percentage
points) and high (80 percent ± 2
percentage points) AV levels specified
in § 156.150(b). Specifically, we are
proposing to remove paragraph (b).
SADP issuers would offer the pediatric
dental EHB without selecting or
calculating an AV level of that coverage.
SADP issuers would continue to be held
to the annual limitation on cost sharing
for the pediatric EHB, as required in
paragraph (a), and provide the pediatric
dental EHB as required by § 155.1065, in
order to be certified as QHPs.
The PPACA does not specifically
require SADP issuers to offer coverage at
the high and low levels of AV. By
removing the AV level requirement,
SADP issuers will have the opportunity
to offer more flexible plan designs to
consumers. In previous comments,
SADP issuers had noted that it is
difficult to meet the low AV
requirements and offer preventive care
without cost sharing, which consumers
are accustomed to in the large group
market. Issuers could offer SADPs at
varying premiums and levels of
coverage, so long as they continue to
offer the pediatric dental EHB and
annual limitations on cost sharing. We
believe that this will allow consumers to
select from a greater variety of plans and
find one that is more likely to meet their
specific needs.
We seek comment on this proposal.
3. Qualified Health Plan Minimum
Certification Standards
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a. Qualified Health Plan Certification
(Subpart C)
In the Market Stabilization final rule,
HHS finalized several standards to
affirm the traditional role of States in
overseeing their health insurance
markets while reducing the regulatory
burden of participating in Exchanges for
issuers. We believe that robust
participation of QHP issuers in
Exchanges will facilitate consumer
access to affordable coverage. In
recognition of the call to return to States
their traditional authority to regulate
health plans and to streamline QHP
certification processes, HHS proposes to
continue to enhance the State
flexibilities in QHP certification that
began for plan year 2018 by identifying
areas where States are already
performing reviews that are duplicative
of the Federal QHP certification process
and incorporating these reviews into the
QHP certification process. In addition to
empowering States, these proposals
would reduce issuer burden.
In the Market Stabilization final rule,
we finalized two proposals related to
QHP certification for plan year 2018
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around network adequacy (§ 156.230)
and essential community providers
(§ 156.235) that we now propose for the
2019 benefit year and beyond.
Specifically, with respect to network
adequacy, we propose to rely on the
States’ reviews in States in which an
FFE is operating, provided the State has
a sufficient network adequacy review
process. For the 2019 benefit year and
beyond, we propose to defer to the
States’ reviews in States with the
authority to enforce standards that are at
least equal to the ‘‘reasonable access
standard’’ defined in § 156.230 and
means to assess issuer network
adequacy. In States that do not have the
authority and means to conduct
sufficient network adequacy reviews,
we propose for the 2019 benefit year
and beyond to rely on an issuer’s
accreditation (commercial, Medicaid, or
Exchange) from an HHS-recognized
accrediting entity, which we propose
would include the three accrediting
entities HHS has previously recognized
for the accreditation of QHPs: The
National Committee for Quality
Assurance, URAC, and Accreditation
Association for Ambulatory Health
Care.63 Unaccredited issuers would be
required to submit an access plan as
part of the QHP application. To show
that the QHP’s network meets the
requirement in § 156.230(a)(2), the
access plan would need to demonstrate
that an issuer has standards and
procedures in place to maintain an
adequate network consistent with the
National Association of Insurance
Commissioners’ Health Benefit Plan
Network Access and Adequacy Model
Act (the Model Act is available at https://
www.naic.org/store/free/MDL-74.pdf).
We propose to further coordinate with
States to monitor network adequacy, for
example, through complaint tracking.
With respect to QHP certification review
for the essential community provider
(ECP) standard, we propose for the 2019
benefit year and beyond that we will
continue to allow issuers to use the ECP
write-in process to identify ECPs that
are not on the HHS list of available ECPs
and will maintain the 20 percent ECP
standard. We believe this standard will
substantially reduce the regulatory
burden on issuers while preserving
adequate access to care provided by
ECPs. As in previous years, if an issuer’s
application does not satisfy the ECP
standard, the issuer would be required
63 Recognition of Entities for the Accreditation of
Qualified Health Plans 77 FR 70163 (November 23,
2012) and Approval of an Application by the
Accreditation Association for Ambulatory Health
Care (AAAHC) To Be a Recognized Accrediting
Entity for the Accreditation of Qualified Health
Plans 78 FR 77470 (December 23, 2013).
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to include as part of its application for
QHP certification a satisfactory narrative
justification describing how the issuer’s
provider networks, as presently
constituted, provide an adequate level
of service for low-income and medically
underserved individuals and how the
issuer plans to increase ECP
participation in the issuer’s provider
networks in future years. At a
minimum, such narrative justification
would include the number of contracts
offered to ECPs for the applicable plan
year; the number of additional contracts
an issuer expects to offer and the
timeframe of those planned
negotiations; the names of the specific
ECPs to which the issuer has offered
contracts that are still pending; and
contingency plans for how the issuer’s
provider network, as currently designed,
would provide adequate care to
enrollees who might otherwise be cared
for by relevant ECP types that are
missing from the issuer’s provider
network.
We also previously outlined areas
where HHS will rely on State reviews of
QHP certification standards for States
with FFEs starting in plan year 2018,
including States with FFEs that perform
plan management functions in
partnership with HHS, in The Guidance
to States on Review of Qualified Health
Plan Certification Standards in
Federally-facilitated Marketplaces for
Plan Years 2018 and Later,64 released on
April 13, 2017. We intended these
changes to help streamline the QHP
certification process and avoid
duplicative Federal and State efforts. In
that guidance, we provided that in FFE
States that do not perform plan
management functions, HHS will
continue to review QHP data for these
States, but will rely on State review for
licensure and good standing standards
required at § 156.200(b)(4), and for
network adequacy standards required at
§ 156.230. For FFEs in States performing
plan management functions, HHS will
continue to rely on State plan data
review for QHP certification standards,
including for service area and
prescription drug formulary outliers and
non-discrimination in cost sharing. We
will continue to review plan data
relating to Federal funds or plan display
on HealthCare.gov, such as cost-sharing
reduction plan variation at § 156.420
and annual re-enrollment at § 155.335(j).
We do not propose any changes to the
approach described in this guidance.
To further streamline QHP
certification by avoiding duplicative
64 https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/QHPCertifcation-Reviews-Guidance-41317.pdf.
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reviews, we also announced in the QHP
Rate Outlier Analysis for Plan Year 2018
and Beyond 65 that we would rely on
States to identify rate outliers for
purposes of QHP certification,66 except
for those States that do not have an
Effective Rate Review Program. These
changes were intended to allow States
and issuers greater flexibility in
facilitating the certification of plans best
suited to their markets, while avoiding
duplicative State and Federal activities.
We do not propose any changes to the
approach described in this guidance.
For Plan Years 2019 and later, HHS
proposes to further expand the role of
States in the QHP certification process
for FFEs, including FFEs where the
State performs plan management
functions. Specifically, we propose to
defer to States for additional review
areas, including accreditation
requirements at § 156.275, compliance
reviews at § 156.715, minimum
geographic area of the plan’s service
area at § 155.1055, and quality
improvement strategy reporting at
§ 156.1130, if feasible and appropriate.
We believe States currently perform
reviews in these areas that are
duplicative of the Federal reviews for
QHP certification. As a result, we do not
believe this policy would require States
to undertake additional reviews or
change existing reviews to match the
Federal standards for QHPs. We seek
comment on whether States are
performing work in these areas, and
whether there are more or different
areas of review for which it would be
appropriate for the FFEs to defer to State
reviews for QHP certification. We seek
comment regarding the potential
benefits as well as challenges or
unintended consequences that States
and issuers may encounter if States
performed increased roles in QHP
certification reviews by taking on the
reviews noted above, or other,
additional reviews. We also seek
comment on the impact for QHP issuers
participating in multiple States and
across Exchange types. HHS anticipates
outlining plan year 2019 QHP
certification standards in future
guidance, including outlining areas
where States performing plan
management functions have flexibility
to follow a different approach. We also
65 https://www.regtap.info/uploads/library/QHP_
RateOutlier_FAQ_5CR_071017.pdf.
66 This review generally identifies rates that are
relatively low compared to other QHP rates in the
same rating area. The identification of a QHP rate
as an outlier does not necessarily indicate
inappropriate rate development; instead, this
information helps inform the determination of
whether certifying the QHP to be offered on the
Exchange would be in the interest of consumers.
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propose to amend § 156.200(b)(2) by
adding a cross reference to proposed
§ 155.706 to align with other proposals
in this rule.
b. Additional Standards Specific to
SHOP for Plan Years Beginning Prior to
January 1, 2018 (§ 156.285)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding additional
standards specific to SHOP for plan
years beginning on or after January 1,
2018 and to introduce those
requirements in a new § 156.286. To
reflect the proposal that the
requirements currently in § 156.285
would apply only for plan years
beginning before January 1, 2018, we
propose to amend the heading of
§ 156.285 and add paragraph (f), to state
that the section would only apply for
plan years that begin prior to January 1,
2018. We discuss the proposed new
standards applicable for plan years
beginning on or after January 1, 2018 in
the following section. These changes
would be effective on the effective date
of the final rule, if finalized as
proposed.
c. Additional Standards Specific to
SHOP for Plan Years Beginning on or
After January 1, 2018 (§ 156.286)
Section 156.285 currently describes
the requirements on QHP issuers
participating in SHOPs to accept
enrollment and payment information
from a SHOP on behalf of an employer
or enrollee. As discussed above, we
propose to amend § 156.285 to make it
only applicable for plan years beginning
prior to January 1, 2018, and to modify
the additional standards specific to QHP
issuers participating in SHOPs
applicable for plan years beginning on
or after January 1, 2018 through the
introduction of a new § 156.286. New
§ 156.286 would include only those
standards that have been applicable
under § 156.285 that would continue to
apply to the SHOPs under the proposed
approach discussed earlier in this
preamble, with minor modifications and
clarifications. The proposals described
in this section would be effective on the
effective date of the final rule, if
finalized as proposed.
We propose to retain § 156.285(a) as
§ 156.286(a), but, to reflect the proposal
that a SHOP would not be required to
process enrollments and payments, to
require issuers to accept payment not
only from the SHOP, but from a
qualified employer or enrollee or a
SHOP. We also propose not to include
the requirement currently in
§ 156.285(a)(4)(ii), as the Federallyfacilitated SHOPs would no longer be
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involved in premium payments. For the
same reason, we also propose a
narrower version of § 156.285(b) as
§ 156.286(b), requiring only that issuers
adhere to the enrollment periods and
processes established by the SHOP
consistent with § 155.726, and establish
uniform enrollment timelines and
processes for qualified employers and
group members. We also propose in
§ 156.286(c) to include only those
requirements from § 156.285(c) that do
not relate to the payment and
enrollment processes that we have
proposed would no longer be required.
We also propose not to include a
paragraph mirroring paragraph (d) of
§ 156.285. This would reflect our
proposal to remove the requirements
contained in current § 155.735, and
generally not to impose coverage related
timelines on issuers of QHPs through
the SHOPs for plans beginning on or
after January 1, 2018. We propose to
include a paragraph mirroring
§ 155.285(e) as § 156.286(d).
Finally, under our proposed
approach, SHOPs would no longer be
required to provide employee
enrollment functionality. When
enrollments are completed by working
with SHOP issuers or SHOP-registered
agent or brokers, it may not always be
immediately apparent to the issuer
whether the enrollment is through the
SHOP, and whether it is part of an
employer’s offering a choice of plans. To
ensure that issuers offering QHPs
through a SHOP do so in a manner that
is consistent with our proposed
interpretation of the SHOP provisions of
the statute, we propose to add new
paragraphs (e) and (f) in § 156.286.
These would require that QHP issuers
offering a QHP through the SHOP accept
enrollments from groups in accordance
with the employer choice policies
applicable to the SHOP under
§ 155.706(b)(3), that they maintain
processes sufficient to identify whether
a group market enrollment is an
enrollment through the SHOP, and they
maintain records of SHOP enrollments
for a period of 10 years following the
enrollment. Proposed paragraph (f) also
would require issuers to utilize a
uniform enrollment form, as required by
section 1311(c)(1)(F) of the PPACA. As
noted in the preamble to § 155.716, we
intend to update the single employer
application to reflect our proposed
changes in § 155.731. An issuer would
be considered to satisfy this proposed
requirement if it used that application
form.
Finally, we propose in paragraph (g)
to state that the requirements contained
within § 156.286 are only applicable for
plan years beginning on or after January
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1, 2018, effective on the effective date of
the final rule, if finalized as proposed.
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d. Meaningful Difference Standard for
Qualified Health Plans in the FederallyFacilitated Exchanges (§ 156.298)
We propose to remove § 156.298 to
eliminate meaningful difference
standards for QHPs offered through a
Federally-facilitated Exchange or StateBased Exchange on the Federal
platform. Under this standard, in order
to be certified as a QHP, a plan must be
meaningfully different from all other
QHPs offered by the same issuer of that
plan within a service area and level of
coverage in the Exchange. As defined in
§ 156.298(b), QHPs are considered
meaningfully different from other plans
if a reasonable consumer would be able
to identify one or more material
differences among five key
characteristics between the plan and
other plans to be offered by the same
issuer.
This meaningful difference standard
was implemented to make it easier for
consumers to understand differences
between plans, and choose the right
plan option for them. However, with
fewer issuers participating in the
Exchange, and fewer plans for
consumers to choose from, we propose
to remove these standards, as we no
longer believe the requirement is
necessary. We believe removing the
meaningful difference standard would
encourage plan design innovation, by
providing more flexibility to issuers in
designing plans, and thus increase plan
offerings and choice for consumers.
e. Other Considerations
We seek comment on ways in which
HHS can foster market-driven programs
that can improve the management and
costs of care and that provide
consumers with quality, personcentered coverage. As we stated in the
2017 and 2018 Payment Notices, we
believe that innovative issuer, provider,
Exchange, and local programs or
strategies can successfully promote and
manage care, in a manner that
contributes to 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 better meet
the goals of affordability, quality, and
access to care.
We are particularly interested in
receiving comments on how we may
encourage value based insurance design
within the individual and small group
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markets and ways to support issuers in
using cost sharing to incentivize more
cost-effective enrollee behavior and
higher quality health outcomes, in
accordance with section 2713(c) of the
PHS Act. Currently, under our rules,
issuers have considerable discretion in
the design of cost-sharing structures,
subject to certain statutory AV
requirements, non-discrimination law
and rules, and other applicable law,
such as the Paul Wellstone and Pete
Domenici Mental Health Parity and
Addiction Equity Act of 2008.
We would like to encourage issuers to
offer HDHPs that can be paired with an
HSA as a cost effective options for
enrollees. While the proportion of
available HSA-eligible HDHPs has been
stable in the FFEs, the percentage of
enrollees in HDHPs has decreased
slightly over the last 3 years as there are
certain technical barriers for issuers in
offering HDHPs in the EHB compliant
market.67 We are particularly interested
in exploring how to use plan display
options on HealthCare.gov to promote
the availability of HDHPs to applicants,
and seek comment on how best to do so.
We are also interested in value based
insurance designs that focus on cost
effective drug tiering structures; address
overused, higher cost health services;
provide innovative network design that
incentivizes enrollees to use higher
quality care; and promote use of
preventive care and wellness services.
We solicit comments on how HHS can
better encourage these types of plan
designs, and whether any existing
regulatory provisions or practices
discourage such designs.
4. Standards for Downstream and
Delegated Entities (§ 156.340)
This section discusses the
responsibilities of a QHP issuer and its
applicable downstream entities. We
propose to amend paragraph (a)(2) to
add a cross reference to proposed
§ 155.706 to align with other proposals
made throughout this proposed rule.
5. Eligibility and Enrollment Standards
for Qualified Health Plan Issuers on
State-Based Exchanges on the Federal
Platform (§ 156.350)
Section 156.350 describes the
eligibility and enrollment standards for
issuers that offer QHP coverage in the
SBE–FPs. Currently, § 156.350(a)(1) and
67 For instance, the maximum annual limitation
on cost sharing established at section 1302(c) of the
PPACA is increasing at a faster rate than the
maximum out of pocket cost limits for HDHPs
under section 223 of the Code. Therefore, a plan
that utilizes the maximum annual limitation on cost
sharing under the PPACA would not meet the
requirements to be an HDHP under the Code that
could be paired with an HSA.
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(2) state that for a QHP issuer to
participate in an SBE–FP for SHOP, it
must comply with the requirements at
§ 156.285(a)(4)(ii) and § 156.285(c)(5)
and (c)(8)(iii), respectively. However, as
discussed elsewhere in this proposed
rule, to align with our proposal
regarding the SHOPs, we are proposing
that these referenced requirements at
§ 156.285 would not be applicable for
plan years beginning on or after January
1, 2018, effective on the effective date of
the final rule, if finalized as proposed.
We therefore propose to amend
§ 156.350(a)(1) and (a)(2) to specify that
they only apply through plan years
beginning prior to January 1, 2018.
We seek comment on these proposals.
6. Minimum Essential Coverage
a. Other Coverage That Qualifies as
Minimum Essential Coverage
(§ 156.602)
A CHIP program is a type of
government-sponsored coverage,
defined under title XXI of the Act that
provides low-cost health coverage to
children in low-income families that do
not otherwise have health coverage.
States may be eligible to receive Federal
funds to initiate and expand such
programs. A CHIP buy-in program, a
‘‘full pay’’ option where a covered
family pays the full premium typically
without any Federal or State assistance,
often provides similar or identical
benefits as the State CHIP program for
children in families that do not
financially qualify for the State’s CHIP
program.68 CHIP buy-in programs are
not authorized or funded under title XXI
of the Act, and therefore are not
government-sponsored minimum
essential coverage under section
5000A(f)(1)(A) of the Code. However,
CHIP buy-in programs may be
recognized as minimum essential
coverage by the Secretary in
consultation with the Secretary of the
Treasury, pursuant to the Secretary’s
authority under section 5000A(f)(1)(E)
of the Code.
In considering whether to recognize
coverage as minimum essential coverage
under the application process provided
for in § 156.604, HHS generally
evaluates whether the coverage
complies with substantially all the
requirements of title I of the PPACA that
apply to non-grandfathered coverage in
the individual market, including the
essential health benefits requirements.
68 Under IRS Notice 2015–37, individuals who
may enroll in a CHIP buy-in program designated as
MEC are eligible for MEC under the CHIP buy-in
program for purposes of the premium tax credit
under section 36B of the Code only if they are
enrolled in the program.
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Many CHIP buy-in programs have
benefits identical to those offered
through the State’s CHIP program under
title XXI; however, those benefits might
not meet the ‘‘substantially all’’
standard as currently interpreted by
HHS, due primarily to differences
between the CHIP buy-in benefits and
those offered under the EHB-benchmark
plan. While the EHB benchmark plan
includes benefits to address the
healthcare needs of all individuals,
including older adults, the CHIP buy-in
programs only offer coverage to
children. Consequently, States may
need to increase the benefits, and as a
result, the cost of CHIP buy-in programs
in order to meet the ‘‘substantially all’’
standard. Based on discussions with
States that sponsor CHIP buy-in
programs, we understand that
administering two programs with
different benefits creates a resource
burden on States.
Section 156.602 specifies the types of
coverage that are designated as
minimum essential coverage pursuant to
the Secretary’s authority under section
5000A(f)(1)(E) of the Code. We propose
to amend this section to include
coverage under a CHIP buy-in program
that provides identical coverage to that
State’s CHIP program under title XXI of
the Act.
We seek comment on this proposal,
including its effects on the individual
market risk pool.
We also seek comment on whether
CHIP buy-in programs that provide
greater coverage should be categorically
designated as minimum essential
coverage, without submitting an
application, or whether such programs
must submit an application so that HHS
can evaluate any differences from the
State’s CHIP program under title XXI to
ensure that the program substantially
resembles the State’s CHIP program
under title XXI. For example, a CHIP
buy-in program could impose less cost
sharing or more generous benefits than
the State’s CHIP program under title
XXI. We also seek comment on whether
other types of government-sponsored
buy-in programs, such as Medicaid buyin programs, should be recognized as
minimum essential coverage without
having to submit an application, and
whether this proposal should apply to
such programs.
b. Requirements for Recognition as
Minimum Essential Coverage
(§ 156.604)
We recognize that the benefits in
some CHIP buy-in programs are similar
but not identical to the State’s CHIP
program under title XXI; for example,
they impose greater cost sharing or
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reduced benefits in comparison with the
State’s CHIP program under title XXI.
Under the proposed changes to
§ 156.602, CHIP buy-in programs with
benefits that differ at all from the State’s
CHIP program under title XXI would
still be required to submit an
application with HHS if they wish to be
recognized as minimum essential
coverage. HHS would evaluate such
programs based on the ‘‘substantially
all’’ standard that currently applies
under § 156.604. We seek comment on
whether HHS should create a new
standard of review under which such
programs must ‘‘substantially resemble’’
the State’s CHIP program under title XXI
to qualify as minimum essential
coverage under § 156.604. The
‘‘substantially resemble’’ standard
would not be as stringent as the
‘‘substantially all’’ standard, but would
give HHS the flexibility to evaluate
CHIP buy-in programs based on whether
they are providing coverage similar to
the State’s CHIP program under title XXI
and are meeting the health requirements
of the children enrolled in the coverage.
We are not proposing to codify the
‘‘substantially resemble’’ standard in
§ 156.604; however, we propose that the
Secretary use the Secretary’s discretion
and authority under section
5000A(f)(1)(E) of the Code to recognize
as minimum essential coverage a CHIP
buy-in program that provides coverage
similar to the State’s CHIP program
under title XXI or when the facts and
circumstances indicate that the CHIP
buy-in program should be recognized as
minimum essential coverage. We seek
comment on this proposal, including its
effects on the individual market risk
pool.
7. Quality Rating System (§ 156.1120)
We recognize that social risk factors
play a major role in health, and one of
our core objectives is to improve
patients’ outcomes including reducing
health disparities. In addition, we seek
to ensure that the quality of care
furnished by providers and health plans
is assessed as fairly and accurately as
possible under HHS quality reporting
programs, including the Quality Rating
System established under section
1311(c)(3) of the PPACA, while helping
to ensure that individuals and
populations receive high quality,
person-centered care. In response to
several comments we received from the
Request for Information, we continue to
assess ways to reduce burden and
promote State flexibility in the
implementation of all statutorily
required Exchange quality programs,
including the Quality Rating System,
and we continue to prioritize strategies
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to improve the value for consumers. We
received many comments in response to
our request for public comment as part
of the annual Quality Rating System
Call Letter process, on whether we
should account for social risk factors in
the Quality Rating System, which
provides quality ratings (or star ratings
from 1 to 5 stars) that account for
member experience, medical care and
health plan administration for QHPs,
offered through an Exchange. We are not
proposing amendments to the Quality
Rating System in this rule. We continue
to evaluate what method or combination
of methods would be most appropriate
for accounting for social risk factors in
the Quality Rating System as well as
other HHS quality reporting programs.
We have closely reviewed related
reports by the Office of the Assistant
Secretary for Planning and Evaluation 69
and the National Academies of
Sciences, Engineering, and Medicine.70
In addition, we continue to await the
results of the National Quality Forum
trial 71 on risk adjustment for quality
measures. We continue to advance
healthcare quality across QHPs, as well
as providers, to improve outcomes of
their enrollees with social risk factors
without masking potential disparities or
minimizing incentives to improve the
outcomes for disadvantaged
populations.
We seek comment as part of this
rulemaking on types of social risk
factors that may be most appropriate as
well as the methods to account for
social risk factors for QHP issuer quality
reporting. Examples of social risk factors
include: Low income subsidy; race and
ethnicity; and geographic area of
residence. Approaches to account for
social risk factors include stratifying
measure scores or risk adjustment of a
particular measure. We seek comment
on which social risk factors could be
used alone or in combination, current
data sources where this information
would be available, and whether other
data should be collected to better
capture the effects of social risk. We will
69 Office of the Assistant Secretary for Planning
and Evaluation. Report to Congress: Social Risk
Factors and Performance under Medicare’s Valuebased Purchasing Programs. (December 21, 2016).
Available at https://aspe.hhs.gov/pdf-report/reportcongress-social-risk-factors-and-performanceunder-medicares-value-based-purchasingprograms.
70 National Academies of Sciences, Engineering,
and Medicine. Accounting for Social Risk Factors
in Medicare Payment. (January 10, 2017). Available
at https://nationalacademies.org/hmd/reports/2017/
accounting-for-social-risk-factors-in-medicarepayment-5.aspx.
71 National Quality Forum socioeconomic status
(SES) trial period Web site at https://
www.qualityforum.org/
ProjectDescription.aspx?projectID=80124.
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take commenters’ input into
consideration as we continue to assess
the appropriateness and feasibility of
accounting for social risk factors in the
Quality Rating System.
8. Direct Enrollment With the QHP
Issuer in a Manner Considered To Be
Through the Exchange (§ 156.1230)
We propose to amend paragraph (b)(2)
of § 156.1230 to conform with the
proposed amendments to § 155.221. The
proposed change would require that,
prior to a QHP issuer’s Internet Web site
being used to complete a QHP selection,
the QHP issuer must engage a third
party entity in accordance with
§ 155.221 to demonstrate operational
readiness and compliance with
applicable requirements. For a
discussion of the provisions of this
proposed rule related to third party
entities performing operational
readiness reviews, please see the
preamble to § 155.221.
F. Part 157—Employer Interactions With
Exchanges and SHOP Participation
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1. Qualified Employer Participation
Process in a SHOP for Plan Years
Beginning Prior to January 1, 2018
(§ 157.205)
As discussed in the following section,
we propose to modify the regulatory
requirements regarding the qualified
employer participation process in a
SHOP for plan years beginning on or
after January 1, 2018 and to introduce
those requirements in a new § 157.206.
To reflect the proposal that the
requirements currently in § 157.205
would apply only for plan years
beginning before January 1, 2018, we
propose to amend the heading of
§ 157.205 and add paragraph (h), to state
that the section would apply only for
plan years that begin prior to January 1,
2018. These changes would be effective
on the effective date of the final rule, if
finalized as proposed.
2. Qualified Employer Participation
Process in a SHOP for Plan Years
Beginning on or After January 1, 2018.
(§ 157.206)
Section 157.205 describes
requirements for participating SHOP
employers. To reflect the proposal to
allow SHOPs to operate in a leaner
fashion, we are proposing several
changes to the requirements related to
qualified employer participation process
in a SHOP for plan years beginning on
or after January 1, 2018, and propose to
introduce these requirements in
§ 157.206. With the exception of the
proposed changes to the process
described here, the process would
remain the same as in § 157.205. The
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proposals described in this section
would be effective on the effective date
of the final rule, if finalized as
proposed.
Paragraph (d) of § 157.205 requires a
qualified employer to submit any
contribution towards the premiums of
any qualified employee according to the
standards and processes described in
§ 155.705. Because we are proposing
that the requirements in § 155.705
regarding employer contribution
methods would not apply for plan years
beginning on or after January 1, 2018,
we also propose that the requirement in
§ 157.705(d) would not apply for those
plan years.
Paragraph (e)(1) of § 157.205 describes
obligations of qualified employers to
employees hired outside of the initial or
annual open enrollment periods. We
propose in § 157.206(d) that qualified
employers must provide employees
hired outside of the initial or annual
open enrollment period with
information about the enrollment
process. We propose that the
requirement in paragraph (e)(1) of
§ 157.705, which requires qualified
employers to provide these employees
with an enrollment period in
accordance with § 155.725(g), would not
be included in § 157.206, as we are
proposing that the requirement in
§ 155.725(g) would not be applicable for
plan years beginning on or after January
1, 2018. We also propose that the
requirement in § 157.205(e)(2) to
provide information about the
enrollment process in accordance with
§ 155.725 would not apply for plan
years beginning on or after January 1,
2018 to reflect the proposal that the
process provided for in many of the
provisions in § 155.725 would not apply
for those plan years.
We also propose that the requirements
in § 157.205(f) regarding the process for
notifying the SHOP in the event the
eligibility status of an employee, or
employee’s dependent has changed
would not apply for plan years
beginning on or after January 1, 2018.
Under the proposed approach for plan
years beginning on or after January 1,
2018, SHOPs would not be required to
process employee enrollment, so there
would be no reason for all qualified
employers to provide such information.
Further, we propose that the
requirement in § 157.205(g) that
qualified employers adhere to the
annual employer election period under
§ 155.725(c) would not apply for plan
years beginning on or after January 1,
2018. Elsewhere, we propose that the
annual employer election period
provision in § 155.725(c) would not
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51113
apply for those plan years, and this
proposal would reflect that removal.
Finally, we propose in paragraph (e)
of § 157.206 to include new
requirements for qualified employers
reflective of the proposed approach for
SHOPs generally. First, since we
propose in § 155.716(f) that an
employer’s determination of eligibility
to participate in the SHOP remains valid
until the employer makes a change that
could end its eligibility under
§ 155.710(b), we propose in
§ 157.205(e)(1) that employers must
submit a new application to the SHOP
if the employer makes a change that
could end its eligibility under § 155.710
or withdraw from participation in the
SHOP. Second, because under our
proposed changes SHOPs would not be
required to process group enrollments,
and therefore would not necessarily
communicate with QHP issuers about
employer eligibility determinations, we
propose to require employers to notify
the QHP issuer of an unfavorable
eligibility determination. However, we
propose that the employer be required
to provide the notification within 5
business days of the end of any
applicable appeal process under
§ 155.741. Specifically, the end of the
appeal process could occur when the
time to file an appeal lapses without an
appeal being filed, when the appeal is
rejected or dismissed, or when the
appeal process concludes with an
adjudication by the appeals entity, as
applicable. We also propose in
paragraph (e)(3) to describe the
employer’s obligations regarding loss of
eligibility to participate in a SHOP or
termination of enrollment or coverage
through the SHOP, if this proposed
approach were to be finalized. Given
that under the proposed approach there
would not necessarily be
communication between the SHOP and
a participating QHP issuer regarding
employer eligibility, enrollment, or
terminations, there may be no way for
the SHOP to notify an issuer in the
event an employer becomes ineligible to
participate in SHOP. Therefore, we
propose to add paragraph (e)(3) to
require employers to notify an issuer of
a loss of eligibility to participate in
SHOP, or a desire to terminate SHOP
enrollment or coverage.
We propose in paragraph (f) of
§ 157.205 that the section would apply
for plan years beginning on or after
January 1, 2018, only. If finalized, these
changes would become effective as of
the effective date of the final rule.
We seek comment on this proposal.
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G. Part 158—Issuer Use of Premium
Revenue: Reporting and Rebate
Requirements
1. Reporting of Federal and State Taxes
(§ 158.162)
Section 2718 of the PHS Act requires
that Federal and State taxes be reported,
but that such amounts are to be
excluded from premium revenue when
calculating an issuer’s MLR and
accompanying rebates. However, the
statute does not define what is included
in Federal and States taxes. The MLR
December 1, 2010, interim final rule (75
FR 74864) interprets this language and
broadly describes Federal and State
taxes that must be reported but are
excluded from premiums in the MLR
and rebate calculations, and Federal and
State taxes that must be reported and are
not excluded from premiums in MLR
and rebate calculations. During our
review of MLR reports submitted by
issuers, HHS noted that some issuers
were excluding employment taxes (such
as the Federal Insurance Contributions
Act (FICA), the Railroad Retirement Tax
Act (RRTA), and the Federal
Unemployment Act (FUTA) taxes; State
unemployment/reemployment
insurance and State employment
training taxes; and other similar taxes
and assessments) from earned premiums
in their MLR and rebate calculations,
whereas most issuers were including
employment taxes in earned premiums
in the MLR and rebate calculations. In
order to provide consistency and clarity
for MLR reporting, HHS amended
§ 158.162 in the 2016 Payment Notice
(80 FR 10750) to specify that all issuers
must include employment taxes in
earned premiums and must not deduct
such taxes in the MLR and rebate
calculations starting with the 2016 MLR
reporting year.
However, in light of the changes in
the market landscape since § 158.162
was amended in early 2015, HHS is
considering whether revising the
decision on the treatment of
employment taxes may help improve
market stability, particularly in the
individual market, by providing an
incentive for issuers to enter or remain
in the market. In addition, in response
to the Request for Information, we
received several comments in favor of
allowing issuers to deduct such taxes
from these calculations. Therefore, we
are inviting comments on whether, in
order to encourage issuer participation
and competition in the markets, HHS
should revise paragraph (a)(2) and
paragraph (b)(2)(iv) of § 158.162 to allow
all issuers to deduct Federal and State
employment taxes from premiums in
their MLR and rebate calculations,
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starting with the 2017 MLR reporting
year for reports to be filed by July 31,
2018. We are not reconsidering the
treatment of the other taxes that cannot
be excluded from premiums in MLR and
rebate calculations (for example, Federal
taxes on investment income and capital
gains) because we believe those taxes
can be distinguished from employment
taxes and the NAIC had explicitly
recommended to HHS that such taxes
should not be excluded from
premiums.72
We solicit comments on this approach
from all stakeholders, including on
whether we should instead amend the
MLR regulations to collect the
employment tax data separately from
other tax data as an informational item
on the MLR Annual Reporting Form to
gather data to inform a decision
regarding whether to amend the
regulation for future years, and whether
changing the treatment of employment
taxes would be likely to help improve
market stability and competition.
2. Allocation of Expenses (§ 158.170)
For a discussion of the proposed
amendment to § 158.170(b) regarding
the description of the allocation method
for quality improvement activity (QIA)
expenses, please see the preamble to
§ 158.221.
3. Formula for Calculating an Issuer’s
Medical Loss Ratio (§ 158.221)
We propose amending § 158.221 by
adding new paragraph (b)(8) to provide
issuers with an option to report quality
improvement activity expenses as a
single fixed percentage of premium
amount starting with the 2017 MLR
reporting year (for reports to be filed by
July 31, 2018). We also propose making
conforming amendments to § 158.170(b)
(Allocation of expenses) in order to
recognize the new proposed option for
reporting QIA expenses.
Section 2718(c) of the PHS Act tasked
the NAIC with establishing standardized
definitions and methodologies for
calculating MLR and rebates, subject to
the certification of the Secretary.
Consistent with the NAIC’s
recommendation to HHS,73 the MLR
72 National Association of Insurance
Commissioners—Model Regulation Service,
Regulation for Uniform Definitions and
Standardized Methodologies for Calculation of the
Medical Loss Ratio for Plan Years 2011, 2012 and
2013 per Section 2718 (b) of the Public Health
Service Act (Oct 27, 2010), available at https://
www.naic.org/documents/committees_ex_mlr_reg_
asadopted.pdf.
73 National Association of Insurance
Commissioners—Model Regulation Service,
Regulation for Uniform Definitions and
Standardized Methodologies for Calculation of the
Medical Loss Ratio for Plan Years 2011, 2012 and
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interim final rule, published on
December 1, 2010 (75 FR 74863), allows
issuers to include in the MLR numerator
expenditures for five categories of
activities that improve health care
quality. Accordingly, issuers are
currently required to report QIA
expenditures in alignment with the five
separate categories codified in
§ 158.150(b)(2)(i)–(v). Additionally,
§ 158.170 requires issuers to use and
disclose specific allocation methods to
report expenses, including QIA
expenditures.
However, in the course of conducting
the MLR audits, HHS observed that the
current MLR regulations require a
substantial effort by issuers to
accurately identify, track and report QIA
expenses. HHS has also observed that,
between 2011 and 2015, issuers that did
report QIA expenses have reported
spending, on average, a consistent
percentage of premium on total QIA:
approximately 0.7 percent in 2011, and
0.8 percent in 2012 through 2015.
Given issuers’ relatively low and
consistent reported expenditures on
QIA and the significant burden
associated with identifying, tracking
and reporting these expenditures, we
propose adding § 158.221(b)(8) to permit
issuers an option to report on their MLR
reporting form a single QIA amount
equal to 0.8 percent of earned premium
in the relevant State and market, in lieu
of tracking and reporting the issuer’s
actual expenditures for QIA, as defined
in § 158.150 and § 158.151. Under this
proposal, all issuers would be able to
include 0.8 percent of earned premium
in their MLR numerator as QIA
expenses for the relevant State and
market. This is in line with a comment
received in response to the Request for
Information requesting that the MLR
formula be simplified. The
accompanying proposed amendments to
§ 158.170(b) would require issuers that
elect the option to include 0.8 percent
of earned premium for QIA expenses to
indicate as such when describing the
allocation method used for QIA
expenses. Issuers that spend more than
0.8 percent of earned premium on QIA
would have the option to report the total
actual, higher amount spent and, if
choosing this option, would have to
report QIA in the five categories
described in § 158.150(b)(2)(i)–(v), as
well as comply with the allocation of
expenses requirements established
under § 158.170. We seek comment on
this proposal.
2013 per Section 2718 (b) of the Public Health
Service Act (Oct 27, 2010), available at https://
www.naic.org/documents/committees_ex_mlr_reg_
asadopted.pdf.
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4. Potential Adjustment to the MLR for
a State’s Individual Market (Subpart C)
adjustments to reduce burdens for States
and HHS.
We propose to amend 45 CFR part
158, subpart C to modify the process
and criteria for the Secretary to
determine whether to adjust the 80
percent MLR standard in the individual
market in a State. This proposal is
consistent with comments we received
on the Request for Information
requesting that issuers be allowed to
include additional expenses in their
MLR calculation, since States would be
able to more easily request reductions of
the individual market MLR standard,
which would effectively enable issuers
in those States to spend more premium
on additional expenses.
Section 2718(d) of the PHS Act
provides that the Secretary may adjust
the MLR standard in the individual
market if the Secretary determines it
appropriate on account of the volatility
of the individual market due to the
establishment of Exchanges. The MLR
December 1, 2010, interim final rule (75
FR 74864) set forth the framework for a
State to request such an adjustment and
the process and criteria for the Secretary
to determine whether to grant a State’s
request. Subpart C of 45 CFR part 158
specifies that the adjustment request
must be initiated by the State, the
adjustment may be granted for up to 3
years at a time, the information that the
State must provide to support its
request, and the criteria that HHS may
consider in making a determination. It
also requires the Secretary to invite
public comments on the adjustment
requests, allows States to hold optional
public hearings, and enables States to
request reconsideration of adverse
determinations.
Section 158.301 specifies that an
adjustment may be granted only if there
is a reasonable likelihood that
application of the 80 percent MLR
standard may destabilize the individual
market in a State. Because in the current
environment, it generally is not the MLR
standard in isolation but rather factors
that, taken together, can contribute to
instability of the individual market in
certain States, the current framework
restricts the States’ ability to obtain
adjustments to the MLR standard as part
of innovative solutions for stabilizing
their individual markets. Therefore, as
outlined below, we propose to make
amendments throughout subpart C of
part 158 to allow for adjustments to the
individual market MLR standard in any
State that demonstrates that a lower
MLR standard could help stabilize its
individual market, and to streamline the
process for applying for such
a. Standard for Adjustment to the
Medical Loss Ratio (§ 158.301)
Currently, § 158.301 permits the
Secretary to adjust the MLR standard
that must be met by issuers offering
coverage in the individual market in a
State for a given MLR reporting year, if
the Secretary determines that the 80
percent MLR standard may destabilize
the individual market in that State. For
the reasons described above, we propose
to amend § 158.301 to permit the
Secretary to adjust the individual
market MLR standard in any State if the
Secretary determines that there is a
reasonable likelihood that an
adjustment to the 80 percent MLR
standard will help stabilize the
individual market in that State. We seek
comment on this proposal.
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b. Information Regarding the State’s
Individual Health Insurance Market
(§ 158.321)
We propose to amend § 158.321 to
modify the information that a State must
submit to the Secretary with its request
for an adjustment to the 80 percent MLR
standard in its individual market.
Currently, § 158.321 requires the State
to describe the State MLR standard and
formula for assessing compliance
(§ 158.321(a)), its market withdrawal
requirements (§ 158.321(b)), and the
mechanisms available to the State to
provide consumers with options for
alternate coverage (§ 158.321(c)). This
information is used to determine what
a State is able to do to mitigate
instability in its individual market
without an adjustment to the MLR
standard. Because we seek to make the
MLR adjustment process less
burdensome on States and make
adjustments available to enable States to
develop innovative solutions for
stabilizing their individual markets, we
propose to remove the requirements in
§ 158.321(a) through (c). Further, all
States must follow the Federal
minimum standards for the MLR
calculation, market withdrawals, and
guaranteed issue and limits on health
status ratings; therefore, we believe it is
not necessary for a State to include this
information as part of its MLR
adjustment request. Additionally, we
propose to redesignate paragraph (d) as
paragraph (a) and to revise the
redesignated paragraph to describe the
information the State must submit
regarding the State’s individual health
insurance market, as outlined below.
Current regulations require a State to
provide detailed individual market
enrollment and premium data for each
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51115
issuer at the product level as well as
each issuer’s market share of the
individual market in the State
(§ 158.321(d)(1)). We consider this
requirement unduly burdensome and
propose to replace it at § 158.321(a)(2)
with a requirement to submit
information on total number of enrollees
(life-years and covered lives) for each
type of coverage sold or renewed in the
State’s individual market, as described
in more detail below. We believe that
enrollment data on life-years and
covered lives for each type of individual
market coverage, rather than the number
of individual enrollees by product,
would provide sufficient information
because the much more granular
product-level detail is not necessary for
HHS to evaluate the likelihood and
magnitude of enrollees potentially
moving from one type of coverage to the
other and the impact this may have on
the State individual market’s risk pool
and market competition. ‘‘Life-years,’’
which the MLR Annual Reporting Form
Instructions define as member-months
divided by 12, generally represent
average enrollment over the course of a
year, while ‘‘covered lives’’ are defined
in those Form Instructions as
enrollment on the last day of the year.
Similarly, we propose to eliminate the
requirement currently in § 158.321(d)(1)
to submit product-level premium data
in favor of the total earned premium
data in the proposed § 158.321(a)(1) as
described below, and to eliminate the
§ 158.321(d)(1) requirement to submit
the issuer’s individual market share
because HHS can determine it based on
the MLR data available to HHS.
Section 158.321(d)(2) also currently
requires States to submit information
regarding the total earned premium
(§ 158.321(d)(2)(i)), agent and broker
commissions (§ 158.321(d)(2)(iv)), and
risk-based capital (RBC) level
(§ 158.321(d)(2)(viii)), for each issuer
that offers individual market coverage to
more than 1,000 enrollees. We consider
this information to continue to be
relevant to determining the health of a
State’s individual market and whether
an adjustment to the MLR standard
could help stabilize the market. We
therefore propose to continue to require
States to include information on total
earned premium (proposed
§ 158.321(a)(1)) and total agent and
broker commission expenses (proposed
§ 158.321(a)(3)) for each type of
coverage sold or renewed in the State’s
individual market, as described in more
detail below, as well as the RBC level
(proposed § 158.321(a)(5)), which, due
to the manner in which RBC is
calculated, would only be appropriate to
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report at the issuer level, rather than for
each type of coverage. We also propose
to revise the accompanying regulation
text for these data elements for
readability. We further propose that
State requests should include
information on total incurred claims
(proposed § 158.321(a)(1)) for each type
of individual market coverage described
below, in lieu of the current more
burdensome requirement to provide
reported and estimated individual
market MLRs (§ 158.321(d)(2)(ii)
through (iii)).
We propose to modify these
requirements to require States to only
include the information for each issuer
actively offering individual market
coverage. In most States, only a few
issuers are actively participating, while
the majority of issuers that have policies
in force are not active and generally
cover a much smaller percentage of the
market. HHS can obtain the limited
information on such issuers that would
be relevant to analyzing a State’s request
from the combination of the MLR data
available to HHS and the data on active
issuers provided by the State, rather
than requiring a State to submit data on
these issuers as part of its request for an
adjustment. We also propose to add a
new § 158.321(b) to require that a State
request include the individual market
data required in the proposed new
§ 158.321(a)(1) through (4) and (6)
separately for each issuer actively
offering individual market plans in that
State group by the following categories,
as applicable: On-Exchange, offExchange, grandfathered health plans as
defined in § 147.140, coverage that
meets the criteria for transitional
policies outlined in applicable
guidance,74 and non-grandfathered
single risk pool coverage, in order to
enable the Secretary to assess the
situation in the State’s individual
market and to appropriately evaluate the
State’s proposal. Proposed new
§ 158.321(b) would also require the
State to report the RBC information at
the issuer level for each issuer actively
offering coverage in the State’s
individual market. A State would not be
required to provide information on
student health insurance coverage as
defined in § 147.145 or individual
market excepted benefits as defined in
§ 148.220.
To further reduce the burden on
States, we propose to remove the
74 See, for example, CMS ‘‘Insurance Standards
Bulletin Series—Information—Extension of
Transitional Policy through Calendar Year 2018
(February 23, 2017) available at https://
www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Extension-TransitionalPolicy-CY2018.pdf.
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requirements to provide net
underwriting profit for each issuer’s
total business in the State and after-tax
profit and profit margin for the
individual market and total business in
the State (§ 158.321(d)(2)(vii)), as well as
to rename the remaining requirement to
provide the individual market ‘‘net
underwriting profit’’ to ‘‘net
underwriting gain’’ to more accurately
reflect the accounting term (proposed
§ 158.321(a)(4)). We believe data on the
individual market net underwriting gain
provides sufficient information because
an issuer’s total gain or loss in a State
does not necessarily impact the issuer’s
decision to participate in the individual
market. We also propose to delete the
requirement to provide information on
estimated MLR rebates
(§ 158.321(d)(2)(v)) to reduce the burden
on States because HHS can estimate
rebate amounts based on available data.
Additionally, we propose to revise the
language at current paragraph
§ 158.321(d)(2)(ix), proposed to be
redesignated at § 158.321(a)(6), to
require the State to provide information
not only on notices by issuers covered
in § 158.321(a) of market exits, but also
the equally or more pertinent issuer
notices of beginning to offer coverage in
the individual market, as well as ceasing
or commencing offering individual
market coverage on the Exchange or in
specific geographic areas (for example,
counties); and to add a new § 158.321(c)
to require similar information on issuers
not actively offering coverage in the
individual market that have indicated
an intent to enter or exit the individual
market, including ceasing or
commencing offering individual market
coverage on the Exchange or in specific
geographic areas. Lastly, we recognize
that in many situations the information
proposed to be required in § 158.321(a)
will only be available for the preceding
calendar year, but we propose to
provide States with an option to also
include information for the current year
(where available), which may be more
relevant if a State makes a request in a
later part of the year.
We seek comment on this proposal.
c. Proposal for Adjusted Medical Loss
Ratio (§ 158.322)
To reduce the burden on States, we
propose to remove paragraphs (a), (c)
and (d) of § 158.322, which would
remove the requirements for a State to
justify how its proposed adjustment was
determined, and to estimate rebates that
would be paid with and without an
adjustment because HHS can make
these estimates instead of the State.
Consistent with our proposed changes
to § 158.301, we propose to revise
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Fmt 4701
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§ 158.322 to require the State to both
provide its proposed, adjusted MLR
standard and explain how this proposed
standard would help stabilize its
individual market. We also propose to
delete current paragraph (b), which
requires an explanation of how an
adjustment would permit issuers to
adjust current business models and
practices in order to meet an 80 percent
MLR as soon as is practicable, to further
reduce burden on States submitting
adjustment requests.
We seek comment on this proposal.
d. Criteria for Assessing Request for
Adjustment to the Medical Loss Ratio
(§ 158.330)
Section 158.330 lists the criteria that
the Secretary may consider in
determining whether to approve a State
request to adjust the 80 percent MLR
standard for the individual market. We
are proposing amendments throughout
the section to reflect the proposal in
§ 158.301 to allow adjustments if the
Secretary determines the adjustment
would help stabilize the individual
market in that State, and the proposed
changes to the information requirements
in § 158.321. These changes are
intended to further streamline the
process and reduce burdens for States
and HHS. Specifically we propose
conforming amendments to the
introductory text of § 158.330 to provide
that the Secretary may consider the
identified criteria when assessing
whether an adjustment to the individual
market MLR standard would be
reasonably likely to help stabilize the
individual market in a State that has
requested such an adjustment. We
propose to replace the information
currently outlined at § 158.330(a)(1)–(4)
regarding individual market issuers
reasonably likely to exit the State with
information regarding the number and
financial performance of issuers actively
offering individual market coverage onExchange, off-Exchange, grandfathered
health plans as defined in § 147.140,
coverage that meets the criteria for
transitional policies outlined in
applicable guidance, and nongrandfathered single risk pool coverage;
the number of issuers reasonably likely
to cease or begin offering such
individual market coverage in the State;
and the likelihood that an adjustment
would increase competition in the
State’s individual market, including in
underserved areas (proposed
§ 158.330(a)). We propose to delete the
existing criteria captured at § 158.330(b)
related to consideration of the number
of individual market enrollees covered
by issuers that are reasonably likely to
exit the State’s individual market absent
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the requested adjustment because the
goal of a State request for adjustment
may be to ensure that health insurance
coverage is available to all, rather than
a certain percentage of, consumers who
want it, and that consumers not only
have coverage, but also a choice of
several issuers. We propose conforming
amendments to the criteria currently
captured at § 158.330(c), proposed to be
redesignated at § 158.330(b), regarding
whether an adjustment might improve
consumers’ access to agents and brokers.
Similar to the proposed amendments to
§ 158.321 described above to remove the
requirement for States to provide
information on available mechanisms to
provide alternate coverage, we propose
to replace the current criteria outlined at
§ 158.330(d)(1)–(5) with consideration
of information on the capacity of any
new issuers or issuers remaining in the
individual market to write additional
business in the event one or more
issuers were to cease or begin offering
individual market coverage on
Exchanges, in certain geographic areas,
or in the entire individual market in the
State (proposed § 158.330(c)). We
propose to retain and modify the
existing criteria at § 158.330(e),
proposed to be redesignated at
§ 158.330(d), on the impact on
premiums charged, and on benefits and
cost sharing provided, to consumers by
issuers remaining in or entering the
individual market in the event one or
more issuers were to cease offering
individual market coverage on the
Exchange, in certain geographic areas,
or in the entire individual market in the
State. Finally, the proposed
amendments retain the existing criteria
at § 158.330(f), proposed to be
redesignated at § 158.330(e), for
consideration of any other relevant
information submitted by the State.
We seek comment on this proposal.
e. Treatment as a Public Document
(§ 158.341)
Because the format in which States
may submit requests for adjustments
may not comply with Federal
requirements for documents posted on
Federal Web sites, some of these
documents may not be able to be posted
directly to the applicable Federal Web
site. For example, a State may submit
spreadsheets containing data or copies
of issuer letters in a format that is not
accessible for individuals with visual
impairments. However, HHS is
committed to transparency and making
this information promptly available to
the public. Therefore, we propose to
amend § 158.341 to reflect that Federal
requirements for documents posted on
Federal Web sites may not permit these
documents to be posted, and to specify
that instructions for the public to access
information on requests for adjustment
to the MLR standard submitted by States
will be provided on the Secretary’s
Internet Web site.
f. Subsequent Requests for Adjustment
to the Medical Loss Ratio (§ 158.350)
We propose to make conforming
amendments to § 158.350, which
describes the information that a State
must submit with a subsequent request
for an adjustment to the MLR standard,
to make this information consistent with
our proposed changes to § 158.301 and
§ 158.330.
We seek comment on this proposal.
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
51117
is given in the following paragraphs
with an estimate of the annual burden,
summarized in Table 12. 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 the required issues under
section 3506(c)(2)(A) of the PRA for the
following information collection
requirements.
A. Wage Estimates
To derive wage estimates, we
generally used data from the Bureau of
Labor Statistics to derive average labor
costs (including a 100 percent increase
for fringe benefits and overhead) for
estimating the burden associated with
the ICRs.75 Table 11 in this proposed
rule presents the mean hourly wage
(calculated at 100 percent of salary), the
cost of fringe benefits and overhead, and
the adjusted hourly wage.
As indicated, employee hourly wage
estimates have been adjusted by a factor
of 100 percent. This is necessarily a
rough adjustment, both because fringe
benefits and overhead costs vary
significantly across employers, and
because methods of estimating these
costs vary widely across studies.
Nonetheless, there is no practical
alternative, and we believe that
doubling the hourly wage to estimate
total cost is a reasonably accurate
estimation method.
TABLE 11—ADJUSTED HOURLY WAGES USED IN BURDEN ESTIMATES
Occupational
code
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
Occupation title
Business Operation Specialist * .......................................................................
Operations Manager ........................................................................................
Software Developers, Systems Software ........................................................
Actuary .............................................................................................................
Actuary * ...........................................................................................................
Financial Examiner * ........................................................................................
Financial Analyst * ............................................................................................
75 See May 2016 Bureau of Labor Statistics,
Occupational Employment Statistics, National
Occupational Employment and Wage Estimates at
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13–1199
11–1021
15–1133
15–2011
15–2011
13–2061
13–2051
https://www.bls.gov/oes/current/oes_nat.htm. For
State Government Employees see NAICS 999200—
State Government, excluding schools and hospitals
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Mean
hourly
wage
($/hr)
Fringe
benefits and
overhead
($/hr)
$31.59
58.70
53.17
54.87
40.41
33.02
34.39
$31.59
58.70
53.17
54.87
40.41
33.02
34.39
Adjusted
hourly
wage
($/hr)
$63.18
117.40
106.34
109.74
80.82
66.04
68.78
(OES Designation) https://www.bls.gov/oes/current/
naics4_999200.htm.
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TABLE 11—ADJUSTED HOURLY WAGES USED IN BURDEN ESTIMATES—Continued
Occupational
code
Occupation title
Financial Manager * .........................................................................................
Lawyer * ...........................................................................................................
Secretaries and Administrative Assistants, Except Legal, Medical, and Executive ..........................................................................................................
Commissioner ** ...............................................................................................
Market Research Analyst ................................................................................
Mean
hourly
wage
($/hr)
Fringe
benefits and
overhead
($/hr)
Adjusted
hourly
wage
($/hr)
11–3031
23–1011
45.83
44.87
45.83
44.87
91.66
89.74
43–6014
........................
13–1161
17.38
58.45
33.95
17.38
58.45
33.95
34.76
116.90
67.90
* Denotes occupations were wages were obtained for State Government employees (https://www.bls.gov/oes/current/naics4_999200.htm).
** Data on compensation of State Insurance Commissioners collected by the Council of State Governments and compiled by Ballotpedia (https://
www.ballotpedia.org). The wage data used in the burden estimates include the cost of fringe benefits and the adjusted hourly wage.
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
B. ICRs Regarding State Flexibility for
Risk Adjustment (§ 153.320)
We are proposing to allow State
regulators to request a reduction in the
calculation of Statewide average
premium, beginning for the 2019 benefit
year. HHS would require any State that
intends to request this flexibility to
submit its proposal for an adjustment to
the Statewide average premium in the
small group market within 30 calendar
days after publication of the proposed
HHS notice of benefit and payment
parameters for the applicable benefit
year for timely review and issuer
notification prior to rate setting. The
burden associated with this requirement
is the time and effort for the State
regulators to submit its proposal to
HHS. We estimate that it will take a
business operations specialist 32 hours
(at a rate of $63.18 per hour) to prepare
the request and 16 hours for a senior
manager (at a rate of $117.40 per hour)
to review the request and transmit it
electronically to HHS. We estimate that
each State seeking a reduction in the
average premium calculation will incur
a burden of 48 hours at a cost of
approximately $3,900 per state to
comply with this reporting requirement
(32 hours for the insurance operations
analyst and 16 hours for the senior
manager). Although we are unable to
precisely estimate the number of States
that will make this request, we expect
that no more than 25 States will make
these requests annually, resulting in a
total annual burden of approximately
1,200 hours with an associated total cost
of $97,504. We seek comment on this
estimated burden. We propose to revise
the current information collection
approved under OMB control number
0938–1155: Standards Related to
Reinsurance, Risk Corridors, Risk
Adjustment, and Payment Appeals, to
account for this additional burden.
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C. ICRs Regarding Risk Adjustment Data
Validation and 500 Billable Member
Months (§ 153.630)
We propose that, beginning with 2017
benefit year risk adjustment data
validation, issuers with 500 billable
member months or fewer that elect to
establish and submit data to an EDGE
server would not be subject to the
requirement to hire an initial validation
auditor or submit initial validation audit
results. Issuers at or below the 500
billable member months threshold
would have their risk score adjusted by
a default error rate equal to the lower of
either the national average negative
error rate, or the average negative error
rate within a State, as set forth in the
2018 Payment Notice. We note that,
beginning with 2018 benefit year risk
adjustment data validation, these issuers
would not be subject to random
sampling under the materiality
threshold discussed below, and would
continue to not be subject to the
requirement to hire an initial validation
auditor or submit initial validation audit
results, but would have their risk scores
adjusted by a default error rate annually.
We note that if the proposal to
implement a central tendency approach
to payment adjustments is finalized,
then it is possible no adjustment would
occur for issuers below this threshold.
HHS estimates that not requiring
issuers that have 500 or fewer billable
member months Statewide to conduct
an initial validation audit beginning in
the 2017 benefit year would exempt 50
issuers from an initial validation audit
and reduce administrative costs for each
issuer by 828 hours with an estimated
cost reduction on average of up to
$100,000. The total burden reduction for
all 50 issuers would be 41,400 hours
with an associated reduction in cost or
$3,520,000. The postponement of the
materiality threshold to the 2018 benefit
year would not impact issuer burden
relative to previous estimates for the
risk adjustment data validation program
included in the 2014 and 2015 Payment
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Notices, particularly given that the
program has been converted to a pilot
for the first 2 years of operation. We
propose to revise the current
information collection approved under
OMB control number 0938–1155:
Standards Related to Reinsurance, Risk
Corridors, Risk Adjustment, and
Payment Appeals, to account for this
reduction in burden.
D. ICRs Regarding Health Insurance
Issuer Rate Increases: Disclosure and
Review Requirements—Applicability
(§ 154.103)
We propose to modify § 154.103(b) to
exempt student health insurance
coverage as defined in 45 CFR 147.145
from the Federal rate review
requirements. Because we would no
longer be reviewing rates for student
health insurance coverage, we expect to
collect less information for the 2019
plan or policy year than collected for
previous years. This would lead to a
reduction in burden related to the
submission and review for issuers and
States. We estimate that 75 student
health insurance issuers will no longer
be required to submit rate increases to
HHS. We estimate that each rate review
submission takes 11 hours for an
actuary (at a rate of $109.74 per hour)
to prepare, and that each issuer would
submit an average of 2.5 plans, at an
estimated annual cost of $3,018,
resulting in a total reduction in the
annual burden to issuers of
approximately 2,063 hours and an
associated reduction in cost of
approximately $226,339. We estimate
that States would no longer submit rate
increases for 188 student health
insurance plans to HHS. We estimate a
reduction in burden to States of one
hour per plan for an actuary (at a rate
of $80.82 per hour) to prepare and
electronically submit the appropriate
materials, for a total reduction in burden
of approximately 188 hours annually
with an associated cost reduction of
approximately $15,194. We propose to
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revise our current burden estimate
approved under OMB control number
0938–1141: Rate Increase Disclosure
and Review Reporting Requirements, to
reflect the reduced burden on States and
issuers.
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
E. ICRs Regarding Rate Increases
Subject to Review (§ 154.200)
We propose to amend § 154.200 to
establish a 15 percent default threshold
for reasonableness review. We expect
this to reduce burden for some issuers
because Part II of the Rate Filing
Justification (Consumer Justification
Narrative) is only required for increases
that meet or exceed the threshold. Based
on rate filings for the 2018 plan year, we
estimate a burden reduction of
approximately 17 percent, or 129 fewer
Narratives. We reached this estimate by
counting the number of submissions
with a product subject to review due to
an increase between 10 percent and 14.9
percent. We estimate that each
Consumer Justification Narrative takes
0.5 hours for an actuary (at a rate of
$109.74 per hour) to prepare and
electronically transmit this document to
HHS. We estimate a total reduction in
burden of 65 hours and an associated
cost reduction is $7,078. We propose to
revise our current burden estimate
approved under OMB control number
0938–1141: Rate Increase Disclosure
and Review Reporting Requirements, to
reflect the reduced burden on issuers.
F. ICRs Regarding the Small Business
Health Options Program (SHOP)
We are proposing to grant additional
flexibilities, effective on the effective
date of the final rule, if finalized as
proposed, and applicable for plan years
beginning on or after January 1, 2018, to
SHOPs, to qualified employers and
employees enrolling in SHOP plans, and
to participating QHP issuers and SHOPregistered agents and brokers in how
they interact with a SHOP. Under the
proposals outlined throughout this
document, SHOPs would no longer be
required to provide enrollment,
premium aggregation services, and
online enrollment functionality through
a SHOP Web site. Instead, small groups
would enroll in a SHOP plan through a
SHOP-registered agent or broker or
through a participating QHP issuer
participating in a SHOP. If this rule is
finalized as proposed, the FF–SHOPs
would follow the approach as outlined.
SBEs would have the flexibility to
operate a SHOP in a way that meets the
needs of their State and complies with
the regulatory flexibilities outlined
herein.
Under the proposed approach, several
pieces of information currently being
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collected by a SHOP would no longer be
collected by a SHOP, or, the way in
which the information is collected
would change. For example, employers,
employees, and agents and brokers may
be required to provide the information
currently collected by a SHOP to an
issuer for the purposes of enrollment in
a SHOP plan. The SHOP however,
would not be the entity collecting the
information and the Federal government
thus would experience a reduction in
burden. Under the proposals described
throughout this rule, employers and
employees would no longer be required
to visit a SHOP Web site in order to
enroll in a SHOP plan and a SHOP
would no longer be required to have the
capability or the need to collect
enrollment information. Employers
would however, be required to apply to
the SHOP to obtain an eligibility
determination, as described in
§ 155.710, at which point the employer
would be asked to provide: (1) Employer
name and address of employer’s
locations; (2) Information sufficient to
confirm the employer is a small
employer; (3) Employer Identification
Number (EIN); and (4) Information
sufficient to confirm that the employer
is offering, at a minimum, all full-time
employees coverage in a QHP through a
SHOP. Under current regulations, the
employer provides, and a SHOP
collects, this information as part of
enrolling in a SHOP QHP through a
SHOP. HHS previously estimated that
an employer needed two hours to
complete the eligibility determination
when it was included as part of
enrolling in a SHOP QHP and that 6,000
employers would complete an
application annually to determine their
eligibility through a SHOP Web site.
Based on these criteria, HHS estimated
that the total annual burden for 6,000
employers was 12,000 hours, with a
total annual cost of $561,240 to
complete the SHOP application and
eligibility determination process. With
the proposed flexibilities, HHS
estimates that for each employer, an
administrative assistant would need less
than 5 minutes (at rate of $34.76 per
hour) to complete the required
eligibility determination. Under the
proposed flexibilities, employers would
also no longer be required to create an
account on an FF–SHOP Web site in
order to complete the eligibility
determination or enroll in a SHOP QHP.
Therefore, HHS estimates that it would
cost an employer approximately $3 to
complete an eligibility determination.
Assuming that 6,000 employers would
complete an eligibility determination,
HHS estimates that the total annual
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51119
burden would be approximately 500
hours, with an estimated total cost of
$17,400. This would result in a net
burden reduction of 11,500 hours and a
net cost reduction of approximately
$543,840 annually. Under the proposals
in § 157.206(e)(1), employers would be
responsible for submitting a new
eligibility determination or, submitting
a notice of withdrawal, in the event the
group experienced a change that would
impact the group’s eligibility to
participate in a SHOP. Under the
proposals in § 157.206(e)(2), employers
would also be required to notify their
QHP issuer(s) of a determination of
ineligibility. Finally, employers would
also, under § 157.206(e)(3) be required
to notify their issuer(s) of their intent to
no longer participate in a SHOP. While
these proposals would require
employers to communicate with issuers
in ways they do not under current
SHOP enrollment practices, HHS does
not anticipate that these practices would
increase the burden on employers as
they, under current practice, must notify
the SHOP of changes in eligibility and
termination. Although the proposals in
§ 155.716 impose an information
collection requirement, the information
that would be collected is no different
from what is already approved under
OMB control number 0938–1193: Data
Collection to Support Eligibility
Determinations and Enrollment for
Small Businesses in the Small Business
Health Options, and therefore we are
not proposing to revise the information
collection at this time.
Employees, under the proposals to
§ 155.716 would not experience an
increase in burden. Under the proposals
described throughout this proposed
rule, employees would no longer be
required to visit an FF–SHOP Web site
to create an account, or, for any
application or enrollment purpose, but
they may need to provide similar
information to an agent or broker or
issuer as a condition of enrollment into
a SHOP QHP. HHS previously estimated
that 60,000 employees completed an
application annually, each spending
approximately one hour to complete an
online application through an FF–SHOP
Web site. The estimated annual burden
was 60,000 burden hours with an
annual cost of $1,025,400. With the
proposed flexibilities to a SHOP as
described in this rule, HHS predicts that
the burden on employees to complete an
online application would shift as no
application would be provided through
a SHOP Web site, but the information
may be required by an agent or broker
or an issuer in order for the employee
to complete an enrollment into a SHOP
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QHP. The proposals described
throughout this proposed rule will
allow agents and brokers and issuers to
enroll consumers in SHOP plans using
the channels they are most familiar
with, potentially reducing the burden of
enrolling SHOP groups. This
information collection is currently
approved under OMB control number
0938–1194: Data Collection to Support
Eligibility Determinations and
Enrollment for Employees in the Small
Business Health Options Program.
Therefore, we are not proposing to
revise the information collection at this
time.
Current regulations, found throughout
§§ 155.705, 155.715, 155.720, 155.725,
require SHOPs to generate certain
notices. These notices may include: (1)
Notices of annual election periods, (2)
notices to employers of employee
coverage terminations, (3) notices of
application inconsistencies, (4) notices
of appeal rights and instructions, (5)
notices of employee and employer
eligibility, (6) notices of employer
withdrawal, (7) (in FF–SHOPs only)
notices to employees if a dependent
turns 26 and is no longer eligible for
dependent coverage, (8) billing invoices,
successful and unsuccessful payment
confirmation notices, and (9) past due
payment notices. In prior guidance,
HHS previously estimated costs for
paper notices in an FF–SHOP. In that
estimate, HHS assumed that 80 percent
of enrollees requested electronic notices
and 20 percent of enrollees requested
paper notices. HHS estimated that
mailing paper notices costs a SHOP
Exchange $0.53 per notice. HHS
determined that SHOPs sent
approximately 48,000 notices to
enrollees when (1) a dependent became
ineligible to remain on the plan, (2)
successful payment was processed, and
(3) a payment was unsuccessful in the
last year. Assuming that 20 percent of
enrollees would opt to receive paper
notices instead of electronic
notifications, HHS estimated that
approximately 9,600 notices would be
sent, costing FF–SHOPs approximately
$5,088. Under the proposed flexibilities,
the SHOPs would only be required to
send notices of employer eligibility and
appeals. This cost would not directly be
transferred to issuers as issuers may
already be required to send such notices
per other applicable State and Federal
Law. This collection is currently
approved under OMB control number
0938–1207: Essential Health Benefits in
Alternative Benefit Plans, Eligibility
Notices, Fair Hearing and Appeal
Processes, and Premiums and Cost
Sharing; Exchanges: Eligibility and
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Enrollment. If this approach is finalized
as proposed, issuers would be required
to collect premiums, as premium
aggregation services would no longer be
provided by the SHOPs that take
advantage of the proposed flexibilities.
HHS does not anticipate a significant
increase of issuers’ burden in this
scenario, as it is not significantly
different from their current operating
practices.
G. ICRs Regarding States Defining the
Essential Health Benefits (§ 156.111(e))
We propose at § 156.111(e) to revise
the collection of data for selection of
States’ EHB-benchmark plans for plan
years beginning on or after January 1,
2019. This proposal includes the
documentation that States would be
required to submit if the State chooses
to change its EHB-benchmark plan. For
this purpose, we propose to amend the
currently approved information
collection (OMB Control Number: 0938–
1174) to reflect the proposed policy.
Because § 156.111(e) would replace the
current data collection requirements at
§ 156.120, we would update the current
EHB-benchmark plan selection to
account for the proposed new regulation
and any associated burden with this
requirement that would fall on those
States that choose to reselect their EHBbenchmark plan. Under the previous
benchmark plan selection policy, 29
States selected one of the 10 basebenchmark plan options and 22 States
defaulted. The current policy did not
allow for States to make an annual
selection. The proposed regulation
would allow States to modify their EHBbenchmark plans annually, but would
not require them to respond to this ICR
for any year for which they did not
change their EHB-benchmark plan. As
such, for purposes of this proposed
regulation, we estimate that 10 States
would choose to make a change to their
EHB-benchmark plans in any given year
(total of 30 States over 3 years within
the authorization of this ICR) and would
respond to this ICR.
The proposals at § 156.111(e)(1)
would require the State to provide
confirmation that the State’s EHBbenchmark plan selection complies with
certain requirements, including those
under proposed § 156.111(a), (b), and
(c). To complete this requirement, we
estimate that a financial examiner
would require 4 hours (at a rate of
$66.04 per hour) to fill out, review, and
transmit a complete and accurate
document. We estimate that it would
cost each State $264 to meet this
reporting requirement, with a total
annual burden for all 10 States of 40
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hours and an associated total cost of
$2,642.
The proposals in § 156.111(e)(2)
would further require the State to
submit an actuarial certification and
associated actuarial report of the
methods and assumptions when
selecting proposed options under
§ 156.111(a)(2) and (3). Specifically, the
actuarial certification that is being
collected under this ICR would be
required to include an actuarial report
that complies with generally accepted
actuarial principles and methodologies.
This would include complying with all
applicable ASOPs (including ASOP 41
on actuarial communications). For
example, ASOP 41 on actuarial
communications includes disclosure
requirements, including those that
apply to the disclosure of information
on the methods and assumptions being
used for the actuarial certification and
report. The actuarial certification for
this proposed requirement is provided
in a template and includes an attestation
that the standard actuarial practices
have been followed or that exceptions
have been noted. The signing actuary
would be required to be a Member of the
American Academy of Actuaries. We are
also seeking comment on a draft
document entitled Draft Example of an
Acceptable Methodology for Comparing
Benefits of a State’s EHB-benchmark
Plan Selection to Benefits of a Typical
Employer Plan As Proposed under the
HHS Notice of Benefit and Payment
Parameters for 2019 (CMS–9930–P) 76
that would provide an example of
method an actuary could use to develop
this actuarial certification and report.
We estimate that an actuary, who is a
member of the American Academy of
Actuaries, would require 16 hours (at a
rate of $80.82 per hour) on average for
§ 156.111(e)(2). This would include the
certification and associated actuarial
report from an actuary to affirm, in
accordance with generally accepted
actuarial principles and methodologies
that the State’s EHB-benchmark plan
definition is equal in scope of benefits
provided under a typical employer plan.
Additionally, this estimate of 16 hours
would also apply if the State is selecting
its EHB-benchmark plan using the
option proposed at § 156.111(a)(3). The
option proposed at § 156.111(a)(3)
would also require the actuary to affirm
76 The Draft Example of an Acceptable
Methodology for Comparing Benefits of a State’s
EHB-benchmark Plan Selection to Benefits of a
Typical Employer Plan As Proposed under the HHS
Notice of Benefit and Payment Parameters for 2019
(CMS–9930–P) is available on CCIIO’s Regulation
and Guidance Web page at https://www.cms.gov/
cciio/resources/regulations-and-guidance/
index.html.
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that the State’s selected EHB-benchmark
plan does not exceed the generosity of
the most generous among a set of
comparison plans proposed
§ 156.111(a)(3), including the State’s
EHB-benchmark plan used for the 2017
plan year and any of the State’s basebenchmark plan options for the 2017
plan year described in § 156.100(a)(1),
supplemented as necessary under
§ 156.110. For these calculations, the
actuary would need to conduct the
appropriate calculations to create and
review an actuarial certification and
associated actuarial report, including
minimal time required for
recordkeeping. The precise level of
effort for the actuary certification and
associated actuarial report under
§ 156.111(e)(2) would likely vary
depending on the State’s approach to its
EHB-benchmark plan and this
certification requirement. For example,
the State may only need to do one plan
comparison for the purposes of both of
these proposed certification
requirements. Specifically, the State
could use the same plan, such as the
State’s EHB-benchmark plan used for
the 2017 plan year, to determine that the
new State’s EHB-benchmark plan is
equal to the scope of benefits provided
under a typical employer plan. The
State could also use those findings to
determine that because the new State
EHB-benchmark plan is equal in scope
of benefits to the State’s EHBbenchmark plan used for the 2017 plan
year, the new State EHB-benchmark
plan does not exceed the generosity of
the most generous of the set of
comparison plans. We estimate that a
financial examiner would require one
hour (at a rate of $66.04 per hour) to
review, combine, and electronically
transmit these documents to HHS, as
part of a State’s EHB-benchmark plan
submission. Because this section of the
proposed regulation would only apply
to options 2 and 3 under proposed
§ 156.111(a)(2) and (3), we are
estimating that only two thirds of States
(7 of the 10 States) would need to
complete and submit this proposed
documentation requirement. Therefore,
we estimate that each State would incur
a burden of 17 hours with an associated
cost of $1,359, with a total annual
burden for 7 states of 119 hours at
associated total cost of $9,514. We seek
comment on this estimate.
The proposals at § 156.111(e)(3)
would further require each State to
submit its new EHB-benchmark plan
documents. The level of effort
associated with this requirement could
depend on the State’s selection of the
EHB-benchmark plan options under the
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proposed regulation at § 156.111(a).
However, for the purposes of this
estimate, we estimate that it would
require a financial examiner (at a rate of
$66.04 per hour) 12 hours on average to
create, review, and electronically
transmit the State’s EHB-benchmark
plan document that accurately reflects
the benefits and limitations, including
medical management requirements and
a schedule of benefits, resulting in a
burden of 12 hours and an associated
cost of $792, with a total annual burden
for all 10 states of 120 hours and an
associated cost of $7,925. The burden
for producing these documents is
significantly higher than previous
estimates because the previous data
collection generally only required the
State (or issuer) to transmit the selected
benchmark plan document. In contrast,
in some cases, the proposed § 156.111(a)
may result in the State needing to create
a completely new document or
significantly modify the current
document to represent the plan
document. Additionally, this estimate of
12 hours also includes the burden
necessary for a State selecting the option
at proposed § 156.111(e)(3) where the
State would also be required to submit
a formulary drug list for the State’s EHBbenchmark plan in a format and manner
specified by HHS. Specifically, the
burden for the State selecting this
option would also likely vary as the
State could use an existing formulary
drug list or create its own formulary
drug list separately for this purpose. To
collect the formulary drug list, the State
would be required to use the template
provided by HHS and submit the
formulary drug list as a list of RxNorm
Concept Unique Identifiers (RxCUIs).
Lastly, the proposal at § 156.111(e)(4)
would require the State to submit the
documentation necessary to
operationalize the State’s EHBbenchmark plan. This reporting
requirement includes the EHB summary
file that is currently posted on CCIIO’s
Web site, used as part of the QHP
certification process, and integrated into
HHS’s IT Build systems that feed into
the data that is displayed on
HealthCare.gov. While this document
would not be a new document, the
burden associated with this document
would be new for States. We estimate
that it would require a financial
examiner 12 hours, on average, (at a rate
of $66.04 per hour) to create, review,
and electronically submit a complete
and accurate document to HHS resulting
in a burden of 12 hours and an
associated cost of $792, with a total
annual burden for all 10 states of 120
hours and an associated cost of $7,925.
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51121
Under the current policy, the burden
estimates 226 respondents per year, for
a total yearly burden total of 165 annual
burden hours and a total annual
associated cost of $8,094 to meet these
reporting requirements. Under the
proposed policy related to EHB, we
estimate that the total number of
respondents would be 10 per year, for
a total yearly burden of 399 hours and
an associated cost of $28,005 to meet
these reporting requirements. The
estimated burden associated with the
proposed changes represents an increase
of 234 hours (increase from 165 hours
to 399 hours) and an annual costs
increase of $19,911 (from $8,094 to
$28,005) over the approved information
collection (OMB Control Number: 0938–
1174).
As part of the update to this OMB
Control Number: 0938–1174, we are also
seeking comment on requirements for
SADPs to submit voluntary reporting.
This collection includes data on
whether the issuer intends to offer
SADP coverage, the anticipated
Exchange market in which coverage
would be offered, and the State and
service area in which the issuer offers
coverage. The burden associated with
meeting this requirement includes the
time and effort needed by the issuer to
report on whether it intends to offer
SADP coverage. We estimate that it will
take one half hour for a health insurance
issuer to meet this reporting
requirement. We estimate that
approximately 175 issuers will respond
to this data collection. Therefore, we
anticipate that the reporting
requirement would require a market
research analyst one half-hour annually
to identify and submit the responsive
records to CMS (at a rate of $67.90 per
hour), for a total cost of $34 a year per
reporting entity. This would result in an
annual burden of 87.5 hours for all 175
issuers and a resulting estimated annual
cost of $5,941. OMB approvals are
issued for three years; therefore, the
aggregate burden for three years would
be approximately 263 hours with an
associated cost of approximately
$17,824. We seek comment on these
proposed estimates.
H. ICRs Regarding Medical Loss Ratio
(§§ 158.170, 158.221, 158.320–323,
158.340, 158.346, and 158.350)
We are proposing to amend § 158.221
to allow issuers the option to report
quality improvement activity expenses
as a single fixed percentage of premium
amount, and make conforming
amendments to § 158.170. We do not
anticipate that implementing this
provision would require significant
changes to the MLR annual reporting
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form and the associated burden. The
burden related to this collection is
currently approved under OMB control
number 0938–1164; Medical Loss Ratio
Annual Reports, MLR Notices, and
Recordkeeping Requirements.
We are also proposing to amend
Subpart C to modify the data and
narratives which a State must submit as
part of the State’s request for an
adjustment to the MLR standard in the
individual market for that State. There
is no standardized application form
associated with a State’s request, but
each request must contain certain data
elements in order to receive
consideration by the Secretary, which
are described in §§ 158.320–158.323,
158.340, 158.346, and 158.350. The
burden related to the proposed
requirements was previously approved
under OMB control number 0938–1114,
Medical Loss Ratio (IFR) Information
Collection Requirements and
Supporting Regulations; the approval
expired in 2014. We intend to reinstate
this information collection, with
modifications to reflect our proposed
revisions to subpart C of part 158. This
document serves as the 60-day notice to
afford the public an opportunity to
comment on this collection of
information requirement. To obtain
copies of a supporting statement and
any related forms for the proposed
collection summarized in this
document, you may make your request
using one of following: (1) Access
CMS’s Web site address at https://
www.cms.hhs.gov/
PaperworkReductionActof1995; (2)
email your request, including your
address, phone number, OMB Control
Number 0938–1114, and CMS document
identifier CMS–10361, to Paperwork@
cms.hhs.gov; or (3) call the Reports
Clearance Office at (410) 786–1326.
We are proposing to eliminate
collection of the following information
from a State requesting an adjustment:
The State MLR standard and formula for
assessing compliance (§ 158.321(a)), its
market withdrawal requirements
(§ 158.321(b)), and the mechanisms
available to the State to provide
consumers with options for alternate
coverage (§ 158.321(c)); as well as the
net underwriting profit for the total
business in the State and the after-tax
profit and profit margin for the
individual market and total business in
the State (§ 158.321(d)(2)(vii)), and the
estimated rebate (§ 158.321(d)(2)(v)) of
each issuer with at least 1,000 enrollees
in the State. We expect this proposal to
reduce the burden on States seeking an
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adjustment. We are also proposing to
replace the requirement that a State
requesting an adjustment must submit
enrollment and premium data for every
individual market issuer at the product
level (§ 158.321(d)(1)) and the reported
and estimated MLRs (§ 158.321(d)(2)(ii)
and (iii)) for issuers with at least 1,000
enrollees, with total enrollment (lifeyears and covered lives), premium, and
total incurred claims for only active
individual market issuers, separately for
five types of individual market
coverage: on-Exchange plans, offExchange plans, grandfathered health
plans as defined in § 147.140, coverage
that meets the criteria for transitional
policies outlined in applicable
guidance, and non-grandfathered single
risk pool coverage. States would not be
required to provide information on
student health insurance coverage as
defined in § 147.145 or excepted
benefits as defined in § 148.220. We
expect this proposal to result in a net
reduction in burden on States seeking
an adjustment. We are also proposing to
continue to collect data on total agents’
and broker’s commission expenses and
net underwriting gain (proposed to be
redesignated from § 158.321(d)(2)(iv)
and (vi) to § 158.321(a)(3) and (4),
respectively) for only active individual
market issuers, but separately for the
five types of coverage described above.
We would continue to collect
information on risk-based capital levels
(proposed to be redesignated from
§ 158.321(d)(2)(viii) to § 158.321(a)(5)) at
the issuer level. While this proposal
would require more breakdown of the
data than § 158.321 currently requires,
in most States there are more issuers
with at least 1,000 enrollees than there
are active issuers in the individual
market, and consequently we expect
that this proposal would have no net
impact on the burden. Additionally, we
are proposing to update
§ 158.321(d)(2)(ix) to collect more
specific information on issuer notices to
the State of changes to participation in
the State’s individual market, rather
than focusing exclusively on notices to
exit the individual market. We do not
expect this proposal to have an
appreciable impact on the burden. We
are further proposing to eliminate the
requirement that a State requesting an
adjustment provide information
explaining and justifying how its
proposed adjustment was determined
and estimating rebates that would be
paid with and without an adjustment
(§ 158.322(a), (c), and (d)); as well as to
replace what information a State must
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Sfmt 4702
provide pursuant to § 158.322(b) with a
requirement to explain how the
adjustment would help stabilize the
State’s individual market. We expect
this proposal to reduce the burden.
Lastly, we are proposing to update what
information a State must submit with a
subsequent request for adjustment
pursuant to § 158.350. We do not expect
this proposal to change the burden.
Based on preliminary data analysis
and previous State requests for
adjustments, we estimate that
approximately 22 States would submit
applications in the first year that the
proposed MLR adjustment process is
codified. We estimate that it would take
approximately 140 hours on average for
each State to complete the application,
including gathering and analyzing data,
synthesizing information, and
developing a proposal for an adjusted
MLR standard. Specifically, we assume
that the application would take a
financial analyst approximately 96
hours (at a rate of $68.78 per hour), an
actuary 6 hours (at a rate of $80.82 per
hour), a financial manager 10 hours (at
a rate of $91.66 per hour), a lawyer 24
hours (at a rate of $89.74 per hour), and
the Commissioner 4 hours (at a rate of
$116.90 per hour) to assemble and
review the various components of the
application, resulting in total of burden
for each state of 140 hours with an
associated cost of $10,626 per response,
representing an estimated total burden
reduction of 45 hours per response. The
documents would be submitted
electronically at minimal cost. We
estimate that the total burden for 22
states to submit a request for an
adjustment to the individual market
MLR standard would be 3,080 hours
with an associated cost of
approximately $233,767, with an
estimated net total reduction in burden
of 620 hours. We recognize that this
burden may vary between States, as
some States may have better access to
the required application information
elements, while other States may have
to seek some of the required information
from health insurance issuers in their
States, which could increase their
burden. Some States may, if providing
the requested information is an undue
burden, ask the Secretary to consider
their application without some of the
information elements. We seek
comment regarding this information
collection requirement.
I. Summary of Annual Burden Estimates
for Proposed Requirements
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51123
TABLE 12—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS
OMB control
No.
Regulation section(s)
Respondents
Burden per
response
(hours)
Responses
Total annual
burden
(hours)
Labor cost
of reporting
($)
Total cost
($)
§ 153.320 ...............................................................................
§ 156.111(e)(1) ......................................................................
§ 156.111(e)(2) ......................................................................
§ 156.111(3)(3) ......................................................................
§ 156.111(e)(4) ......................................................................
§§ 158.320–323, 158.340, 158.346–350 ..............................
0938–1155
0938–1174
0938–1174
0938–1174
0938–1174
0938–1114
0938–1174
25
* 10
*7
* 10
* 10
22
175
25
10
7
10
10
22
175
48
4
17
12
12
140
0.5
1,200
40
119
120
120
3,080
87.5
97,504.00
2,641.60
9,514.12
7,924.80
7,924.80
233,766.72
5,941.25
97,504.00
2,641.60
9,514.12
7,924.80
7,924.80
233,766.72
5,941.25
Total ...............................................................................
....................
207
234
....................
4766.5
365,217.29
365,217.29
* Denote the same entities. For purposes of calculating the total, the highest value is used only once.
** 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 12.
J. 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 and
recordkeeping requirements. These
requirements are not effective until they
have been approved by the OMB.
To obtain copies of the supporting
statement and any related forms for the
proposed collections discussed above,
please visit CMS’s Web site at
www.cms.hhs.gov/
PaperworkReductionActof1995, or call
the Reports Clearance Office at 410–
786–1326.
We invite public comments on these
potential information collection
requirements. If you wish to comment,
please submit your comments
electronically as specified in the
ADDRESSES section of this proposed rule
and identify the rule (CMS–9930–P), the
ICR’s CFR citation, CMS ID number, and
OMB control number.
ICR-related comments are due January
2, 2018.
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.
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VI. Regulatory Impact Analysis
A. Statement of Need
This rule proposes standards related
to the risk adjustment program for the
2019 benefit year, as well as certain
modifications that will promote State
flexibility and control over their
insurance markets, reduce burden on
stakeholders, and protect consumers
from increases in premiums due to
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issuer uncertainty. The Premium
Stabilization Rule and previous
Payment Notices provided detail on the
implementation of the risk adjustment
program, including the specific
parameters applicable for the 2014,
2015, 2016, 2017, and 2018 benefit
years. This rule proposes additional
standards related to essential health
benefits; cost-sharing parameters;
qualified health plan certification; the
Exchanges, including terminations,
exemptions, eligibility and enrollment;
AV for stand-alone dental plans; MEC;
the rate review program; the medical
loss ratio program; the Small Business
Health Options Program; and FFE and
SBE–FP 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)), and Executive
Order 13771 on Reducing Regulation
and Controlling Regulatory Costs
(January 30, 2017).
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
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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.
Section 3(f) of Executive Order 12866
defines a ‘‘significant regulatory action’’
as an action that is likely to result in a
rule—(1) having an annual effect on the
economy of $100 million or more in any
1 year, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
a serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order. A
regulatory impact analysis (RIA) must
be prepared for major rules with
economically significant effects ($100
million or more in any 1 year), and a
‘‘significant’’ regulatory action is subject
to review by OMB. HHS has concluded
that this rule is likely to have economic
impacts of $100 million or more in at
least 1 year, and therefore, meets the
definition of ‘‘significant rule’’ under
Executive Order 12866. Therefore, HHS
has provided an assessment of the
potential costs, benefits, and transfers
associated with this rule.
The provisions in this proposed rule
aim to improve the health and stability
of the Exchanges, and to provide States
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with additional flexibility and control
over their insurance markets. They
would reduce regulatory burden, and
reduce administrative costs for issuers
and States, and would lower net
premiums for consumers. Through the
reduction in financial uncertainty for
issuers and increased affordability for
consumers, these provisions are
expected to increase access to affordable
health coverage. Although there is some
uncertainty regarding the net effect on
enrollment and premiums, we
anticipate that the provisions of this
proposed rule would help further HHS’s
goal of ensuring that all consumers have
access to quality, affordable healthcare;
that markets are stable; and that
Exchanges operate smoothly.
In accordance with Executive Order
12866, HHS has determined that the
benefits of this regulatory action justify
the costs.
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 PPACA is
to make affordable health insurance
available to individuals who do not
have access to affordable employersponsored coverage or governmentsponsored coverage. The provisions
within this proposed rule are integral to
the goal of expanding coverage. For
example, the risk adjustment program
helps prevent risk selection and
decrease the risk of financial loss that
health insurance issuers might
otherwise expect in 2019.
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 the risk
adjustment program works as intended,
and that States have more control and
flexibility over essential health benefits,
QHP certification and the operation and
establishment of Exchanges. Affected
entities such as QHP issuers would
incur costs to comply with the proposed
provisions, for example, those related to
the functions of a SHOP; including
calculating the minimum participation
rate at the employer level and
processing SHOP enrollments for
employers and employees; and States
would incur costs to comply with
provisions regarding essential health
benefits. In accordance with Executive
Order 12866, HHS believes that the
benefits of this regulatory action justify
the costs.
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C. Impact Estimates of the Payment
Notice Provisions and Accounting Table
In accordance with OMB Circular A–
4, Table 13 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 access to 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 any
reduction in burden related to changes
in the timing related to States posting
proposed and final rate filing
information; increased flexibility for
Exchanges related to the removal of
certain requirements for Navigator
programs and non-Navigator assistance
personnel entities; increased access to
the direct enrollment pathway
stemming from permitting a third-party
entity to conduct operational readiness
reviews for agents, brokers, and issuers;
benefits to Exchanges related to
proposed simplifications of verification
requirements; benefits to consumers,
issuers or Exchanges related to the
changes related to the special
enrollment periods; increased flexibility
for States relating to the proposals
regarding the SHOP enrollment process;
potential decreases in premiums to
consumers related to removing actuarial
value standards for SADPs; and
reductions in burden associated with
CHIP buy-in plans with identical
coverage to the CHIP program under
title XXI of the Act in the applicable
State being automatically recognized as
MEC—and certain costs—such as the
costs incurred by small employers,
agents and brokers, and potential
increases in out-of-pocket costs to
consumers related to removing actuarial
value standards for SADPs; and costs to
issuers, brokers, agents, and employers
related to changes in SHOP enrollment
procedures. The effects in Table 13
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 13 reflect direct
administrative costs to health insurance
issuers as a result of the proposed
provisions, and include administrative
costs associated with States requesting a
reduction in the calculation of
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Statewide average premium for the
State’s small group market for the
purpose of risk adjustment, the
reduction in costs relating to issuers and
States having to no longer submit rate
increases for student health insurance
plans to HHS, and costs associated with
States seeking an adjustment to the MLR
standard in the State’s individual
market that are estimated in the
Collection of Information section of this
proposed rule. The annual monetized
transfers described in Table 13 include
costs associated with SBE–FP user fees,
the risk adjustment user fee paid to HHS
by issuers, and reductions in rebate
payments from issuers to consumers
related to QIA and MLR adjustments.
We are proposing to collect a total of
$38 million in risk adjustment user fees
or $1.68 per enrollee per year from risk
adjustment issuers, which is less than
the $40 million in contract costs
expected for benefit year 2017 when we
established a similar $1.68 per-enrolleeper-year risk adjustment user fee
amount. As in 2018, the risk adjustment
user fee contract costs for 2019 include
additional costs for risk adjustment data
validation; however, we expect reduced
costs related to issuer outreach and
education as issuers gain familiarity
with the risk adjustment program, and
enrollment remains steady in 2019 HHS
risk adjustment covered plans compared
to the billable member month
enrollment estimated for 2018. Also, we
expect a decrease in FFE user fee
collections necessary as we estimate
lower contract costs due to streamlining
of FFE operations and an increase in
premiums but also lower enrollment,
resulting in a proposed user fee rate of
3.5 percent for 2019, which is the same
as the FFE user fee rate established for
2014 through 2018 benefit years.
However, the decrease in user fee
collections required to support FFE
functions for the 2019 benefit year will
be similar to the updated costs for the
2018 benefit year, and the user fee rate
will yield the same amount of transfers
from FFE issuers to the Federal
government as in the prior benefit year.
Therefore, there are no changes to the
FFE user fee transfers to include in
Table 13. We are also proposing an
SBE–FP user fee rate to be set at 3.0
percent for benefit year 2019, which is
higher than the 2.0 percent SBE–FP user
fee rate we finalized for the 2018 benefit
year. In this rule, we are also proposing
to cease charging user fees on SHOP
issuers offering plans through an FFE or
SBE–FP starting for plan years
beginning on and after January 1, 2018.
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TABLE 13—ACCOUNTING TABLE
Benefits
Qualitative:
• Greater market stability resulting from improvements to the risk adjustment methodology.
• Potential increased enrollment in the individual market stemming from lower premiums, leading to improved access to health care for the
previously uninsured, especially individuals with medical conditions, which will result in improved health and protection from the risk of
catastrophic medical expenditures.a
• More informed Exchange QHP certification decisions.
• Increased coverage options for small businesses and employees with less adverse selection.
• Cost savings to consumers and issuers due to reduced administrative costs for issuers.
• Reduced costs and burden for States with CHIP buy-in plans automatically recognized as recognized as MEC.b
• Potential decreases in premiums associated with States opting to select a new EHB-benchmark plan.
• Reduced burden to Exchanges, due to the removal of the requirements that each Exchange must have at least two Navigator entities,
and that one of these entities must be a community and consumer-focused nonprofit group, and the removal of the requirement that each
Navigator (and each non-Navigator entity subject to § 155.215) maintain a physical presence in the Exchange service area.
• Reduced costs and burden and increased flexibility to agents and brokers performing direct enrollment and their third party auditors due
to the removal of the requirement to obtain HHS approval to perform reviews.
• Reduction in administrative costs to issuers due to the removal of the meaningful difference standard, and proposed changes to the
SHOPs.
• Reduction in costs and burden to issuers by establishing a 15 percent default threshold for rate increase reasonableness review.
Costs
Estimate
(million)
Year
dollar
Discount rate
(percent)
Period
covered
¥$28
2016
7
2018–2022
¥26.75
Annualized Monetized ($/year)
2016
3
2018–2022
Quantitative:
• Costs incurred by issuers and States to comply with provisions in the proposed rule as detailed in the Collection of Information Requirements section, taking into account the reduction in burden and costs for issuers and States due to the elimination of the requirement to
submit rate reviews to HHS for student health insurance coverage b and increase in the rate review threshold and the reduction in burden
and costs to States related to the requests for adjustment to the MLR standard in their individual markets.
• Reduction in costs to issuers due to changes to the requirements for risk adjustment data validation.
• Reduction in potential costs to Exchanges since they will no longer be required to conduct sampling as a verification process for eligibility
for employer-based insurance starting plan year 2018, and can instead conduct an alternate process through plan year 2019.
• Regulatory familiarization costs.
Qualitative:
• Costs due to increases in providing medical services (if health insurance enrollment increases).
• Costs to issuers of redesigning SADPs to account for the removal of actuarial value standards for SADPs.
• Potential increases in out of pocket costs associated with States opting to select a new EHB-benchmark plan.
Transfers
Estimate
(million)
Federal Annualized Monetized ($/year)
Year
dollar
Discount rate
(percent)
Period
covered
$16.2
2018–2022
2017
3
2018–2022
87
2017
7
2018–2022
87
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7
17
Other Annualized Monetized ($/year)
2017
2017
3
2018–2022
Quantitative:
• Decrease in transfers from health insurance issuers to the Federal government of $2 million related to the decrease in annual cost of risk
adjustment user fees for 2019–2021 (the total risk adjustment user fee amount for 2018 was $40 million and was previously estimated to
remain the same for years 2019–2021).
• Increased transfers from SBE–FP issuers to the Federal government of $20 million due to increase in user fee rate from 2.0 set in 2018
to 3.0 percent proposed for 2019.
• Decrease in user fee transfers from SHOP issuers offering plans through an FFE or SBE–FP to the Federal government of approximately $6 million in 2019.
• Reduced transfers from consumers to health insurance issuers in the form of rebates of $75 million to $87 million due to proposed
amendments to the medical loss ratio requirements.c
Qualitative:
• Lower premium rates in the individual market due to the improved risk profile of the insured, competition, and pooling.
• A decrease in the premiums and risk adjustment transfers in the small group market as a result of potential State requests to reduce the
Statewide average premium for the purposes of the risk adjustment transfer formula in the small group market.
• Potential increases in premiums associated with adjustments to MLR.
• Potential decreases in premiums associated with removal of AV standards for SADPs.
• Potential increases in out of pocket costs associated with removal of AV standards for SADPs.
a Removal
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b The reduction in burden and costs associated with student health insurance and CHIP buy-in plans could result in lower premiums for these
groups.
c For the purpose of calculating total transfers, the upper bound was used.
This RIA expands upon the impact
analyses of previous rules and utilizes
the Congressional Budget Office’s (CBO)
analysis of the PPACA’s impact on
Federal spending, revenue collection,
and insurance enrollment. The PPACA
ends the transitional reinsurance
program and temporary risk corridors
program after the benefit year 2016.
Therefore, the costs associated with
those programs are not included in
Tables 14 or 15 for fiscal years 2019–
2022. Table 14 summarizes the effects of
the risk adjustment program on the
Federal budget from fiscal years 2018
through 2022, with the additional,
societal effects of this proposed rule
discussed in this RIA. We do not expect
the provisions of this proposed rule to
significantly alter CBO’s estimates of the
budget impact of the premium
stabilization programs that are described
in Table 14. We note that transfers
associated with the risk adjustment
program 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
13).
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 2018 Payment Notice for the
impacts associated with the advance
payment of premium tax credits, the
premium stabilization programs, and
FFE user fee requirements.
TABLE 14—ESTIMATED FEDERAL GOVERNMENT OUTLAYS AND RECEIPTS FOR THE RISK ADJUSTMENT, REINSURANCE, AND
RISK CORRIDORS PROGRAMS FROM FISCAL YEAR 2018–2022
[In billions of dollars]
Year
2018
Risk Adjustment, Reinsurance, and Risk Corridors Program Payments ...............................
Risk Adjustment, Reinsurance, and Risk Corridors Program Collections * ............................
2019
5
5
2020
5
5
2021
5
6
2022
6
6
2018–2022
6
6
27
28
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 $1 million in payments in FY 2018 that are collected in prior fiscal years. CBO does not expect a shortfall in these
programs.
Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2017 to 2027 Table 2. September 2017. Available at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53091-fshic.pdf.
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1. Risk Adjustment
The risk adjustment program is a
permanent program created by the
PPACA 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
153 in Title 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
through 2018 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 2019
benefit year, we estimate that the total
cost for HHS to operate the risk
adjustment program on behalf of States
for 2019 will be approximately $38
million, slightly less than in 2018, and
that the risk adjustment user fee would
be approximately $1.68 per enrollee per
year. This user fee reflects contract costs
to support the risk adjustment data
validation process in 2019, lower costs
related to risk adjustment issuer
outreach and education, and lower
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enrollment in risk adjustment covered
QHPs, which results in the same user
fee rate as the 2018 benefit year after
rounding to the nearest cent.
We believe that our proposal to blend
the coefficients calculated from the 2016
benefit year EDGE enrollee-level data
with 2014 and 2015 MarketScan® data
will provide stability within the risk
adjustment program and minimize
volatility in changes to risk scores from
the 2018 benefit year to the 2019 benefit
year due to differences in the datasets’
underlying populations.
We are proposing to allow States to
request a reduction in the Statewide
average premium in the small group
market. We expect this proposed policy
would reduce premiums and transfers
in the small group markets proportional
to the percent by which the States
choose to reduce the transfers. However,
because the risk adjustment program is
budget neutral, any State decision to
reduce the Statewide average premium
used to calculate risk adjustment
transfers will have no net impact on risk
adjustment transfers.
2. Risk Adjustment Data Validation
This proposed regulation includes
changes to the requirements for risk
adjustment data validation that overall
would reduce regulatory burden and
costs for issuers of risk adjusted plans.
HHS believes the proposal to only
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adjust issuers’ risk adjustment risk
scores whose data validation error rates
materially deviate from the national
central tendency of error rates would
help market stability by increasing
issuers’ ability to predict risk
adjustment transfers and liquidity
needs. We anticipate that, under this
proposal, most issuers required to
participate in risk adjustment data
validation would not have their risk
scores adjusted, based on our analysis of
error rates in the Medicare risk
adjustment data validation program.
The proposal to retroactively adjust
transfers for issuers that exited a State
market would result in transfer
adjustments for a small subset of issuers
that previously would not have had
their transfers adjusted, but HHS does
not expect this policy to increase
burden for these issuers, especially in
light of the payment adjustment
proposal described above.
HHS estimates that not requiring
issuers that have 500 or fewer billable
member months Statewide to conduct
an initial validation audit beginning in
the 2017 benefit year would reduce the
administrative burden and costs on
those issuers. The reduction in burden
and costs related to this ICR has been
discussed previously in the Collection
of Information Requirements section.
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Under the proposed change to the
sampling methodology, issuers that
were the sole issuer in a risk pool would
still need to provide a sample for data
validation, but the sample would not
include enrollees from the risk pool
where they were the sole issuer.
Therefore, this proposal would not have
a significant impact on costs or burden
for affected issuers.
We propose to amend § 153.630(b)(6)
to state that a provider licensed to
diagnose mental illness that is
prohibited by State privacy laws from
furnishing a complete medical record
for data validation may furnish a signed
mental or behavioral health assessment
that providers routinely prepare. For
risk adjustment data validation
purposes, we assume a mental or
behavioral health assessment is signed
by a qualified provider who is licensed
by the State to diagnose mental illness
and, to the extent permissible under
governing privacy and confidentiality
laws, contains: (i) The enrollee’s name;
(ii) gender; (iii) date of birth; (iv) current
status of all mental or behavioral health
diagnoses; and (v) dates of service. The
burden associated with submitting
medical records for RADV purposes and
therefore, this proposal, is currently
approved under OMB Control Number
0938–1155: Standards Related to
Reinsurance, Risk Corridors, Risk
Adjustment, and Payment Appeals.
We propose to amend § 153.630(b)(9)
to state that, if an issuer of a risk
adjustment covered plan (1) fails to
engage an initial validation auditor; (2)
fails to submit the results of an initial
validation audit to HHS; (3) engages in
misconduct or substantial noncompliance with the risk adjustment
data validation standards and
requirements applicable to issuers of
risk adjustment covered plans; or (4)
intentionally or recklessly misrepresents
or falsifies information that it furnishes
to HHS, HHS may impose CMPs in
accordance with the procedures set
forth in § 156.805(b) through (e).
Because risk adjustment data validation
has thus far operated as a pilot program,
we cannot estimate the number of
issuers that would be subject to CMPs.
However, we do not expect that a
significant number of issuers would
engage in the extreme misconduct
required to warrant a CMP under this
proposal.
3. Rate Review
In § 154.103, we propose to exclude
student health insurance coverage from
the Federal rate review requirements.
This would reduce burden related to
rate review submission and review for
issuers and States. In addition,
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providing States with more flexibility
regarding timing of submission of rate
filing justification, reducing the advance
notification requirement for rate
increase announcements, timing of
posting proposed and final rate filing
information, and changing the threshold
for reasonableness review to a 15
percent increase rather than a 10
percent increase, would reduce
regulatory burden for issuers and States.
The reduction in burden and costs
related to ICRs have been discussed
previously in the Collection of
Information Requirements section.
4. Additional Required Benefits
(§ 155.170)
In the preamble to § 155.170, we
propose to extend the applicability of
the policies governing State-required
benefits to the proposals described at
§ 156.111 that would provide States
with new options for selecting their
EHB-benchmark plans beginning for the
2019 plan year. Specifically, under any
of the three proposed EHB-benchmark
plan selection options, or if the State
defaults to its current EHB-benchmark
plan, the current policies regarding
State-required benefits would continue
to apply if the proposals at § 156.111 are
finalized. Because these policies would
continue to be in effect, we do not
anticipate any additional burden on
States or issuers due to this proposal.
5. Standards for Navigators and Certain
Non-Navigator Assistance Personnel
(§§ 155.210 and 155.215)
We propose to amend § 155.210(c)(2)
to remove the requirements that each
Exchange must have at least two
Navigator entities and that one of these
entities must be a community and
consumer-focused nonprofit group. We
also propose to amend §§ 155.210(e)(7)
and 155.215(h) to remove the
requirements that Navigators and nonNavigator assistance personnel entities
subject to those regulations maintain a
physical presence in the Exchange
service area. The proposed amendments
to § 155.210(c)(2) would reduce the
burden on Exchanges to have at least
two separate Navigator entities, and as
a result, Exchanges may be able to
reduce funding amounts while still
meeting program requirements.
Removing these requirements would
help promote flexibility and autonomy
for each Exchange to structure its
Navigator program, and to award grant
funding to the number and type of
entities that would be most effective for
that specific Exchange service area. To
the extent that Exchanges take
advantage of these flexibilities,
consumers may have fewer options of
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Navigator grantees and may not have
access to a Navigator grantee or a nonNavigator assistance personnel entity
that maintains a physical presence in
the Exchange service area. Exchanges
continue to have the flexibility to fund
more than one Navigator grantee and
SBEs continue to have the flexibility to
require that Navigators maintain a
physical presence in the Exchange
service area.
6. Standards for Third-Party Entities To
Perform Audits of Agents, Brokers, and
Issuers Participating in Direct
Enrollment (§ 155.221)
The proposed regulations would
replace the existing requirement that an
HHS-approved third party perform
audits of agents and brokers
participating in direct enrollment to
instead permit a third-party entity to
conduct operational readiness reviews
for agents, brokers, and issuers
participating in direct enrollment. HHS
anticipates this approach would reduce
the regulatory burden on agents,
brokers, and issuers utilizing this
section for enhanced direct enrollment
oversight. HHS also anticipates that this
proposal would reduce the burden on
third-party auditors performing reviews
under § 155.221, as those entities would
no longer be required to obtain HHS
approval to perform the reviews.
Furthermore, we believe this proposal
would expand the available number of
qualified third-party auditors by
removing any time and operational
restrictions imposed by the HHS preapproval requirement, which would
provide more flexibility to agents,
brokers, or issuers as they complete
operational readiness reviews.
Additionally, we believe this proposal
would enable more agents, brokers and
issuers to demonstrate operational
readiness by reducing the burden on
HHS for conducting reviews, expediting
the ability of these entities to
demonstrate readiness, and increasing
the feasibility of approval for use of
innovative pathways, thereby creating
more opportunities for enrollment in
QHP coverage for consumers,
potentially increasing enrollment. HHS
anticipates that some of the burden
would be lessened by the fact that many
agent, brokers, or issuers would already
have the established privacy and
security controls, and may have existing
relationships with auditors that could
be leveraged for these reviews. We
would provide additional technical
details regarding compliance with the
specific requirements under these rules
in guidance in the future. It is difficult
to estimate a nationwide effect with
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precision. We seek comment on the
impact of this policy.
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7. Eligibility Standards (§ 155.305)
The requirement in § 155.305(f)(4)(ii)
that the Exchange must send direct
notification to the tax filer before
denying eligibility for APTC to
consumers who fail to file and reconcile
went into effect in mid-January 2017;
therefore, it did not impact operations
for the 2017 open enrollment period,
which was nearly over then. At that
point in time, for the FFE, the
household contacts for non-filers had
been notified of their tax filer’s noncompliance, and APTC had been
discontinued at auto re-enrollment for
those who did not file a Federal income
tax return according to IRS data or
inform the FFE that they had filed a
Federal tax return and reconciled past
APTC. Requiring the Exchange to deny
APTC for failure to file and reconcile
even in the absence of ‘‘direct
notification . . . to the tax filer’’ is
unlikely to add new burden since
Exchanges have not yet implemented
§ 155.305(f)(4)(ii). We do not believe
that Exchanges have built an FTIcompliant noticing infrastructure since
the publication of the final rule
establishing § 155.305(f)(4)(ii) that they
would need to dismantle if this proposal
is finalized. However, if
§ 155.305(f)(4)(ii) remains in effect,
Exchanges will incur significant costs,
as discussed above, to build the
infrastructure necessary to directly
notify tax filers about their tax filing
status while protecting FTI.
8. Verification Requirements (§ 55.320)
Verification Requirements in this
proposed rule would also amend
§ 155.320(d)(4) to allow an Exchange to
conduct an HHS-approved alternative
process instead of sampling, as provided
under paragraph (d)(4)(ii) through
benefit year 2019. We believe this
would relieve Exchanges from the
burden of investing resources to
conduct sampling when the FFEs’ study
of a sampling-like process found that
this method of verification may not be
cost-effective for some Exchanges at this
time. We estimate the burden associated
with sampling based in part on the
alternative process used for the FFEs.
HHS incurred approximately $750,000
in costs to design and operationalize
this study and the study indicated that
$353,581 of APTC was potentially
incorrectly granted to individuals who
inaccurately attested to their eligibility
for or enrollment in a qualifying eligible
employer-sponsored plan. We placed
calls to employers to verify 15,125 cases
but were only able to verify 1,948 cases.
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A large number of employers either
could not be reached or were unable to
verify a consumer’s information,
resulting in a verification rate of
approximately 13 percent. The samplesize involved in the 2016 study did not
represent a statistically significant
sample of the target population and did
not fulfill all regulatory requirements for
sampling under paragraph (d)(4)(i) of
§ 155.320.
Taking additional costs into
account—namely, the cost of sending
notices to employees as required under
paragraph (d)(4)(i)(A), the cost of
building the infrastructure and
implementing the first year of
operationalizing this process, and the
cost of expanding the number of cases
to a statistically significant sample size
of approximately 1 million cases—we
estimate that the overall cost of
implementing sampling would be
approximately $8 million for the FFE,
and between $2 million and $7 million
for other Exchanges, depending on their
enrollment volume and existing
infrastructure. Therefore, we estimate
that the average per-Exchange cost of
implementing sampling that resembles
the FFE’s approach would be
approximately $4.5 million for a total
cost to State-based Exchanges of $54
million, when assuming 12 State-based
Exchanges (operating in 11 States and
the District of Columbia). This cost
estimate does not, however, take into
account the cost of notifying consumers
when the information provided by their
employer changes their eligibility
determination described under
paragraph (d)(4)(i)(E), the cost of
providing employees consumer support
that may be needed to understand
notices and any change in eligibility, or
the cost of ending those consumers’
APTCs, when necessary. This estimate
also does not account for the unique
operating costs of each Exchange, the
proposed change to paragraph (d)(4) to
allow Exchanges to continue to use an
alternate process through benefit year
2019, and the flexibility afforded
Exchanges described at § 155.315(h) and
referenced in § 155.320(a)(2).
We believe these changes would
lessen the financial and technical
burdens on Exchanges under current
regulation and allow Exchanges to
conduct an alternative process to
sampling under paragraph (d)(4) as
approaches to sampling are refined and
data bases are compiled over time. We
seek comment on the reduction in
burden associated with extending the
option to allow Exchanges to fulfill
verification requirements by conducting
an HHS-approved alternative process to
sampling through plan year 2019.
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9. Special Enrollment Periods
(§ 155.420)
We do not anticipate that the
revisions to § 155.420 would create any
costs or burdens. The proposed
revisions in paragraph (b)(2)(i) align
regulatory policy for special enrollment
periods based on a court order with
other similar special enrollment period
types, and create operational
efficiencies for Exchanges by
streamlining effective date options
across similar special enrollment period
qualifying events related to a qualified
individual gaining or becoming a
dependent. For example, this revision to
the regulation would enable the FFE to
use a simpler online, automated
application pathway for more special
enrollment period-eligible consumers,
meaning that fewer consumers will need
to use a manual and costly casework
process to use their special enrollment
period. For limited cases when
casework support is required,
operations would also be simplified.
Similarly, the revision to paragraph
(d)(1)(iii) allows Exchanges to provide
similar treatment to all women losing
non-MEC pregnancy-related coverage,
which enables a more streamlined
special enrollment period eligibility
process.
Additionally, amending paragraph
(a)(5) to exempt qualified individuals
from the prior coverage requirement that
applies to certain special enrollment
periods if, for at least 1 of the 60 days
prior to the date of their qualifying
event, they lived in a service area where
there were no QHPs offered through an
Exchange may provide a pathway to
coverage for a small group of
individuals, and is not anticipated to
impact the Exchange risk pool. The
Exchange already exempts qualified
individuals who may not previously
have had access to QHP coverage
through an Exchange, including those
who were previously living in a foreign
country or United States territory and
Indians as defined by section 4 of the
Indian Health Care Improvement Act.
Therefore, we do not believe that adding
an additional small population to this
exemption will create additional costs
or burdens.
Finally, because simplified special
enrollment period eligibility policy
provides improved pathways to
continuous coverage for special
enrollment period-eligible consumers,
we anticipate that the revisions would
reduce burden on consumers, have a
positive effect on the risk pool, and not
result in additional costs or burdens for
issuers.
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10. Effective Dates for Terminations
(§ 155.430)
Permitting all enrollee-initiated
terminations to become effective on the
date of enrollee request or a later date
of their choosing and removing the
special termination effective date for
newly eligible Medicaid/CHIP/basic
health plan consumers streamlines
termination effective dates for
Exchanges and reduces complication
and confusion among consumers and
issuers. There are no new costs incurred
by Exchanges or issuers by aligning
these termination dates, as Exchanges
and issuers are well acquainted with
same-day termination transactions.
However, enrollees who receive
retroactive coverage under Medicaid
may be unable to recoup QHP premiums
paid. Nevertheless, operationalizing the
aligned termination dates may reduce
system errors and related casework, as
well as confusion for consumers,
issuers, and caseworker and call center
staff based on contradictory rules for
different scenarios.
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11. Eligibility Standards for Exemptions
(§ 155.605)
We do not anticipate that the
proposed amendment to § 155.605(d)
would create additional costs or
burdens. The proposed amendment to
§ 155.605(d)(2)(iv) would enable the
Exchanges to process the consumer’s
exemption from the individual shared
responsibility provision due to lack of
affordable coverage based on projected
income, for those not eligible for
employer-sponsored coverage, when
there is no bronze plan available by
allowing the Exchanges to process the
consumer’s exemption based on the
lowest cost Exchange metal level plan
available in the individual market
through the Exchange in the State in the
rating area in which the individual
resides. This proposal would not
increase the burden on consumers or
Exchanges. Without these revisions,
individuals may lack access to
qualifying or affordable health coverage,
but be unable to qualify for an
exemption from the individual shared
responsibility provision to purchase
qualifying health coverage and the
associated financial penalty due to the
lack of coverage in their area or the
inability to calculate whether coverage
is unaffordable. This proposal would
also not result in additional costs or
burdens for issuers.
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12. Small Business Health Options
Program (Part 155, Subpart H, § 155.200,
§§ 156.285 and 156.286, § 156.350,
§§ 157.205 and 157.206)
HHS is proposing to grant additional
flexibilities, for plan years beginning on
or after January 1, 2018, to small
employers enrolling in SHOP QHPs and
to participating QHP issuers in how
they interact with a SHOP. If finalized,
these changes would become effective
as of the effective date of the final rule.
Under this proposed rule, several
existing requirements on SHOPs would
not apply for plan years beginning on or
after January 1, 2018, allowing SBEs the
flexibility to operate a SHOP in a way
that makes sense for the small
businesses in their State, with reduced
limitations imposed by Federal
regulation. The FF–SHOPs, if this rule
is finalized as proposed, would take
advantage of the flexibility of the
enrollment approach described through
this proposed rule and operate in a
leaner fashion. Under the proposed
approach, SHOPs would no longer be
required to enroll small groups in SHOP
QHPs through a SHOP Web site.
Instead, small employers would enroll
through a participating QHP issuer, or a
SHOP-registered agent or broker.
HHS believes that the proposed
changes would reduce burden on
participating QHP issuers, small
employers, and agents and brokers for
several reasons. Under the proposed
approach to SHOP enrollment for plan
years beginning on or after January 1,
2018, effective on the effective date of
the final rule, if finalized as proposed,
participating QHP issuers would enroll
small groups through their existing
enrollment channels—utilizing their
existing technologies and processes.
Small groups enrolled in SHOP QHPs
for plan years before January 1, 2018
would not be affected by the proposed
changes to enrollment through a SHOP
until they would be due to renew in a
SHOP QHP for the 2018 plan year.
While some additional requirements
would be imposed onto issuers, if this
approach were to become final, HHS
anticipates that any additional burden
on issuers as a result of the changes
proposed in this rule, if finalized, would
be negated in an ultimate net reduction
in burden as many Federal regulations
are being removed and any additional
requirements onto issuers mainly
consist of practices they currently
perform in the private market.
In the 2018 Payment Notice, HHS
finalized the removal of a participation
provision that had required certain QHP
issuers to participate in an FF–SHOP in
order to participate in an FFE. As a
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result, HHS expects that there will be a
significant decrease in the number of
issuers in the FF–SHOPs in the 2018
plan year and therefore, also expects
fewer enrollments in the FF–SHOPs and
SBE–FPs utilizing the Federal platform
for SHOP. As of January 1, 2017,
approximately 7,554 employer groups
were enrolled in the FF–SHOPs,
covering 38,749 lives. With the
anticipated significant decreases in QHP
issuer participation and enrollment
beginning in 2018, it is not cost effective
for the Federal government to continue
to maintain certain FF–SHOP
functionalities, collect significantly
reduced user fees on a monthly basis,
maintain the technologies required to
maintain an FF–SHOP Web site and
payment platform, generate enrollment
and payment transaction files, and
perform enrollment reconciliation.
Under the proposed approach, issuers
would still be subject to their State
requirements, and HHS would minimize
Federal requirements related to SHOP
plans (that is, notice requirements, etc.)
for plan years beginning on or after
January 1, 2018. For example, issuers
are often required by State law to
generate enrollment and payment
notices, and would continue to generate
any State-required notices under the
proposed SHOP enrollment approach.
Under the proposed approach, the FF–
SHOPs would no longer generate
enrollment notices, but the notice
requirements for the FF–SHOPs would
not necessarily be transferred directly to
participating QHP issuers. HHS can
imagine a scenario where an issuer
might generate an additional notice to a
SHOP consumer that they are not
required by Federal law to send, but
may be required by State law, to send.
Issuers, under the proposed approach
would still be required to accept
enrollment from employers that offer
their employees a choice of plans. HHS
can foresee a circumstance where an
employer offers its employees a choice
of plans, across plan categories, and
where the employees choose to enroll in
plans offered by multiple issuers. In this
circumstance, it would also be possible
that an issuer would receive one
application for enrollment from a group.
Under the proposed approach to SHOP
enrollment, the issuer would be
required to accept that single enrollment
so long as the employer’s group has met
the minimum participation rate for their
State, or is enrolling between November
15 and December 15, when the
minimum participation rate rules do not
apply. Given the expected decrease in
issuer participation in the SHOP
beginning in plan year 2018, HHS
believes that a circumstance, similar to
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the one discussed above may occur. In
the absence of premium aggregation
services, issuers, under the proposed
approach would be working directly
with an employer, or their appointed
SHOP-registered agent or broker for
matters of enrollment and premium
billing and payment. Under the
proposed regulations, issuers would be
required to enroll consumers into plans,
even if only one employee of a group
would like to enroll. Further, if this
proposal were to become final, issuers
would also be required to process
enrollments into SHOP QHPs, and,
handle appeals (other than appeals
related to employer eligibility),
administer special enrollment periods
and terminations. Issuers would still be
subject to the market wide effective
dates outlined in § 147.104(b)(1)(i)(C).
While HHS believes that issuers
currently perform the majority of these
tasks, issuers may experience an
increase in burden as it relates to the
volume of consumers enrolling in their
SHOP QHPs. Overall, HHS believes that
under this approach, issuers would see
a net cost savings, as their business
processes for SHOP enrollments could
be more closely aligned with their
current business practices for
enrollments outside the SHOP, and they
would no longer be remitting user fees
for FF–SHOP and SBE–FP SHOP
enrollments.
As noted, SBEs would be given the
flexibility to adopt an enrollment
approach through which enrollments
occur directly with issuers or SHOPregistered agents or brokers, to continue
to operate with the same functionalities
as they currently do or to develop new
practices as permitted by the proposals
in this rule. In any case, SBEs would
need to meet only the proposed
regulations, therefore minimizing the
overall amount of regulatory
requirements that SBEs would
otherwise need to meet. HHS believes
that the proposed new flexibility for
SBEs will result in an overall reduction
in burden and cost for SBEs because we
are providing SBEs with the flexibility
to pursue the enrollment approach that
best meets their needs, because we are
reducing the overall regulatory
requirements for the SHOP Exchanges,
and for the same reasons described
above regarding why the proposed
enrollment approach would reduce
burdens on the FF–SHOP and its
stakeholders.
Under the proposed approach for plan
years beginning on or after January 1,
2018, HHS believes that employers
seeking to purchase FF–SHOP coverage
would experience a reduction in
regulatory burden related to enrollment,
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despite the fact that they may be
required to visit at least two Web sites
(the SHOP Web site and the issuer’s
Web site) prior to completing an
enrollment in SHOP coverage as they
would be able to enroll in coverage
through a SHOP-registered agent or
broker or through a participating QHP
issuer—using issuers’ streamlined
enrollment technologies. Employers
would also be required, under the
proposals described throughout this
document to notify their QHP issuer of
their eligibility to purchase a SHOP
QHP and of their ineligibility, if their
eligibility were to be revoked. We
believe this would still be less
cumbersome than the existing eligibility
and enrollment process.
Under the proposed approach, some
employers, specifically those who offer
their employees a choice of plans,
would experience an increase of
administrative burden with the removal
of a SHOP’s premium aggregation
services. Without a SHOP’s premium
aggregation services, employers would
have to collect the enrollment and
payment information needed from each
of the issuers whose plans the employer
intends to offer to its employees. In the
event employees select plans from
multiple insurance companies, the
employer would be responsible for
distributing the applications for
enrollment to the individual issuers,
collecting payments from the employees
and sending the individual payments to
each issuer. Due to the expected
decrease in issuer participation in the
FF–SHOPs, some SHOP employers will
likely only have one issuer offering FF–
SHOP plans in their area and would not
be able to offer their employees a choice
of plans across issuers. In addition,
historically, a majority of employers
have not offered employee choice across
different issuers. Therefore HHS does
not believe the potential increased
burden in this area due the proposed
removal of premium aggregation
services to be significant. Employers
would still be able to view a listing of
all of the SHOP QHPs available, by plan
category and issuer on a SHOP Web site.
HHS expects that the actual process of
enrolling in SHOP QHPs under this
approach would be less burdensome
than the existing enrollment approach
through a SHOP Web site. As previously
mentioned, HHS anticipates
significantly lower issuer participation
in the SHOP in the 2018 plan year. A
decrease in issuer participation
unfortunately also results in less choice
for consumers. While employers could
experience an increase in burden, under
the proposed flexibilities for SHOPs,
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HHS anticipates the benefits of the
proposed approach would ultimately
outweigh the minimal additional costs
employers could face, if these proposals
were to be finalized.
Further, because the Federal
government would experience a
dramatic reduction in the role it plays
in operating an FF–SHOP and the
contract support that it requires in order
to support it. In 2016, the cost of
running the FF–SHOP Web site was
approximately $30 million, and HHS
expects annual expenditures to drop
significantly—by at least 90 percent—
within a few years, as it responsibly
wind-downs the integration of the FF–
SHOPs.
13. User Fees (§ 156.50)
To support the operation of FFEs, we
require in § 156.50(c) that a
participating issuer offering a plan
through an FFE or SBE–FP 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 2019 benefit year, we propose a
monthly FFE user fee rate equal to 3.5
percent and for an SBE–FP equal to 3.0
percent of the monthly premium. This
increase in SBE–FP user fee rate from
2.0 percent in 2018 to 3.0 percent in
2019 will increase transfers from SBE–
FP issuers to the Federal government by
$20 million. Additionally, we propose
to cease charging monthly user fees to
SHOP issuers offering plans through an
FFE or SBE–FP for plan years beginning
on and after January 1, 2018, effective
on the effective date of the final rule, if
finalized as proposed. This proposal
will decrease user fee transfers from
SHOP issuers offering plans through an
FFE or SBE–FP of approximately $6
million.
14. Provision of EHB
In § 156.111, we propose to provide
States with more flexibility by offering
States three new methods for selecting
their State EHB-benchmark plans.
Under this proposal, if the State does
not select one of the three methods for
changing its EHB-benchmark plan, the
State would default to its current EHBbenchmark plan. We recognize that, to
the extent that States take advantage of
the proposed EHB-benchmark plan
selection options at § 156.111, States,
issuers, and consumers would
experience an increase in burden to
develop new policies and implement
new plan designs. We anticipate that
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most States would need to invest
resources to analyze the three new EHBbenchmark selection options to make an
informed selection, even if a State
defaults. Several States may select one
of the new options, and would need
additional resources to facilitate a
public notice and comment period;
develop and submit the necessary
documents specified by HHS (including
the requisite actuarial certification) to
effectuate the State’s selection; and, if
making changes to their EHBbenchmark plan for 2019, to instruct
their issuers on how to manually change
the Add-in file used in the Plans and
Benefits Template to align with the
State’s EHB-benchmark plan, as
discussed in preamble.77 Additionally,
in States that choose to select their EHBbenchmark plan under any of the three
available proposed options, issuers
offering plans that provide EHB would
incur additional administrative costs
associated with designing plans
compliant with the State’s newly
selected EHB-benchmark plan.
Due to the many PPACA policies
directly or indirectly tied to EHB, HHS
recognizes the impact this proposed
policy would have on parties beyond
issuers required to provide EHBcompliant plans. For example, the
State’s new EHB-benchmark selection
could impact how HHS reviews and
recognizes plans seeking minimal
essential coverage designation,78 how
issuers set their annual limitation on
cost-sharing, and how issuers determine
which benefits may not be subject to
annual and lifetime dollar limits.79
It is our aim that the flexibility under
the proposed policy would allow for
States and issuers to be more innovative
in designing benefit structures and
affordable health plans that benefit the
consumer. However, we realize that this
proposed policy would have varying
impact on consumers depending on
how a State chooses to implement the
proposed policy. Consumers enrolled in
77 For certain States, taking action on the EHBbenchmark plan may require legislature action or
other high level state approval.
78 Consumers generally must maintain minimum
essential coverage or obtain an exemption to avoid
the individual shared responsibility payment. As
noted in the preamble to § 156.602 in this proposed
rule, in considering whether to recognize coverage
as MEC under the application process provided for
in § 156.604, HHS generally evaluates whether the
coverage complies with substantially all the
requirements of title I of the PPACA that apply to
non-grandfathered coverage in the individual
market, including the EHB requirements.
79 The definition of EHB also has an impact on
the annual limitation on cost sharing at section
1302(c) of the PPACA (which is incorporated into
section 2707(b) of the PHS Act) and the prohibition
of annual and lifetime dollar limits at section 2711
of the PHS Act, as added by the PPACA.
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individual and small group market
plans would be impacted by changes to
EHB in that their benefits may change
and in some cases premiums could
increase or decrease depending upon
State implementation of the proposed
policies. Additionally, in States that use
one of the proposed methods to select
a new EHB-benchmark plan, the new
EHB-benchmark plan selection may
impact the amount of premium tax
credit (PTC) and CSRs for enrollees in
the State. For these consumers,
subsidies would increase or decrease
when compared to their State’s current
EHB-benchmark plan. PTC is available
only for that portion of a plan’s
premium attributed to EHB. To the
extent that a State’s EHB-benchmark
plan, under the proposal, leads to lower
premiums for the second lowest cost
silver plan, PTC would be reduced, but
not the percent of income a consumer
with PTC is expected to contribute to
their premium. This effect would
represent a transfer from consumers
who receive PTC to the Federal
government. Individual and small group
market enrollees who do not receive
PTC would experience lower premiums
for less comprehensive coverage that
could result in more affordable coverage
options but possibly higher out-ofpocket costs for the consumer.
We anticipate that States are more
likely to select EHB-benchmark plans
under this proposal such that premiums
are reduced. The proposal, however,
provides some flexibility for States to
select EHB-benchmark plans in a
manner that would increase premiums,
for example by selecting another State’s
EHB-benchmark plan that provides
greater benefits than the State’s current
EHB-benchmark plan. To the extent that
a State’s EHB-benchmark plan leads to
higher premiums for the second lowest
cost silver plan, PTC would be
increased.
Consumers who have specific health
needs may also be impacted by the
proposed policy. In the individual and
small group markets, depending on the
selection made by the State in which the
consumer lives, consumers with less
comprehensive plans may no longer
have coverage for certain services. In
other States, again depending on State
choices, consumers may gain coverage
for some services.
As explained above, HHS anticipates
that modifying § 156.111 as proposed
would generate additional costs for
States, issuers, and certain consumers in
the short run. However, although we are
uncertain as to how States might take
advantage of this flexibility and States
are not required to make any changes
under this policy, we also believe the
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51131
additional flexibility in plan and benefit
design might produce premium savings,
outweighing the potential burdens. The
proposed polices offer issuers in States
that utilize the proposed flexibility to
select a new EHB-benchmark plan the
opportunity to lower plan premiums,
which would increase affordability of
health insurance for consumers in the
individual and small group markets
who do not receive PTC and do not
require the benefits that are no longer
considered EHB.
When adjusting coverage of services
under the proposed options, we
encourage States to consider the
spillover effects in addition to the costs
and utilization of these services.
Spillover effects include increased use
of other services, such as increased used
of emergency services or increased use
of public services provided by the State
or other government entities, when a
certain service is no longer covered by
insurance. Depending on the State
population’s use of services and health
care needs, States may arrive at different
conclusions about the effects of
adjusting a particular benefit. Because
we do not know how States would
choose to adjust their benchmark plans,
we are not able to predict the effects
these modifications may have on costs.
Additionally, we also proposed at
§ 156.115 to allow for benefit
substitution to occur within the same
EHB category or between EHB categories
to offer additional issuer flexibility.
Because issuers are already familiar
with substituting benefits within benefit
categories, we do not believe that
broadening the policy to allow benefit
substitution between benefit categories
would create additional burden for
issuers. This proposal would increase
the burden on consumers who choose
between plans offered in the individual
and small group markets as they would
need to spend more time and effort
comparing benefits offered by different
plans in order to determine what, if any,
benefits have been substituted and what
plan would best suit their health care
and financial needs. We also note that
States are generally primarily
responsible for enforcement of EHB and
continue to have the option to set
criteria for benefit substitution.
Additionally, by allowing substitution
between categories, States may
encounter difficulties in ensuring that
all categories are filled in such a way
that amounts to EHB.
We solicit comments on the impact of
the proposed EHB policy and on
whether other impacts should be
considered.
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15. Application to Stand-Alone Dental
Plans Inside the Exchange (§ 156.150)
In this proposed rule, we are
proposing to remove AV requirements
for SADP issuers. We estimate that the
proposed change in AV could lead to a
reduction in premiums for certain
SADPs. Issuers may choose to offer
more SADPs at varying premiums and
levels of coverage. The offering of more
SADPs and SADPs with lower
premiums may lead to increased
enrollment in SADPs. Because certain
eligible taxpayers could use premium
tax credit to pay for the portion of SADP
premiums attributable to EHB, a
reduction in premiums would likely
reduce the benchmark premium for
purposes of the premium tax credit,
leading to a small transfer from credit
recipients to the government. If
enrollment increases due to potentially
lower premiums there could be an
overall increase in the total premium tax
credit payments by the government. The
net effect is uncertain. We seek
comment on the impact of this proposed
change.
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16. Qualified Health Plan Certification
For plan years 2019 and later, we
propose to further expand the role of
States in the QHP certification process
for FFEs, including FFEs where the
State performs plan management
functions. Specifically, we propose to
defer to States for additional review
areas, including accreditation
requirements at § 156.275, compliance
reviews at § 156.715, minimum
geographic area of the plan’s service
area at § 155.1055, and quality
improvement strategy reporting at
§ 156.1130, if feasible and appropriate.
We also propose to extend, for the 2019
benefit year and beyond, the QHP
certification review standards related to
network adequacy and essential
community providers that we finalized
in the Market Stabilization rule. We do
not anticipate these proposals would
increase burden on States because we
believe these reviews are already being
performed by States. We anticipate a
slight reduction in burden for issuers
due to not needing to undergo
duplicative reviews and a reduction in
costs to the Federal government. We
seek comment on whether there are
burdens we are not considering.
In § 156.298, we propose to remove
the meaningful difference standard. If
the meaningful difference standard is
removed, issuers would have a potential
reduction in administrative costs since
they would no longer have to
implement their internal assessments as
to whether their plan offerings meet this
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standard. Consumers may have more
QHPs to select from. However, we do
not have evidence from any Exchange
that removing the meaningful difference
standard would create any new burden
on consumers.
We also anticipate that the proposal to
remove the meaningful difference
standard would reduce the regulatory
burden on SBE–FPs. Under
§ 155.200(f)(2)(iv), SBE–FPs are required
to establish and oversee requirements
for their issuers that are no less stringent
than the meaningful difference standard
as it applies to issuers participating in
the FFEs. Under our proposal, SBE–FPs
would no longer need to establish such
a standard or oversee it.
17. Provisions Related to Cost Sharing
(§ 156.130)
The PPACA provides for the
reduction or elimination of cost sharing
for certain eligible individuals enrolled
in QHPs offered through the Exchanges.
This assistance helps many low- and
moderate-income individuals and
families obtain health insurance—for
many people, cost sharing is a barrier to
obtaining needed health care.80
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
PPACA to the estimated 2019 maximum
annual limitation on cost sharing for
self-only coverage. 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 past
Payment Notices.
We also proposed the premium
adjustment percentage for the 2019
benefit year. Under § 156.130(e), and
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 the percentage
(if any) by which the average per
enrollee premium for employer80 Brook, Robert H., John E. Ware, William H.
Rogers, Emmett B. Keeler, Allyson Ross Davies,
Cathy D. Sherbourne, George A. Goldberg, Kathleen
N. Lohr, Patricia Camp and Joseph P. Newhouse.
The Effect of Coinsurance on the Health of Adults:
Results from the RAND Health Insurance
Experiment. Santa Monica, CA: RAND Corporation,
1984. Available at https://www.rand.org/pubs/
reports/R3055.
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sponsored health insurance coverage for
the preceding calendar year exceeds
such average per enrollee premium for
employer-sponsored health insurance
for 2013. The annual premium
adjustment percentage sets the rate of
increase for three parameters detailed in
the PPACA: The annual limitation on
cost sharing (defined at § 156.130(a)),
the required contribution percentage
used to determine eligibility for certain
exemptions under section 5000A of the
Code, and the assessable payments
under sections 4980H(a) and 4980H(b)
of the Code. We believe that the
proposed 2019 premium adjustment
percentage is well within the parameters
used in the modeling of the PPACA, and
we do not expect that these proposed
provisions will alter CBO’s March 2016
baseline estimates of the budget impact.
18. Minimum Essential Coverage
(§ 156.602, § 156.604)
We propose to designate CHIP buy-in
programs that provide identical
coverage to the CHIP program under
title XXI of the Act in the applicable
State as minimum essential coverage.
Currently very few States offer CHIP
buy-in plans and such plans in two
states have applied for and been
recognized as minimum essential
coverage. This proposed provision
would reduce burden on sponsors of
such programs that might otherwise
have had to electronically submit to
HHS information regarding their plans
and certify that their plans meet
substantially all of the requirements of
Title I of the PPACA, as applicable to
non-grandfathered, individual coverage
(including reviewing and updating
documents), make changes to their
program to obtain recognition as
minimum essential coverage, and
provide a notice to enrollees informing
them that the plan has been recognized
as minimum essential coverage for the
purposes of the individual shared
responsibility provision. If CHIP buy-in
programs that provide greater coverage
and government-sponsored buy-in
programs, such as Medicaid buy-in
programs are categorically recognized as
minimum essential coverage, sponsors
of such programs would also experience
a similar reduction in burden. The
sponsor of any type of coverage
recognized as minimum essential
coverage would continue to be required
to provide the annual information
reporting to the IRS specified in section
6055 of the Code and furnish statements
to individuals enrolled in such coverage
to assist them in establishing that they
are not subject to the individual shared
responsibility provision of section
5000A of the Code.
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19. Medical Loss Ratio (Part 158)
We propose to amend § 158.221(b) to
allow issuers the option to report a
single quality improvement activity
expense amount equal to 0.8 percent of
earned premium in the relevant State
and market, in lieu of reporting the
actual QIA amounts in five separate
categories described in
§ 158.150(b)(2)(i)–(v). Based on MLR
data for the 2015 MLR reporting year,
HHS estimates that the proposed
amendment would decrease rebate
payments from issuers to consumers by
approximately $23 million.
We also propose to amend several
sections of 45 CFR part 158, subpart C
(§§ 158.301, 158.321–158.322, 158.330,
158.341, 158.350) to modify the process
and criteria for the Secretary to
determine whether to adjust the 80
percent MLR standard in the individual
market in a State. While it is uncertain
what specific adjustments States may
request, most adjustments previously
granted by the Secretary have ranged
from 70 to 75 percent. Based on MLR
data for the 2015 MLR reporting year,
and assuming that 22 States would
request an adjustment (including 17
States that previously requested
adjustments), HHS estimates that the
proposed amendments would decrease
rebate payments from issuers to
consumers or increase premiums paid
by consumers to issuers by
approximately $52 million (assuming a
reduction of the 80 percent MLR
standard to 75 percent for all 22 States)
to $64 million (assuming a reduction of
the MLR standard to 70 percent for all
22 States) annually, for up to 3 years at
a time. This represents an estimated 74
percent to 91 percent reduction,
respectively, in rebates payable in those
22 States, which together accounted for
$70 million out of the nationwide total
$107 million in rebates that issuers
owed to individual market consumers
for 2015. The actual reduction in rebates
may be lower or higher depending on
which States apply for an adjustment,
and whether and how much the
Secretary may adjust the individual
market MLR standard in each State.
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20. Regulatory Review Costs
If regulations impose administrative
costs on private entities, such as the
time needed to read and interpret this
proposed rule, we should estimate the
cost associated with regulatory review.
Due to the uncertainty involved with
accurately quantifying the number of
entities that will review the rule, we
assume that the total number of unique
commenters on last year’s proposed rule
will be the number of reviewers of this
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proposed rule. We acknowledge that
this assumption may understate or
overstate the costs of reviewing this
rule. It is possible that not all
commenters reviewed last year’s rule in
detail, and it is also possible that some
reviewers chose not to comment on the
proposed rule. For these reasons we
thought that the number of past
commenters would be a fair estimate of
the number of reviewers of this rule. We
welcome any comments on the
approach in estimating the number of
entities which will review this proposed
rule.
We are required to promulgate a
substantial portion of this rule each year
under our regulations and we estimate
that approximately half of the remaining
provisions would cause additional
regulatory review burden that
stakeholders do not already anticipate.
We also recognize that different types of
entities are in many cases affected by
mutually exclusive sections of this
proposed rule, and therefore for the
purposes of our estimate we assume that
each reviewer reads approximately 50
percent of the rule, excluding the
portion of the rule that we are required
to promulgate each year.
Using the wage information from the
BLS for medical and health service
managers (Code 11–9111), we estimate
that the cost of reviewing this rule is
$105.16 per hour, including overhead
and fringe benefits.81 Assuming an
average reading speed, we estimate that
it would take approximately 1 hour for
the staff to review the relevant portions
of this proposed rule that causes
unanticipated burden. For each entity
that reviews the rule, the estimated cost
is $105.16. Therefore, we estimate that
the total cost of reviewing this
regulation is approximately $70,247
($105.16 x 668 reviewers).
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.
For the 2019 benefit year, we
considered using only the 2016 benefit
year enrollee-level EDGE data to
recalibrate the risk adjustment model
coefficients. However, this could lead to
uncertainty in issuers’ expectation of
risk adjustment transfers due to the sole
use of a new dataset for recalibrating the
model coefficients. We believe that
blending multiple years of data will
promote stability for the risk adjustment
coefficients year-to-year, particularly for
81 https://www.bls.gov/oes/current/oes_nat.htm.
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rare conditions with small sample sizes.
Therefore, we are proposing to blend
coefficients calculated from the 2016
benefit year enrollee-level EDGE data
with 2014 and 2015 MarketScan® data.
Additionally, given the timing of the
proposed rule, we are unable to analyze
the enrollee-level EDGE data in time to
publish the coefficients calibrated using
the EDGE data in the proposed rule.
Similar to the 2018 benefit year final
risk adjustment coefficients, we
considered publishing the 2019 benefit
year final risk adjustment coefficients in
guidance after the publication of the
final rule with more recent MarketScan®
data that will become available at the
end of this year. However, we expect the
2016 benefit year enrollee-level risk
adjustment data will be available in
time for the final rule. Additionally, we
are not proposing to use the 2016
MarketScan® data that will become
available at the end of this year for the
2019 benefit year risk adjustment model
recalibration. As such, we are proposing
to finalize the 2019 benefit year model
coefficients blended with 2016 EDGE
data, and 2014 and 2015 MarketScan®
data in the final rule.
With respect to the risk adjustment
data validation program, HHS
considered an alternate policy under
which HHS would not adjust payment
transfers for an issuer that exited a
market within a State during or after the
benefit year being audited, unless the
error rate for the exited issuer was
egregiously high relative to the error
rates of other issuers in the State and
market. We would define the error rate
threshold for triggering a payment
adjustment as 2 or 3 standard deviations
from a benchmark negative error rate.
For exited issuers that have error rates
above the established threshold, we
would make a retroactive adjustment to
their final benefit year payment transfer
in the same manner as outlined above.
While this alternative approach may
provide returning issuers in the State
and market with more certainty about
their risk adjustment transfers for a
given benefit year, it does not offer as
much protection against gaming as the
proposed policy, and could result in
exited issuers that do not have
egregiously high error rates being
overpaid relative to the risk of their
enrollee populations.
We considered maintaining the
current applicability of rate review, and
continuing to review student health
insurance coverage rate increases.
However, the proposed rule would
provide States with greater flexibility to
meet the needs of their markets and
reduce the burden associated with
review of plans that are not part of the
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single risk pool. As a practical matter,
student health insurance coverage has
generally been given the same plan
design flexibility as plans in the large
group market. Just like purchasers of
large group plans, purchasers in the
student market are viewed as more
sophisticated, with greater leverage and
ability to avoid the imposition of
unreasonable rate increases. Single risk
pool pricing, the primary focus of the
rate review program, does not apply to
student health insurance coverage.
We considered maintaining the
current 30-day notice requirement for
States to notify HHS prior to posting
proposed and final rate increases.
However, such advanced notice may be
impractical in some States so we have
decreased the notice requirement to 5
business days.
In adding standards for § 155.221,
HHS considered making no changes to
the existing rule and retaining the
existing standard for agents and brokers
to contract with a third-party entity
approved by HHS for conducting audits
under the section. We believe, however,
that changes to this section are
necessary to include issuers and to
provide the necessary flexibility in
oversight that both protects consumers
and encourages enrollment pathway
innovation for agents, brokers, and
issuers using direct enrollment.
For the proposed amendments to
§ 155.320, we considered developing a
comprehensive database using
information from employers on the
plans they offer to their employees and
their family members that could satisfy
verification requirements under
paragraph (d)(2) for all Exchanges. This
approach would be resource-intensive
for Exchanges, and would produce a
database with limited utility due to data
limitations. Developing a database;
recruiting and educating employers to
participate in voluntarily submitting the
data; and providing technical assistance
to employers for the first year of
implementation on how to input the
data is estimated to cost at least $38
million. Building such a database would
also rely on the voluntary participation
of substantially all employers. This
participation would be onerous for
employers. Employers would need to
provide individual employee level data
regarding plans the employer will offer,
information that may not be available in
time to populate a comprehensive
database prior to the Exchange’s plan
year. In addition, since the PPACA does
not require employers to provide to the
Exchange the relevant information on
what coverage they offer, Exchanges and
HHS would not receive data from all
employers. After weighing our options,
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we decided that this approach would be
overly costly and burdensome, and of
limited value due to gaps in the data
Exchanges and HHS would be able to
collect. We also considered removing
the requirement to connect to an HHSapproved data source, and the
requirement to use an alternative
method if the Exchange does not
connect to the required data sources, but
were concerned about the potential
impact on program integrity.
In developing the proposal related to
the SHOP enrollment process, we
considered maintaining the status quo,
but believe that the increase in
flexibility, cost savings and reduction in
burden resulting from the proposed
enrollment approach, would have a
positive impact on small businesses
across the country and provide States
with needed flexibility.
In developing the proposal for the
new EHB-benchmark plan selection
options described at § 156.111, we
considered a variety of alternatives,
including maintaining the current EHBbenchmark policy without modification.
Although maintaining the current policy
would promote stability by preserving
the current EHB-benchmarks across all
States, we do not believe it would offer
the additional flexibility that States
have requested in selecting an EHBbenchmark plan to best meet the needs
of their consumer population. We also
considered whether it was feasible to
offer States increased flexibility by
allowing them to set a range of
acceptable EHB within their State, such
that issuers could offer plans within that
range with more limited EHB coverage
or more robust EHB coverage. However,
we determined that this option did not
meet statutory requirements. To balance
stability, flexibility, and statutory
requirements, we instead propose to
offer States the expanded EHBbenchmark plan selection options at
§ 156.111 as well as the option to
default to the State’s current EHBbenchmark plan. We believe this
approach would provide States with the
opportunity to take advantage of greater
flexibility in selecting an EHBbenchmark plan while also providing
those States that value stability with the
option to retain their current benchmark
plan. We solicit comments on proposed
options at § 156.111.
With respect to the provision
regarding removing the AV requirement
for SADPs, we considered making no
change or proposing an expansion to the
de minimis range to mirror the
expanded de minimis range for QHPs
(¥4/+2 percentage points) or of +/¥3
percentage points. We determined that
these alternatives were less desirable
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because they do not provide issuers
with as much flexibility to offer a range
of SADPs as the proposed removal of
the AV standards for SADPs.
For the QHP certification standard
regarding meaningful difference, we
considered maintaining the requirement
on issuers, but we believe that removing
this provision would promote the
offering of a variety of affordable QHPs
that will meet consumers’ needs, would
provide issuers with more flexibility,
and would remove an unnecessary
regulatory requirement.
We considered maintaining the
current policy requiring all CHIP buy-in
programs that wish to be recognized as
minimum essential coverage, to comply
with the requirements for recognition as
MEC outlined in § 156.604. However,
this proposed rule would help reduce
burden on plan sponsors of such
programs, while ensuring the enrollees
have a basic standard of coverage that
satisfies the individual shared
responsibility provision. In the
preamble to § 156.602, we solicit
comments on whether CHIP buy-in
programs that are not identical to the
State’s CHIP program but provide
similar or greater coverage for enrollees
should also be designated as MEC or
whether such programs must submit an
application so that HHS can evaluate
any differences with the title XXI
program to ensure that the program
substantially resembles the title XXI
program.
For the proposed amendments to
§ 158.221(b), we considered retaining
the current quality improvement
activity reporting requirements, since
giving issuers the option to report a
standardized rate for QIA expenditures
may inhibit HHS from being able to
analyze trends in issuers’ investment in
improving the quality of healthcare in
the future, and reduce rebates to
consumers by allowing issuers to
effectively increase their MLRs by 0.8
percent even if those issuers engaged in
and spent only trivial amounts on QIA.
However, this change would also
potentially level the playing field among
issuers to a certain extent and lead to
more accurate rebate payments, since
many issuers likely do engage in QIA
but forego reporting that spending
because the burden of analyzing,
documenting, tracking, allocating, and
reporting QIA expenses exceeds the
benefits for MLR purposes. Because the
proposed approach of giving issuers the
option to report a minimal, standardized
rate would reduce unwarranted
regulatory and economic burdens for
issuers that do not want to track and
report the exact QIA amounts for their
MLR calculation, we believe that the
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proposed approach would be more
effective and objective than the current
requirements.
For the proposed amendments to part
158, subpart C, we considered retaining
the current requirements for States to
request an adjustment to the 80 percent
MLR standard in the individual market
in a State. However, HHS recognizes
that many of the current State
application requirements are
burdensome and less relevant in the
post-2014 reformed environment, and
may preclude or discourage States from
proposing innovative solutions to help
stabilize their individual markets.
Therefore, we believe this proposal
would reduce regulatory burdens on
States, and provide States with an
additional tool to promote stability in
their markets.
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 and risk adjustment data
validation programs, which are
intended to stabilize premiums as
insurance market reforms are
implemented and Exchanges facilitate
increased enrollment. Because we
believe that insurance firms offering
comprehensive health insurance
policies generally exceed the size
thresholds for ‘‘small entities’’
established by the SBA, we do not
believe that an initial regulatory
flexibility analysis is required for such
firms.
For purposes of the RFA, we expect
the following types of entities to be
affected by this proposed rule:
• Health insurance issuers.
• Group health plans.
We believe that health insurance
issuers and group health plans would be
classified under the North American
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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.82 We believe
that few, if any, insurance companies
underwriting comprehensive health
insurance policies (in contrast, for
example, to travel insurance policies or
dental discount policies) fall below
these size thresholds.
In this proposed rule, we proposed to
allow enrollment through a SHOPregistered agent or broker, or through a
participating QHP issuer. The SHOPs
are generally 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.
Based on data from MLR annual
report submissions for the 2015 MLR
reporting year, approximately 92 out of
over 530 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 50 percent of these small
companies belong to larger holding
groups, and many if not all of these
small companies are likely to have nonhealth lines of business that would
result in their revenues exceeding $38.5
million. We estimate that 57 of these 92
potentially small entities would
82 ‘‘Table of Small Business Size Standards
Matched to North American Industry Classification
System Codes’’, effective February 26, 2016, U.S.
Small Business Administration, available at https://
www.sba.gov/contracting/getting-started-contractor/
make-sure-you-meet-sba-size-standards/tablesmallbusiness-size-standards.
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51135
experience a decrease in the rebate
amount owed to consumers under the
proposed amendments to the quality
improvement activity reporting
provisions in part 158, and 27 of these
57 entities are part of larger holding
groups. In addition, we estimate that no
small entities would be impacted by the
proposed amendments to 45 CFR part
158, subpart C. Therefore, we believe
that the provisions of this proposed rule
regarding MLR would not affect a
substantial number of small entities,
and further, the impact of the proposed
QIA provisions on small entities would
be positive.
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. Currently, that
threshold is approximately $148
million. Although we have not been
able to quantify all costs, we expect the
combined impact on State, local, or
Tribal governments and the private
sector to be below the threshold.
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.
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 rule, HHS
attempted to balance the States’
interests in regulating health insurance
issuers with the need to ensure market
stability. By doing so, it is HHS’s view
that we have complied with the
requirements of Executive Order 13132.
Because States have flexibility in
designing their Exchange and Exchangerelated programs, State decisions will
ultimately influence both administrative
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expenses and overall premiums. States
are not required to establish an
Exchange or risk adjustment program.
For States that elected previously to
operate an Exchange, or risk adjustment
program, much of the initial cost of
creating these programs was funded by
Exchange Planning and Establishment
Grants. After establishment, Exchanges
must 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
determining standards relating to health
insurance that is offered in the
individual and small group markets. For
example, we propose to provide States
with substantially more flexibility in
selecting an EHB-benchmark plan, to
explore ways to make it easier for States
to establish and maintain a State
Exchange, to expand the role of States
in QHP certification in FFEs, to provide
States with substantially more flexibility
in how they operate a SHOP, to provide
States with the option to request an
adjustment in the risk adjustment
program for their small group market;
and to make it easier for States to apply
for and be granted an adjustment to the
MLR standard in their State. This rule
also proposes to return flexibility to
States in their review of rate increases.
We propose to give States the choice to
review rate increases for student health
insurance coverage. We propose to
eliminate the requirement that proposed
and final rate increases must be posted
uniformly, instead allowing States with
an Effective Rate Review program to
publish proposed and final rate
increases on a rolling basis if they so
choose. We also propose to reduce the
advance notification that States must
give HHS about the posting of rate
increases from 30 days to 5 business
days. Finally, we propose that States
would no longer be required to seek
approval if the State-specific threshold
for reasonableness review is lower than
the Federal default rate review
threshold.
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
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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.
I. Reducing Regulation and Controlling
Regulatory Costs
Executive Order 13771, titled
Reducing Regulation and Controlling
Regulatory Costs, was issued on January
30, 2017. Section 2(a) of Executive
Order 13771 requires an agency, unless
prohibited by law, to identify at least
two existing regulations to be repealed
when the agency publicly proposes for
notice and comment, or otherwise
promulgates, a new regulation. In
furtherance of this requirement, section
2(c) of Executive Order 13771 requires
that the new incremental costs
associated with new regulations shall, to
the extent permitted by law, be offset by
the elimination of existing costs
associated with at least two prior
regulations. This proposed rule, if
finalized as proposed, is expected to be
an EO 13771 deregulatory action.
List of Subjects
45 CFR Part 147
Health care, Health insurance,
Reporting and recordkeeping
requirements.
45 CFR Part 153
Administrative practice and
procedure, Health care, Health
insurance, Health records,
Intergovernmental relations,
Organization and functions (government
agencies), Reporting and recordkeeping
requirements.
45 CFR Part 154
45 CFR Part 155
Fmt 4701
45 CFR Part 157
Employee benefit plans, Health
insurance, Health maintenance
organizations (HMO), Health records,
Hospitals, Indians, Individuals with
disabilities, Medicaid, Organization and
functions (government agencies), Public
assistance programs, Reporting and
recordkeeping requirements, Technical
assistance, Women and 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 147, 153, 154, 155, 156, 157
and 158 as set forth below.
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP AND INDIVIDUAL HEALTH
INSURANCE MARKETS
1. 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.
2. Section 147.102 is amended by
revising paragraph (c)(3)(iii)((D) to read
as follows:
■
Administrative practice and
procedure, Advertising, Brokers,
Conflict of interests, Consumer
protection, Grants administration, Grant
programs—health, Health care, Health
insurance, Health maintenance
organizations (HMO), Health records,
Hospitals, Indians, Individuals with
disabilities, Intergovernmental relations,
Loan programs—health, Medicaid,
Organization and functions (government
agencies), Public assistance programs,
Reporting and recordkeeping
requirements, Technical assistance,
Women and youth.
Frm 00086
Administrative practice and
procedure, Advertising, Advisory
committees, Conflict of interests,
Consumer protection, Grant programs—
health, Grants administration, Health
care, Health insurance, Health
maintenance organization (HMO),
Health records, Hospitals, Indians,
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.
■
Administrative practice and
procedure, Claims, Health care, Health
insurance, Penalties, Reporting and
recordkeeping requirements.
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45 CFR Part 156
Sfmt 4702
§ 147.102
Fair health insurance premiums.
*
*
*
*
*
(c) * * *
(3) * * *
(iii) * * *
(D) To the extent permitted by
applicable state law and, in the case of
coverage offered through a SHOP, as
permitted by the SHOP, apply this
paragraph (c)(3)(iii) uniformly among
group health plans enrolling in that
product, giving those group health plans
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the option to pay premiums based on
average enrollee premium amounts.
*
*
*
*
*
■ 3. Section 147.104 is amended by—
■ a. Revising paragraphs (b)(1)(i)(B),
(b)(1)(i)(C) and (b)(1)(ii);
■ b. Removing paragraph (b)(1)(iii); and
■ c. Revising paragraphs (b)(2)(i)
introductory text and (ii).
The revisions read as follows:
§ 147.104 Guaranteed availability of
coverage
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*
*
*
*
*
(b) * * *
(1) * * *
(i) * * *
(B) In the case of a group health plan
in the small group market that cannot
comply with employer contribution or
group participation rules for the offering
of health insurance coverage, as allowed
under applicable State law, and in the
case of a QHP offered in the SHOP, as
permitted by § 156.285(e) or § 156.286(e)
of this subchapter, a health insurance
issuer may restrict the availability of
coverage to an annual enrollment period
that begins November 15 and extends
through December 15 of each calendar
year.
(C) With respect to coverage in the
small group market, and in the large
group market if such coverage is offered
through a SHOP in a State, for a plan
selection received on the first through
the fifteenth day of any month, the
coverage effective date must be the first
day of the following month. For a plan
selection received on the 16th through
last day of any month, the coverage
effective date must be the first day of the
second following month. In either such
case, a small employer may instead opt
for a later effective date within a quarter
for which small group market rates are
available.
(ii) Individual market. A health
insurance issuer in the individual
market must allow an individual to
purchase health insurance coverage
during the initial and annual open
enrollment periods described in
§ 155.410(b) and (e) of this subchapter.
Coverage must become effective
consistent with the dates described in
§ 155.410(c) and (f) of this subchapter.
(2) * * *
(i) A health insurance issuer in the
individual market must provide a
limited open enrollment period for the
triggering events described in
§ 155.420(d) of this subchapter,
excluding, with respect to coverage
offered outside of an Exchange, the
following:
*
*
*
*
*
(ii) In applying this paragraph (b)(2),
a reference in § 155.420 (other than in
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§ 155.420(a)(5)) of this subchapter to a
‘‘QHP’’ is deemed to refer to a plan, a
reference to ‘‘the Exchange’’ is deemed
to refer to the applicable State authority,
and a reference to a ‘‘qualified
individual’’ is deemed to refer to an
individual in the individual market.
*
*
*
*
*
PART 153—STANDARDS RELATED TO
REINSURANCE, RISK CORRIDORS,
AND RISK ADJUSTMENT UNDER THE
AFFORDABLE CARE ACT
4. The authority citation for part 153
continues to read as follows:
■
Authority: Secs. 1311, 1321, 1341–1343,
Pub. L. 111–148, 24 Stat. 119.
5. Section 153.630 is amended by
revising paragraphs (b)(6), (8), and (9) to
read as follows:
■
§ 153.630 Data validation requirements
when HHS operates risk adjustment.
*
*
*
*
*
(b) * * *
(6) An issuer must provide the initial
validation auditor and the second
validation auditor with all relevant
source enrollment documentation, all
claims and encounter data, and medical
record documentation from providers of
services to each enrollee in the
applicable sample without unreasonable
delay and in a manner that reasonably
assures confidentiality and security in
transmission. Notwithstanding any
other provision of this section, a
qualified provider that is licensed to
diagnose mental illness by the State and
that is prohibited from furnishing a
complete medical record by applicable
Federal or State privacy laws
concerning any enrollee’s treatment for
one or more mental or behavioral health
conditions may furnish a signed mental
or behavioral health assessment that, to
the extent permissible under such laws,
should contain: the enrollee’s name;
gender; date of birth; current status of
all mental or behavioral health
diagnoses; and dates of service. The
mental or behavioral health assessment
should be signed by the provider and
submitted with an attestation that the
provider is prohibited from furnishing a
complete medical record by applicable
State or Federal privacy laws.
*
*
*
*
*
(8) The initial validation auditor must
measure and report to the issuer and
HHS, in a manner and timeframe
specified by HHS, its inter-rater
reliability rates among its reviewers.
The initial validation auditor must
achieve a consistency measure of at
least 95 percent for his or her review
outcomes, except that for validation of
risk adjustment data for the 2015 and
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51137
2016 benefit years, the initial validation
auditor may meet an inter-rater
reliability standard of 85 percent for
review outcomes.
(9) HHS may impose civil money
penalties in accordance with the
procedures set forth in § 156.805(b)
through (e) of this subchapter if an
issuer of a risk adjustment covered
plan—
(i) Fails to engage an initial validation
auditor;
(ii) Fails to submit the results of an
initial validation audit to HHS;
(iii) Engages in misconduct or
substantial non-compliance with the
risk adjustment data validation
standards and requirements applicable
to issuers of risk adjustment covered
plans; or
(iv) Intentionally or recklessly
misrepresents or falsifies information
that it furnishes to HHS.
*
*
*
*
*
PART 154—HEALTH INSURANCE
ISSUER RATE INCREASES:
DISCLOSURE AND REVIEW
REQUIREMENTS
6. 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).
7. Section 154.103 is amended by
revising paragraph (b) to read as follows:
■
§ 154.103
Applicability.
*
*
*
*
*
(b) Exceptions. The requirements of
this part do not apply to—
(1) Grandfathered health plan
coverage as defined in § 147.140 of this
subchapter;
(2) Excepted benefits as described in
section 2791(c) of the PHS Act; and
(3) For plan years beginning on or
after January 1, 2019, student health
insurance coverage as defined in
§ 147.145 of this subchapter.
■ 8. Revise § 154.200 to read as follows:
§ 154.200
review.
Rate increases subject to
(a) A rate increase filed in a State, or
effective in a State that does not require
a rate increase to be filed, is subject to
review if:
(1) The rate increase is 15 percent or
more applicable to a 12-month period
that begins on January 1, as calculated
under paragraph (b) of this section; or
(2) The rate increase meets or exceeds
a State-specific threshold applicable to
a 12-month period that begins on
January 1, as calculated under
paragraph (b) of this section, determined
by the Secretary. A State-specific
threshold shall be based on factors
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impacting rate increases in a State to the
extent that the data relating to such
State-specific factors are available by
August 1 of the preceding year. States
interested in proposing a State-specific
threshold greater than the Federal
default stated in paragraph (a)(1) of this
section are required to submit a
proposal for approval of such threshold
to the Secretary by August 1 of the
preceding year.
(b) A rate increase meets or exceeds
the applicable threshold set forth in
paragraph (a) of this section if 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.
(c) If a rate increase that does not
otherwise meet or exceed the threshold
under paragraph (b) of this section
meets or exceeds the threshold when
combined with a previous increase or
increases during the 12-month period
preceding the date on which the rate
increase would become effective, then
the rate increase must be considered to
meet or exceed the threshold and is
subject to review under § 154.210, and
such review shall include a review of
the aggregate rate increases during the
applicable 12-month period.
■ 9. Section 154.215 is amended by
revising paragraph (h)(2) to read as
follows:
§ 154.215 Submission of rate filing
justification.
*
*
*
*
*
(h) * * *
(2) CMS will make available to the
public on its 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’s Freedom of Information Act
regulations, 45 CFR 5.31(d).
*
*
*
*
*
■ 10. Section 154.301 is amended by
revising paragraph (b)(2), and removing
paragraph (b)(3) to read as follows:
§ 154.301 CMS’s determinations of
Effective Rate Review Programs.
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*
*
*
*
(b) * * *
(2) If a State intends to make the
information in paragraph (b)(1)(i) of this
section available to the public prior to
the date specified by the Secretary, or if
it intends to make the information in
paragraph (b)(1)(ii) of this section
available to the public prior to the first
day of the annual open enrollment
period in the individual market for the
applicable calendar year, the State must
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notify CMS in writing, no later than five
(5) business days prior to the date it
intends to make the information public,
of its intent to do so and the date it
intends to make the information public.
*
*
*
*
*
beginning prior to January 1, 2018,
must—
*
*
*
*
*
■ 14. Section 155.210 is amended by
revising paragraphs (c)(2) introductory
text and (e)(7) to read as follows:
PART 155—EXCHANGE
ESTABLISHMENT STANDARDS AND
OTHER RELATED STANDARDS
UNDER THE AFFORDABLE CARE ACT
§ 155.210
11. 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).
12. Section 155.106 is amended by
revising paragraph (c) introductory text
to read as follows:
■
§ 155.106 Election to operate an Exchange
after 2014.
Navigator program standards.
*
*
*
*
*
(c) * * *
(2) The Exchange must include an
entity from at least one of the following
categories for receipt of a Navigator
grant:
*
*
*
*
*
(e) * * *
(7) In a Federally-facilitated
Exchange, no individual or entity shall
be ineligible to operate as a Navigator
solely because its principal place of
business is outside of the Exchange
service area;
*
*
*
*
*
■ 15. Section 155.215 is amended by
revising paragraph (h) to read as
follows:
*
*
*
*
(c) Process for State Exchanges that
seek to utilize the Federal platform for
select functions. States may seek
approval to operate a State Exchange
utilizing the Federal platform for only
the individual market. A State seeking
approval to operate a State Exchange
utilizing the Federal platform for the
individual market to support select
functions through a Federal platform
agreement under § 155.200(f) must:
*
*
*
*
*
■ 13. Section 155.200 is amended by
removing and reserving paragraphs
(f)(2)(ii) through (iv); and revising
paragraph (f)(4) introductory text to read
as follows;
§ 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.
§ 155.200
§ 155.221 Standards for third-parties to
perform audits of agents, brokers, and
issuers participating in direct enrollment.
*
Functions of an Exchange.
*
*
*
*
*
(f) * * *
(2) * * *
(ii) [Reserved]
(iii) [Reserved]
(iv) [Reserved]
*
*
*
*
*
(4) A State Exchange on the Federal
platform that utilizes the Federal
platform for SHOP functions, for plan
years beginning on or after January 1,
2018, must require its QHP issuers to
make any changes to rates in accordance
with the timeline applicable in a
Federally-facilitated SHOP under
§ 155.706(b)(6)(i)(A). A State Exchange
on the Federal platform that utilizes the
Federal platform for SHOP functions, as
set forth in paragraphs (f)(4)(i) through
(vii) of this section, for plan years
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*
*
*
*
*
(h) In a Federally-facilitated
Exchange, no individual or entity shall
be ineligible to operate as a nonNavigator entity or as non-Navigator
assistance personnel solely because its
principal place of business is outside of
the Exchange service area.
*
*
*
*
*
■ 16. Section 155.221 is revised to read
as follows:
(a) An agent, broker, or issuer
participating in direct enrollment must
engage a third-party entity to conduct an
annual review to demonstrate
operational readiness in accordance
with § 155.220(c)(3)(i)(K) and with
§ 156.1230(b)(2) of this subchapter. The
third-party entity will be a downstream
or delegated entity of the agent, broker
or issuer that participates or wishes to
participate in direct enrollment.
(b) An agent, broker, or issuer
participating in direct enrollment must
satisfy the requirement to demonstrate
operational readiness under paragraph
(a) of this section by engaging a thirdparty entity that meets each of the
following standards:
(1) Has experience conducting audits
or similar services, including experience
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with relevant privacy and security
standards;
(2) Adheres to HHS specifications for
content, format, privacy, and security in
the conduct of an operational readiness
review, which includes ensuring that
agents, brokers, and issuers are in
compliance with the applicable privacy
and security standards and other
applicable requirements;
(3) Collects, stores, and shares with
HHS all data related to the third-party
entity’s audit of agents, brokers, and
issuers in a manner, format, and
frequency specified by HHS until 10
years from the date of creation, and
complies with the privacy and security
standards HHS adopts for agents,
brokers, and issuers as required in
accordance with § 155.260;
(4) Discloses to HHS any financial
relationships between the entity and
individuals who own or are employed
by an agent, broker, or issuer for which
it is conducting an operational readiness
review.
(5) Complies with all applicable
Federal and State requirements;
(6) Ensures, on an annual basis, that
appropriate staff successfully complete
operational readiness review training as
established by HHS prior to conducting
audits under paragraph (a) of this
section;
(7) Permits access by the Secretary
and the Office of the Inspector General
(OIG) or their designees in connection
with their right to evaluate through
audit, inspection, or other means, to the
third-party entity’s books, contracts,
computers, or other electronic systems,
relating to the third-party entity’s audits
of agent’s, broker’s, or issuer’s
obligations in accordance with Federal
standards under paragraph (a) of this
section until 10 years from the date of
creation; and
(8) Complies with other minimum
business criteria as specified in
guidance by HHS.
(c) An agent, broker or issuer may
engage multiple third-party entities to
conduct the audit under paragraph (a) of
this section and each third-party entity
must satisfy the standards outlined
under paragraph (b) of this section.
■ 17. Section 155.305 is amended by
revising paragraph (f)(4) to read as
follows:
§ 155.305
Eligibility standards.
*
*
*
*
*
(f) * * *
(4) Compliance with filing
requirement. The Exchange may not
determine a tax filer eligible for APTC
if HHS notifies the Exchange as part of
the process described in § 155.320(c)(3)
that APTC were made on behalf of the
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tax filer or either spouse if the tax filer
is a married couple for a year for which
tax data would be utilized for
verification of household income and
family size in accordance with
§ 155.320(c)(1)(i), and the tax filer or his
or her spouse did not comply with the
requirement to file an income tax return
for that year as required by 26 U.S.C.
6011, 6012, and implementing
regulations and reconcile the advance
payments of the premium tax credit for
that period.
*
*
*
*
*
■ 18. Section 155.320 is amended by—
■ a. Revising paragraphs (c)(3)(iii)
introductory text, and paragraph
(c)(3)(iii)(A);
■ b. Adding paragraphs (c)(3)(iii)(D)
through (F);
■ c. Revising paragraph (c)(3)(vi)(C), (D),
(F) and (G); and
■ d. Revising paragraph (d)(4)
introductory text.
The revisions and additions read as
follows:
§ 155.320 Verification process related to
eligibility for insurance affordability
programs.
*
*
*
*
*
(c) * * *
(3) * * *
(iii) Verification process for changes
in household income. (A) Except as
specified in paragraph (c)(3)(iii)(B), (C),
and (D) of this section, if an applicant’s
attestation, in accordance with
paragraph (c)(3)(ii)(B) of this section,
indicates that a tax filer’s annual
household income has increased or is
reasonably expected to increase from
the data described in paragraph
(c)(3)(ii)(A) of this section for the benefit
year for which the applicant(s) in the
tax filer’s family are requesting coverage
and the Exchange has not verified the
applicant’s MAGI-based income through
the process specified in paragraph
(c)(2)(ii) of this section to be within the
applicable Medicaid or CHIP MAGIbased income standard, the Exchange
must accept the applicant’s attestation
regarding a tax filer’s annual household
income without further verification.
*
*
*
*
*
(D) If an applicant’s attestation to
projected annual household income, as
described in paragraph (c)(3)(ii)(B) of
this section, is greater than or equal to
100 percent but not more than 400
percent of the FPL for the benefit year
for which coverage is requested and is
more than a reasonable threshold above
the annual household income computed
in accordance with paragraph
(c)(3)(ii)(A) of this section, the data
described in paragraph (c)(3)(ii)(A) of
this section indicates that projected
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51139
annual household income is under 100
percent FPL, and the Exchange has not
verified the applicant’s MAGI-based
income through the process specified in
paragraph (c)(2)(ii) of this section to be
within the applicable Medicaid or CHIP
MAGI-based income standard, the
Exchange must proceed in accordance
with § 155.315(f)(1) through (4). For the
purposes of this paragraph, a reasonable
threshold is established by the Exchange
in guidance and approved by HHS, but
must not be less than 10 percent, and
can also include a threshold dollar
amount. Applicants that would
otherwise be eligible for APTC based on
§ 155.305(f)(2) are not subject to the
verification described in this paragraph.
(E) If, at the conclusion of the period
specified in § 155.315(f)(2)(ii), the
Exchange remains unable to verify the
applicant’s attestation, the Exchange
must determine the applicant’s
eligibility based on the information
described in paragraph (c)(3)(ii)(A) of
this section, notify the applicant of such
determination in accordance with the
notice requirements specified in
§ 155.310(g), and implement such
determination in accordance with the
effective dates specified in § 155.330(f).
(F) If, at the conclusion of the period
specified in § 155.315(f)(2)(ii), the
Exchange remains unable to verify the
applicant’s attestation and the
information described in paragraph
(c)(3)(ii)(A) of this section is
unavailable, the Exchange must
determine the tax filer ineligible for
advance payments of the premium tax
credit and cost-sharing reductions,
notify the applicant of such
determination in accordance with the
notice requirements specified in
§ 155.310(g), and discontinue any
advance payments of the premium tax
credit and cost-sharing reductions in
accordance with the effective dates
specified in § 155.330(f).
*
*
*
*
*
(vi) * * *
(C) Increases in annual household
income. If an applicant’s attestation, in
accordance with paragraph (c)(3)(ii)(B)
of this section, indicates that a tax filer’s
annual household income has increased
or is reasonably expected to increase
from the data described in paragraph
(c)(3)(vi)(A) of this section to the benefit
year for which the applicant(s) in the
tax filer’s family are requesting coverage
and the Exchange has not verified the
applicant’s MAGI-based income through
the process specified in paragraph
(c)(2)(ii) of this section to be within the
applicable Medicaid or CHIP MAGIbased income standard, the Exchange
must accept the applicant’s attestation
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for the tax filer’s family without further
verification, unless:
(1) The Exchange finds that an
applicant’s attestation of a tax filer’s
annual household income is not
reasonably compatible with other
information provided by the application
filer, or
(2) The data described in paragraph
(c)(3)(vi)(A) of this section indicates that
projected annual household income is
under 100 percent FPL and the
applicant’s attestation to projected
household income, as described in
paragraph (c)(3)(ii)(B) of this section, is
greater than or equal to 100 percent but
not more than 400 percent of the FPL for
the benefit year for which coverage is
requested and is more than a reasonable
threshold above the annual household
income as computed using data sources
described in paragraph (c)(3)(vi)(A) of
this section, in which case the Exchange
must follow the procedures specified in
§ 155.315(f)(1) through (4). The
reasonable threshold used under this
paragraph must be equal to the
reasonable threshold established in
accordance with paragraph (c)(3)(iii)(D)
of this section.
(D) Decreases in annual household
income and situations in which
electronic data is unavailable. If
electronic data are unavailable or an
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 as
computed using data sources described
in paragraphs (c)(3)(vi)(A) of this
section, the Exchange must follow the
procedures specified in § 155.315(f)(1)
through (4). The reasonable threshold
used under this paragraph must be
equal to the reasonable threshold
established in accordance with
paragraph (c)(3)(vi) of this section.
*
*
*
*
*
(F) If, at the conclusion of the period
specified in § 155.315(f)(2)(ii), the
Exchange remains unable to verify the
applicant’s attestation, the Exchange
must determine the applicant’s
eligibility based on the information
described in paragraph (c)(3)(ii)(A) of
this section, notify the applicant of such
determination in accordance with the
notice requirements specified in
§ 155.310(g), and implement such
determination in accordance with the
effective dates specified in § 155.330(f).
(G) If, at the conclusion of the period
specified in § 155.315(f)(2)(ii), the
Exchange remains unable to verify the
applicant’s attestation for the tax filer
and the information described in
paragraph (c)(3)(ii)(A) of this section is
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unavailable, the Exchange must
determine the tax filer ineligible for
advance payments of the premium tax
credit and cost-sharing reductions,
notify the applicant of such
determination in accordance with the
notice requirement specified in
§ 155.310(g), and discontinue any
advance payments of the premium tax
credit and cost-sharing reductions in
accordance with the effective dates
specified in § 155.330(f).
*
*
*
*
*
(d) * * *
(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 through 2019, 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.
*
*
*
*
*
■ 19. Section 155.420 is amended by:
■ a. Revising paragraphs (a)(4)(iii), (a)(5)
and (b)(2)(i);
■ b. Removing paragraph (b)(2)(v);
■ c. Redesignating paragraph (b)(2)(vi)
as paragraph (b)(2)(v);
■ d. Revising paragraph (d)(1)(iii); and
■ e. Revising paragraph (d)(10)(i).
The revisions read as follows:
§ 155.420
Special enrollment periods.
(a) * * *
(4) * * *
(iii) For the other triggering events
specified in paragraph (d) of this
section, except for paragraphs (d)(2)(i),
(d)(4), (d)(6)(i) and (ii) for becoming
newly eligible for CSRs, (d)(8), (d)(9),
(d)(10) and (d)(12) of this section:
(A) If an enrollee qualifies for a
special enrollment period, the Exchange
must allow the enrollee and his or her
dependents to change to another QHP
within the same level of coverage (or
one metal level higher or lower, if no
such QHP is available), as outlined in
§ 156.140(b) of this subchapter; or
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(B) If a dependent qualifies for a
special enrollment period, and an
enrollee is adding the dependent to his
or her QHP, the Exchange must allow
the enrollee to add the dependent to his
or her current QHP; or, if the QHP’s
business rules do not allow the
dependent to enroll, the Exchange must
allow the enrollee and his or her
dependents to change to another QHP
within the same level of coverage (or
one metal level higher or lower, if no
such QHP is available), as outlined in
§ 156.140(b) of this subchapter, or enroll
the new qualified individual in a
separate QHP.
(5) Prior coverage requirement.
Qualified individuals who are required
to demonstrate coverage in the 60 days
prior to a qualifying event can either
demonstrate that they had minimum
essential coverage as described in 26
CFR 1.5000A–1(b) for 1 or more days
during the 60 days preceding the date of
the qualifying event; lived in a foreign
country or in a United States territory
for 1 or more days during the 60 days
preceding the date of the qualifying
event; are an Indian as defined by
section 4 of the Indian Health Care
Improvement Act; or lived in a service
area for 1 or more days during the 60
days preceding the date of the
qualifying event where no qualified
health plan was offered through the
Exchange.
(b) * * *
(2) * * *
(i) In the case of birth, adoption,
placement for adoption, placement in
foster care, or child support or other
court order as described in paragraph
(d)(2)(i) of this section, the Exchange
must ensure that coverage is effective
for a qualified individual or enrollee on
the date of birth, adoption, placement
for adoption, placement in foster care,
or effective date of court order; or it may
permit the qualified individual or
enrollee to elect a coverage effective
date of the first of the month following
plan selection; or in accordance with
paragraph (b)(1) of this section. If the
Exchange permits the qualified
individual or enrollee to elect a
coverage effective date of either the first
of the month following the date of plan
selection or in accordance with
paragraph (b)(1) of this section, the
Exchange must ensure coverage is
effective on the date duly selected by
the qualified individual or enrollee.
*
*
*
*
*
(d) * * *
(1) * * *
(iii) Loses pregnancy-related coverage
described under section
1902(a)(10)(A)(i)(IV) and
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(a)(10)(A)(ii)(IX), of the Act (42 U.S.C.
1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX))
or loses access to health care services
through coverage provided to a pregnant
woman’s unborn child, based on the
definition of a child in 42 CFR 457.10.
The date of the loss of coverage is the
last day the qualified individual would
have pregnancy-related coverage or
access to health care services through
the unborn child coverage; or
*
*
*
*
*
(10) * * *
(i) Is a victim of domestic abuse or
spousal abandonment as defined by 26
CFR 1.36B–2 or a dependent or
unmarried victim within a household, is
enrolled in minimum essential
coverage, and seeks to enroll in coverage
separate from the perpetrator of the
abuse or abandonment; or
*
*
*
*
*
■ 20. Section 155.430 is amended by:
■ a. Revising paragraph (d)(1);
■ b. Removing paragraphs (d)(2)(i)
through (iv);
■ c. Adding new paragraph (d)(2)(i); and
■ d. Redesignating paragraph (d)(2)(v) as
(d)(2)(ii).
The revisions and additions read as
follows:
§ 155.430 Termination of Exchange
enrollment or coverage.
(d) * * *
(1) For purposes of this section,
changes in eligibility for advance
payments of the premium tax credit and
cost sharing reductions, including
terminations, must adhere to the
effective dates specified in § 155.330(f).
(2) * * *
(i) On the date on which the
termination is requested by the enrollee
or on another prospective date selected
by the enrollee; or
*
*
*
*
*
■ 21. Section 155.500 is amended by
revising the definitions of ‘‘Appeal
request’’ and ‘‘Appeals entity’’ to read as
follows:
§ 155.500
Definitions.
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
*
*
*
*
*
Appeal request means a clear
expression, either orally or in writing,
by an applicant, enrollee, employer, or
small business employer or employee to
have any eligibility determination or
redetermination contained in a notice
issued in accordance with § 155.310(g),
§ 155.330(e)(1)(ii), § 155.335(h)(1)(ii),
§ 155.610(i), § 155.715(e) or (f), or
§ 155.716(e) reviewed by an appeals
entity.
Appeals entity means a body
designated to hear appeals of eligibility
determinations or redeterminations
contained in notices issued in
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accordance with § 155.310(g),
§ 155.330(e)(1)(ii), § 155.335(h)(1)(ii),
§ 155.610(i), § 155.715(e) and (f), or
§ 155.716(e).
*
*
*
*
*
■ 22. Section 155.605 is amended by
revising paragraph (d)(2)(iv) to read as
follows:
§ 155.605 Eligibility standards for
exemptions.
*
*
*
*
*
(d) * * *
(2) * * *
(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.
If there is not a bronze level plan offered
through the Exchange in the
individual’s rating area, the Exchange
must use the annual premium for the
lowest cost Exchange metal level plan
available in the individual market
through the Exchange in the State in the
rating area in which the individual
resides to determine whether coverage
exceeds the affordability threshold
specified in section 5000A(e)(1) of the
Code; and
*
*
*
*
*
■ 23. Section 155.610 is amended by
revising paragraph (h)(2) to read as
follows:
§ 155.610 Eligibility process for
exemptions.
*
*
*
*
*
(h) * * *
(2) The Exchange will only accept an
application for an exemption described
in § 155.605(d)(1) during one of the 3
calendar years after the month or
months during which the applicant
attests that the hardship occurred.
■ 24. Section 155.700 is amended by
revising paragraph (a) to read as follows:
§ 155.700 Standards for the establishment
of a SHOP.
(a) General requirement. (1) For plan
years beginning before January 1, 2018,
an Exchange must provide for the
establishment of a SHOP that meets the
requirements of this subpart and is
designed to assist qualified employers
and facilitate the enrollment of qualified
employees into qualified health plans.
(2) For plan years beginning on or
after January 1, 2018, an Exchange must
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51141
provide for the establishment of a SHOP
that meets the requirements of this
subpart and is designed to assist
qualified employers in facilitating the
enrollment of their employees in
qualified health plans.
*
*
*
*
*
■ 25. Section 155.705 is amended by
revising the section heading and adding
paragraph (e) to read as follows:
§ 155.705 Functions of a SHOP for plan
years beginning prior to January 1, 2018.
*
*
*
*
*
(e) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
Section 155.706 is applicable for plan
years beginning on or after January 1,
2018.
■ 26. Section 155.706 is added to read
as follows:
§ 155.706 Functions of a SHOP for plan
years beginning on or after January 1, 2018.
(a) Exchange functions that apply to
SHOP. The SHOP must carry out all the
required functions of an Exchange
described in this subpart and in
subparts C, E, K, and M of this part,
except:
(1) Requirements related to individual
eligibility determinations in subpart D
of this part;
(2) Requirements related to
enrollment of qualified individuals
described in subpart E of this part;
(3) The requirement to issue
certificates of exemption in accordance
with § 155.200(b); and
(4) Requirements related to the
payment of premiums by individuals,
Indian tribes, tribal organizations and
urban Indian organizations under
§ 155.240.
(b) Unique functions of a SHOP. The
SHOP must also provide the following
unique functions:
(1) Enrollment and eligibility
functions. The SHOP must adhere to the
requirements outlined in subpart H.
(2) Employer choice requirements.
The SHOP must allow a qualified
employer to select a level of coverage as
described in section 1302(d)(1) of the
Affordable Care Act, in which all QHPs
within that level are made available to
the qualified employees of the
employer.
(3) SHOP options with respect to
employer choice requirements. (i) For
plan years beginning on or after January
1, 2018, SHOP:
(A) Must allow an employer to make
available to qualified employees all
QHPs at the level of coverage selected
by the employer as described in
paragraph (b)(2) of this section, and
(B) May allow an employer to make
one or more QHPs available to qualified
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employees by a method other than the
method described in paragraph (b)(2) of
this section.
(ii) For plan years beginning on or
after January 1, 2018, a Federallyfacilitated SHOP will provide a
qualified employer a choice of two
methods to make QHPs available to
qualified employees:
(A) The employer may choose a level
of coverage as described in paragraph
(b)(2) of this section, or
(B) The employer may choose a single
QHP.
(iii) For plan years beginning on or
after January 1, 2018, a SHOP may, and
a Federally-facilitated SHOP will
provide a qualified employer a choice of
two methods to make stand-alone dental
plans available to qualified employees:
(A) The employer may choose to make
available a single stand-alone dental
plan.
(B) The employer may choose to make
available all stand-alone dental plans
offered through the SHOP at a level of
coverage as described in § 156.150(b)(2)
of this subchapter.
(iv) A SHOP may also provide a
qualified employer with a choice of a
third method to make QHPs available to
qualified employees by offering its
qualified employees a choice of all
QHPs offered through the 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. A State with a Federallyfacilitated SHOP may recommend that
the Federally-facilitated SHOP not make
this additional option available in that
State, by submitting a letter to HHS in
advance of the annual QHP certification
application deadline, by a date to be
established by HHS. The State’s letter
must describe and justify the State’s
recommendation, based on the
anticipated impact this additional
option would have on the small group
market and consumers.
(v) A SHOP may also provide a
qualified employer with a choice of a
third method to make stand-alone
dental plans available to qualified
employees by offering its qualified
employees a choice of all stand-alone
dental plans offered through the SHOP
by a single issuer across all available
levels of coverage, as described in
§ 156.150(b)(2) of this subchapter, if
such levels are available. If levels of
coverage are not available, a SHOP may
make a choice of all stand-alone dental
plans available. A State with a
Federally-facilitated SHOP may
recommend that the Federallyfacilitated SHOP not make this
additional option available in that State,
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by submitting a letter to HHS in advance
of the annual QHP certification
application deadline, by a date to be
established by HHS. The State’s letter
must describe and justify the State’s
recommendation, based on the
anticipated impact this additional
option would have on the small group
market and consumers.
(vi) States operating 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, except that a State
with a State-based Exchange utilizing
the Federal platform for SHOP
enrollment functions may decide
against offering the employer choice
models specified in paragraphs (b)(3)(iv)
and (b)(3)(v) of this section in that State,
provided that the State notifies HHS of
that decision in advance of the annual
QHP certification application deadline,
by a date to be established by HHS.
(4) The SHOP may, upon an election
by a qualified employer, enter into an
agreement with a qualified employer to
facilitate the administration of
continuation coverage by collecting
premiums for continuation coverage
enrolled in through the SHOP directly
from a person enrolled in continuation
coverage through the SHOP consistent
with applicable law and the terms of the
group health plan, and remitting
premium payments for this coverage to
QHP issuers.
(5) QHP Certification. With respect to
certification of QHPs in the small group
market, the SHOP must ensure each
QHP meets the requirements specified
in § 156.285 of this subchapter.
(6) Rates and rate changes. The SHOP
must—
(i) Require all QHP issuers to make
any change to rates at a uniform time
that is no more frequently than
quarterly.
(A) In a Federally-facilitated SHOP,
rates may be updated quarterly with
effective dates of January 1, April 1, July
1, or October 1 of each calendar year.
The updated rates must be submitted to
HHS at least 60 days in advance of the
effective date of the rates.
(B) [Reserved]
(ii) Prohibit all QHP issuers from
varying rates for a qualified employer
during the employer’s plan year.
(7) QHP availability in merged
markets. If a State merges the individual
market and the small group market risk
pools in accordance with section
1312(c)(3) of the Affordable Care Act,
the SHOP may permit employer groups
to enroll in any QHP meeting level of
coverage requirements described in
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section 1302(d) of the Affordable Care
Act.
(8) QHP availability in unmerged
markets. If a State does not merge the
individual and small group market risk
pools, the SHOP must permit employer
groups to enroll only in QHPs in the
small group market.
(9) SHOP expansion to large group
market. If a State elects to expand the
SHOP to the large group market, a SHOP
must allow issuers of health insurance
coverage in the large group market in
the State to offer QHPs in such market
through a SHOP beginning in 2017
provided that a large employer meets
the qualified employer requirements
other than that it be a small employer.
(10) Participation rules. Subject to
§ 147.104 of this subchapter, the SHOP
may authorize a uniform group
participation rate for the offering of
health insurance coverage in the SHOP,
which must be a single, uniform rate
that applies to all groups and issuers in
the SHOP. If the SHOP authorizes a
minimum participation rate, such rate
must be based on the rate of employee
participation in the SHOP, not on the
rate of employee participation in any
particular QHP or QHPs of any
particular issuer.
(i) Subject to § 147.104 of this
subchapter, a Federally-facilitated
SHOP must use a minimum
participation rate of 70 percent,
calculated as the number of full-time
employees accepting coverage offered
by a qualified employer plus the
number of full-time employees who, at
the time the employer submits the
SHOP group enrollment, are enrolled in
coverage through another group health
plan, governmental coverage (such as
Medicare, Medicaid, or TRICARE),
coverage sold through the individual
market, or in other minimum essential
coverage, divided by the number of fulltime employees offered coverage.
(ii) Notwithstanding paragraphs
(b)(10)(i) of this section, a Federallyfacilitated SHOP may utilize a different
minimum participation rate in a State if
there is evidence that a State law sets a
minimum participation rate or that a
higher or lower minimum participation
rate is customarily used by the majority
of QHP issuers in that State for products
in the State’s small group market
outside the SHOP.
(11) Premium calculator. In the
SHOP, the premium calculator
described in § 155.205(b)(6) must
facilitate the comparison of available
QHPs.
(c) Coordination with individual
market Exchange for eligibility
determinations. A SHOP that collects
employee eligibility or enrollment data
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must provide data related to eligibility
and enrollment of a qualified employee
to the individual market Exchange that
corresponds to the service area of the
SHOP, unless the SHOP is operated
pursuant to § 155.100(a)(2).
(d) Duties of Navigators in the SHOP.
In States that have elected to operate
only a SHOP pursuant to
§ 155.100(a)(2), at State option and if
State law permits the Navigator duties
described in § 155.210(e)(3) and (4) may
be fulfilled through referrals to agents
and brokers.
(e) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
■ 27. Section 155.715 is amended by
revising the section heading and adding
paragraph (h) to read as follows:
§ 155.715 Eligibility determination process
for SHOP for plan years beginning prior to
January 1, 2018.
*
*
*
*
*
(h) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
§ 155.716 is applicable for plan years
beginning on or after January 1, 2018.
■ 28. Section 155.716 is added to read
as follows:
asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
§ 155.716 Eligibility determination process
for SHOP for plan years beginning on or
after January 1, 2018.
(a) General requirement. The SHOP
must determine whether an employer
requesting a determination of eligibility
to participate in a SHOP is eligible in
accordance with the requirements of
§ 155.710.
(b) Applications. The SHOP must
accept a SHOP single employer
application form from employers, in
accordance with the relevant standards
of § 155.730.
(c) Verification of eligibility. For the
purpose of verifying employer
eligibility, the SHOP—
(1) May establish, in addition to or in
lieu of reliance on the application,
additional methods to verify the
information provided by the applicant
on the applicable application;
(2) Must collect only the minimum
information necessary for verification of
eligibility in accordance with the
eligibility standards described in
§ 155.710; and
(3) May not perform individual
market Exchange eligibility
determinations or verifications
described in subpart D of this part.
(d) Eligibility adjustment period.
When the information submitted on the
SHOP single employer application is
inconsistent with information collected
from third-party data sources through
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the verification process described in
paragraph (c)(1) of this section or
otherwise received by the SHOP, the
SHOP must—
(1) Make a reasonable effort to
identify and address the causes of such
inconsistency, including through
typographical or other clerical errors;
(2) Notify the employer of the
inconsistency;
(3) Provide the employer with a
period of 30 days from the date on
which the notice described in paragraph
(d)(2) of this section is sent to the
employer to either present satisfactory
documentary evidence to support the
employer’s application, or resolve the
inconsistency; and
(4) If, after the 30-day period
described in paragraph (d)(2) of this
section, the SHOP has not received
satisfactory documentary evidence, the
SHOP must—
(i) Notify the employer of its denial or
termination of eligibility in accordance
with paragraph (e) of this section and of
the employer’s right to appeal such
determination; and
(ii) If the employer was enrolled
pending the confirmation or verification
of eligibility information, discontinue
the employer’s participation in the
SHOP at the end of the month following
the month in which the notice is sent.
(e) Notification of employer eligibility.
The SHOP must provide an employer
requesting eligibility to purchase
coverage through the SHOP with a
notice of approval or denial or
termination of eligibility and the
employer’s right to appeal such
eligibility determination.
(f) Validity of Eligibility
Determination. An employer’s
determination of eligibility to
participate in SHOP remains valid until
the employer makes a change that could
end its eligibility under § 155.710(b) or
withdraws from participation in the
SHOP.
(g) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
■ 29. Section 155.720 is amended by
revising the section heading and adding
paragraph (j) to read as follows:
§ 155.720 Enrollment of employees into
QHPs under SHOP for plan years beginning
prior to January 1, 2018.
*
*
*
*
*
(j) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
Section 155.721 is applicable for plan
years beginning on or after January 1,
2018.
■ 30. Section 155.721 is added to read
as follows:
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51143
§ 155.721 Record retention and IRS
Reporting for plan years beginning on or
after January 1, 2018.
(a) Records. The SHOP must receive
and maintain for at least 10 years
records of qualified employers
participating in the SHOP.
(b) Reporting requirement for tax
administration purposes. The SHOP
must, at the request of the IRS, report
information to the IRS about employer
eligibility to participate in SHOP
coverage.
(c) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
■ 31. Section 155.725 is amended by
revising the section heading and adding
paragraph (l) to read as follows:
§ 155.725 Enrollment periods under SHOP
for plan years beginning prior to January 1,
2018.
*
*
*
*
*
(l) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
Section 155.726 is applicable for plan
years beginning on or after January 1,
2018.
■ 32. Section 155.726 is added to read
as follows:
§ 155.726 Enrollment periods under SHOP
for plan years beginning on or after January
1, 2018.
(a) General requirements. The SHOP
must ensure that issuers offering QHPs
through the SHOP adhere to applicable
enrollment periods, including special
enrollment periods.
(b) Rolling enrollment in the SHOP.
The SHOP must permit a qualified
employer to purchase coverage for its
small group at any point during the
year. The employer’s plan year must
consist of the 12-month period
beginning with the qualified employer’s
effective date of coverage, unless the
plan is issued in a State that has elected
to merge its individual and small group
risk pools under section 1312(c)(3) of
the Affordable Care Act, in which case
the plan year will end on December 31
of the calendar year in which coverage
first became effective.
(c)(1) Special enrollment periods. The
SHOP must ensure that issuers offering
QHPs through the SHOP provide special
enrollment periods consistent with the
section, during which certain qualified
employees or dependents of qualified
employees may enroll in QHPs and
enrollees may change QHPs.
(2) The SHOP must ensure that
issuers offering QHPs through a SHOP
provide a special enrollment period for
a qualified employee or a dependent of
a qualified employee who;
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(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), (9), (10), (11), or (12);
(ii) Loses eligibility for coverage
under a Medicaid plan under title XIX
of the Social Security Act or a State
child health plan under title XXI of the
Social Security Act; or
(iii) Becomes eligible for assistance,
with respect to coverage under a SHOP,
under such Medicaid plan or a State
child health plan (including any waiver
or demonstration project conducted
under or in relation to such a plan).
(3) A qualified employee or
dependent of a qualified employee who
experiences a qualifying event described
in paragraph (j)(2) of this section has:
(i) Thirty (30) days from the date of
a triggering event described in
paragraph (c)(2)(i) of this section to
select a QHP through the SHOP; and
(ii) Sixty (60) days from the date of a
triggering event described in paragraph
(c)(2)(ii) or (iii) of this section to select
a QHP through the SHOP;
(4) A dependent of a qualified
employee is not eligible for a special
enrollment period if the employer does
not extend the offer of coverage to
dependents.
(5) The effective dates of coverage for
special enrollment periods are
determined using the provisions of
§ 155.420(b).
(6) Loss of minimum essential
coverage is determined using the
provisions of § 155.420(e).
(d) Limitation. Qualified employees
will not be able to enroll unless the
employer group meets any applicable
minimum participation rate
implemented under § 155.706(b)(10).
(e) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
■ 33. Section 155.730 is amended by
revising the section heading and adding
paragraph (h) to read as follows:
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§ 155.730 Application standards for SHOP
for plan year beginning prior to January 1,
2018.
*
*
*
*
*
(h) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
Section 155.731 is applicable for plan
years beginning on or after January 1,
2018.
■ 34. Section 155.731 is added to read
as follows:
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§ 155.731 Application standards for SHOP
for plan years beginning on or after January
1, 2018.
(a) General requirements. Application
forms used by the SHOP must meet the
requirements set forth in this section.
(b) Single employer application. The
SHOP must use a single application to
determine employer eligibility. Such
application must collect the following—
(1) Employer name and address of
employer’s locations;
(2) Information sufficient to confirm
the employer is a small employer;
(3) Employer Identification Number
(EIN); and
(4) Information sufficient to confirm
that the employer is offering, at a
minimum, all full-time employees
coverage in a QHP through a SHOP.
(c) Model application. The SHOP may
use the model single employer
application provided by HHS.
(d) Alternative employer application.
The SHOP may use an alternative
application if such application is
approved by HHS and collects the
information described in paragraph (b).
(e) Filing. The SHOP must:
(1) Accept applications from SHOP
application filers; and
(2) Provide the tools to file an
employer eligibility application via an
Internet Web site.
(f) Additional safeguards. (1) The
SHOP may not provide to the employer
any information collected on an
employee application with respect to
spouses or dependents other than the
name, address, and birth date of the
spouse or dependent.
(2) The SHOP is not permitted to
collect information on the single
employer or on an employee application
unless that information is necessary to
determine SHOP eligibility or effectuate
enrollment through the SHOP.
(g) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
■ 35. Section 155.735 is amended by
revising the section heading and adding
paragraph (h) to read as follows:
§ 155.735 Termination of SHOP enrollment
or coverage for plan years beginning prior
to January 1, 2018.
*
*
*
*
*
(h) Applicability date. The provisions
of this section apply for plan years
beginning before January 1, 2018.
■ 36. Section 155.740 is amended by
revising the section heading and adding
paragraph (p) to read as follows:
§ 155.740 SHOP employer and employee
eligibility appeals requirements for plan
years beginning prior to January 1, 2018.
*
*
*
*
*
(p) Applicability date. The provisions
of this section apply for plan years
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beginning prior to January 1, 2018.
Section 155.741 is applicable for plan
years beginning on or after January 1,
2018.
■ 37. Section 155.741 is added to
subpart H to read as follows:
§ 155.741 SHOP employer and employee
eligibility appeals requirements for plan
year beginning on or after January 1, 2018.
(a) Definitions. The definitions in
§§ 155.20, 155.300, and 155.500 apply
to this section.
(b) General requirements. (1) A State,
establishing an Exchange that provides
for the establishment of a SHOP
pursuant to § 155.100 must provide an
eligibility appeals process for the SHOP.
Where a State has not established an
Exchange that provides for the
establishment of a SHOP pursuant to
§ 155.100, HHS will provide an
eligibility appeals process for the SHOP
that meets the requirements of this
section and the requirements in
paragraph (b)(2) of this section.
(2) The appeals entity must conduct
appeals in accordance with the
requirements established in this section
and §§ 155.505(e) through (h) and
155.510(a)(1) and (2) and (c).
(c) Employer right to appeal. An
employer may appeal—
(1) A notice of denial or termination
of eligibility under § 155.716(e); or
(2) A failure by the SHOP to provide
a timely eligibility determination or a
timely notice of an eligibility
determination in accordance with
§ 155.716(e).
(d) Appeals notice requirement.
Notices of the right to appeal a denial
of eligibility under § 155.716(e) must be
written and include—
(1) The reason for the denial or
termination of eligibility, including a
citation to the applicable regulations;
and
(2) The procedure by which the
employer may request an appeal of the
denial or termination of eligibility.
(e) Appeal request. The SHOP and
appeals entity must—
(1) Allow an employer to request an
appeal within 90 days from the date of
the notice of denial or termination of
eligibility to—
(i) The SHOP or the appeals entity; or
(ii) HHS, if no State Exchange that
provides for establishment of a SHOP
has been established;
(2) Accept appeal requests submitted
through any of the methods described in
§ 155.520(a)(1);
(3) Comply with the requirements of
§ 155.520(a)(2) and (3); and
(4) Consider an appeal request valid if
it is submitted in accordance with
paragraph (e)(1) of this section.
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(f) Notice of appeal request. (1) Upon
receipt of a valid appeal request, the
appeals entity must—
(i) Send timely acknowledgement to
the employer of the receipt of the appeal
request, including—
(A) An explanation of the appeals
process; and
(B) Instructions for submitting
additional evidence for consideration by
the appeals entity.
(ii) Promptly notify the SHOP of the
appeal, if the appeal request was not
initially made to the SHOP.
(2) Upon receipt of an appeal request
that is not valid because it fails to meet
the requirements of this section, the
appeals entity must—
(i) Promptly and without undue
delay, send written notice to the
employer that is appealing that—
(A) The appeal request has not been
accepted,
(B) The nature of the defect in the
appeal request; and
(C) An explanation that the employer
may cure the defect and resubmit the
appeal request if it meets the timeliness
requirements of paragraph (e) of this
section, or within a reasonable
timeframe established by the appeals
entity.
(ii) Treat as valid an amended appeal
request that meets the requirements of
this section.
(g) Transmittal and receipt of records.
(1) Upon receipt of a valid appeal
request under this section, or upon
receipt of the notice under paragraph
(f)(2) of this section, the SHOP must
promptly transmit, via secure electronic
interface, to the appeals entity—
(i) The appeal request, if the appeal
request was initially made to the SHOP;
and
(ii) The eligibility record of the
employer that is appealing.
(2) The appeals entity must promptly
confirm receipt of records transmitted
pursuant to paragraph (g)(1) of this
section to the SHOP that transmitted the
records.
(h) Dismissal of appeal. The appeals
entity—
(1) Must dismiss an appeal if the
employer that is appealing—
(i) Withdraws the request in
accordance with the standards set forth
in § 155.530(a)(1); or
(ii) Fails to submit an appeal request
meeting the standards specified in
paragraph (e) of this section.
(2) Must provide timely notice to the
employer that is appealing of the
dismissal of the appeal request,
including the reason for dismissal, and
must notify the SHOP of the dismissal.
(3) May vacate a dismissal if the
employer makes a written request
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within 30 days of the date of the notice
of dismissal showing good cause why
the dismissal should be vacated.
(i) Procedural rights of the employer.
The appeals entity must provide the
employer the opportunity to submit
relevant evidence for review of the
eligibility determination.
(j) Adjudication of SHOP appeals.
SHOP appeals must—
(1) Comply with the standards set
forth in § 155.555(i)(1) and (3); and
(2) Consider the information used to
determine the employer’s eligibility as
well as any additional relevant evidence
submitted during the course of the
appeal by the employer or employee.
(k) Appeal decisions. Appeal
decisions must—
(1) Be based solely on—
(i) The evidence referenced in
paragraph (j)(2) of this section;
(ii) The eligibility requirements for
the SHOP under § 155.710(b), as
applicable.
(2) Comply with the standards set
forth in § 155.545(a)(2) through (5)
(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 the employer is found ineligible
under the decision, then the appeal
decision is effective as of the date of the
notice of the appeal decision.
(l) Notice of appeal decision. The
appeals entity must issue written notice
of the appeal decision to the employer
and to the SHOP within 90 days of the
date the appeal request is received.
(m) Implementation of SHOP appeal
decisions. The SHOP must promptly
implement the appeal decision upon
receiving the notice under paragraph (l)
of this section.
(n) Appeal record. Subject to the
requirements of § 155.550, the appeal
record must be accessible to the
employer in a convenient format and at
a convenient time.
(o) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
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PART 156—HEALTH INSURANCE
ISSUER STANDARDS UNDER THE
AFFORDABLE CARE ACT, INCLUDING
STANDARDS RELATED TO
EXCHANGES
38. 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).
39. Section 156.100 is amended by
revising the section heading and the
introductory text and by adding
paragraph (d) to read as follows:
■
§ 156.100 State selection of benchmark
plan for plan years beginning prior to
January 1, 2019.
For plan years beginning before
January 1, 2019, each State may identify
a single EHB-benchmark plan according
to the selection criteria described below:
*
*
*
*
*
(d) Applicability date: For plan years
beginning on or after January 1, 2019,
§ 156.111 applies in place of this
section.
■ 40. Section 156.111 is added to
Subpart B to read as follows:
§ 156.111 State selection of EHBbenchmark plan for plan years beginning
on or after January 1, 2019.
(a) Subject to paragraphs (b), (c), (d)
and (e) of this section, for plan years
beginning on or after January 1, 2019, a
State may change its EHB-benchmark
plan by:
(1) Selecting the EHB-benchmark plan
that another State used for the 2017 plan
year under § 156.100 and § 156.110 of
this subpart;
(2) Replacing one or more categories
of EHBs under § 156.110(a) of this
subpart under its EHB-benchmark plan
used for the 2017 plan year with the
same category or categories of EHB from
the EHB-benchmark plan that another
State used for the 2017 plan year under
§ 156.100 and § 156.110 of this subpart;
or
(3) Otherwise selecting a set of
benefits that would become the State’s
EHB-benchmark plan, provided that the
new EHB-benchmark plan does not
exceed the generosity of the most
generous among a set of comparison
plans, including:
(i) The State’s EHB-benchmark plan
used for the 2017 plan year, and
(ii) Any of the State’s base-benchmark
plan options for the 2017 plan year
described in § 156.100(a)(1) of this
subpart, supplemented as necessary
under § 156.110 of this subpart.
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(b) A State’s EHB-benchmark plan
must:
(1) EHB coverage. Provide an
appropriate balance of coverage for the
categories of benefits at § 156.110(a) of
this subpart.
(2) Scope of benefits. (i) Be equal in
scope of benefits to what is provided
under a typical employer plan, defined
as:
(A) An employer plan within a
product (as these terms are defined in
§ 144.103 of this subchapter) with
substantial enrollment in the product of
at least 5,000 enrollees sold in the small
group or large group market, in one or
more States; or
(B) A self-insured group health plan
with substantial enrollment of at least
5,000 enrollees in one or more States;
(ii) Not have benefits unduly
weighted towards any of the categories
of benefits at § 156.110(a) of this
subpart; and
(iii) Provide benefits for diverse
segments of the population, including
women, children, persons with
disabilities, and other groups.
(c) The State must provide reasonable
public notice and an opportunity for
public comment on the State’s selection
of an EHB-benchmark plan.
(d) A State must notify HHS of the
selection of a new EHB-benchmark plan
by a date to be determined by HHS for
each applicable plan year.
(1) If the State does not make a
selection by the annual selection date,
the State’s EHB-benchmark plan for the
applicable plan year would be that
State’s EHB-benchmark plan applicable
for the prior year.
(2) [Reserved]
(e) A State changing its EHBbenchmark plan under this section must
submit documents in a format and
manner specified by HHS by a date
determined by HHS. These must
include:
(1) A document confirming that the
State’s EHB-benchmark plan definition
complies with the requirements under
paragraphs (a), (b) and (c) of this
section, including information on which
selection option under paragraph (a) of
this section the State is using, and
whether the State is using another
State’s EHB-benchmark plan;
(2) If the State is selecting its EHBbenchmark plan using the options in
paragraph (a)(2) or (3) of this section, an
actuarial certification and an associated
actuarial report from an actuary, who is
a member of the American Academy of
Actuaries, in accordance with generally
accepted actuarial principles and
methodologies that affirms:
(i) That the State’s EHB-benchmark
plan definition is equal in scope to
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benefits provided under a typical
employer plan; and
(ii) If the State is selecting its EHBbenchmark plan using the option in
paragraph (a)(3) of this section, that the
new EHB-benchmark plan does not
exceed the generosity of the most
generous among the plans listed in
paragraph (a)(3)(i) and (ii) of this
section;
(3) The State’s EHB-benchmark plan
document that reflects the benefits and
limitations, including medical
management requirements, a schedule
of benefits and, if the State is selecting
its EHB-benchmark plan using the
option in paragraph (a)(3) of this
section, a formulary drug list in a format
and manner specified by HHS; and
(4) Other documentation specified by
HHS, which is necessary to
operationalize the State’s EHBbenchmark plan.
■ 41. Section 156.115 is amended by
revising paragraph (b)(1)(ii) to read as
follows:
§ 156.115
Provision of EHB.
*
*
*
*
*
(b) * * *
(1) * * *
(ii) Is substituted within the same
essential health benefit category or
between essential health benefit
categories, as long as the plan with
substitutions still provides benefits that
are substantially equal to the EHBbenchmark plan, provides an
appropriate balance among the EHB
categories such that benefits are not
unduly weighted towards any category,
and provides benefits for diverse
segments of the population; and
*
*
*
*
*
■ 42. Section 156.150 is amended by
removing and reserving paragraph (b) to
read as follows:
§ 156.150 Application to stand-alone
dental plans inside the Exchange.
*
*
*
*
*
(b) [Reserved]
*
*
*
*
*
■ 43. Section 156.200 is amended by
revising paragraph (b)(2) to read as
follows:
§ 156.200 QHP issuer participation
standards.
*
*
*
*
*
(b) * * *
(2) Comply with Exchange processes,
procedures, and requirements set forth
in accordance with subpart K of part
155 and, in the small group market,
§ 155.705 and § 155.706 of this
subchapter;
*
*
*
*
*
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44. Section 156.285 is amended by
revising the section heading and adding
paragraph (f) to read as follows:
■
§ 156.285 Additional standards specific to
SHOP for plan years beginning prior to
January 1, 2018.
*
*
*
*
*
(f) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
Additional standards specific to SHOP
for plan years beginning on or after
January 1, 2018 are in § 156.286.
■ 45. Section 156.286 is added to read
as follows:
§ 156.286 Additional standards specific to
SHOP for plan years beginning on or after
January 1, 2018.
(a) SHOP rating and premium
payment requirements. QHP issuers
offering a QHP through a SHOP must:
(1) Accept payment from a qualified
employer or an enrollee, or a SHOP on
behalf of a qualified employer or
enrollee
(2) Adhere to the SHOP timeline for
rate setting as established in
§ 155.706(b)(6) of this subchapter;
(3) Charge the same contract rate for
a plan year; and
(4) Adhere to the premium rating
standards described in § 147.102 of this
subchapter regardless of whether the
QHP being sold through the SHOP is
sold in the small group market or the
large group market.
(b) Enrollment periods and processes
for the SHOP. QHP issuers offering a
QHP through the SHOP must adhere to
enrollment periods and processes
established by the SHOP, consistent
with § 155.726 of this subchapter, and
establish a uniform enrollment timeline
and process for enrolling qualified
employers and employer group
members.
(c) Enrollment process for the SHOP.
A QHP issuer offering a QHP through
the SHOP must:
(1) Provide new enrollees with the
enrollment information package as
described in § 156.265(e); and
(2) Enroll all qualified employees
consistent with the plan year of the
applicable qualified employer.
(d) Participation rules. QHP issuers
offering a QHP through the SHOP may
impose group participation rules for the
offering of health insurance coverage in
connection with a QHP only if and to
the extent authorized by the SHOP in
accordance with § 155.706 of this
subchapter.
(e) Employer choice. QHP issuers
offering a QHP through the SHOP must
accept enrollments from groups in
accordance with the employer choice
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policies applicable to the SHOP under
§ 155.706(b)(3) of this subchapter.
(f) Identification of SHOP
enrollments. QHP issuers offering a QHP
through the SHOP must use a uniform
enrollment form, maintain processes
sufficient to identify whether a group
market enrollment is an enrollment
through the SHOP, and maintain
records of SHOP enrollments for a
period of 10 years following the
enrollment.
(g) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
§ 156.298
[Removed]
46. Section 156.298 is removed.
47. Section 156.340 is amended by
revising paragraph (a)(2) to read as
follows:
■
(a) * * *
(2) Exchange processes, procedures,
and standards in accordance with
subparts H and K of part 155 and, in the
small group market, § 155.705 and
§ 155.706 of this subchapter;
*
*
*
*
*
■ 48. Section 156.350 is amended by
revising paragraphs (a)(1) and (a)(2) to
read as follows:
§ 156.350 Eligibility and enrollment
standards for Qualified Health Plan issuers
on State-based Exchanges on the Federal
platform.
(a) * * *
(1) Section 156.285(a)(4)(ii) regarding
the premiums for plans offered on the
SHOP, for plan years beginning prior to
January 1, 2018;
(2) Section 156.285(c)(5) and (c)(8)(iii)
regarding the enrollment process for
SHOP, for plan years beginning prior to
January 1, 2018; and
*
*
*
*
*
■ 49. Section 156.602 is amended by
redesignating paragraph (e) as paragraph
(f) and adding new paragraph (e) to read
as follows:
§ 156.602 Other coverage that qualifies as
minimum essential coverage.
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*
*
*
*
(e) CHIP buy-in programs. Coverage
under a Children’s Health Insurance
Program (CHIP) buy-in program that
provides identical coverage to that
State’s CHIP program under title XXI of
the Social Security Act.
*
*
*
*
*
■ 50. Section 156.1230 is amended by
revising paragraph (b)(2) to read as
follows:
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*
*
*
*
(b) * * *
(2) The QHP issuer must engage a
third party entity in accordance with
§ 155.221 of this subchapter to
demonstrate operational readiness and
compliance with applicable
requirements prior to the QHP issuer’s
Internet Web site being used to
complete a QHP selection.
*
*
*
*
*
PART 157—EMPLOYER
INTERACTIONS WITH EXCHANGES
AND SHOP PARTICIPATION
51. The authority citation for part 157
continues to read as follows:
§ 156.340 Standards for downstream and
delegated entities.
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*
■
■
*
§ 156.1230 Direct enrollment with the QHP
issuer in a manner considered to be
through the Exchange.
Authority: Title I of the Affordable Care
Act, Sections 1311, 1312, 1321, 1411, 1412,
Pub. L. 111–148, 124 Stat. 199.
52. Section 157.205 is amended by
revising the section heading and adding
paragraph (h) to read as follows:
■
§ 157.205 Qualified employer participation
process in a SHOP for plan years beginning
prior to January 1, 2018.
*
*
*
*
*
(h) Applicability date. The provisions
of this section apply for plan years
beginning prior to January 1, 2018.
Section 157.206 is applicable for plan
years beginning on or after January 1,
2018.
■ 53. Section 157.206 is added to read
as follows:
§ 157.206 Qualified employer participation
process in a SHOP for plan years beginning
on or after January 1, 2018.
(a) General requirements. When
joining the SHOP, a qualified employer
must comply with the requirements,
processes, and timelines set forth by this
part and must remain in compliance for
the duration of the employer’s
participation in the SHOP.
(b) Selecting QHPs. During an election
period, a qualified employer may make
coverage in a QHP available through the
SHOP in accordance with the processes
developed by the SHOP in accordance
with § 155.706 of this subchapter.
(c) Information dissemination to
employees. A qualified employer
participating in the SHOP must
disseminate information to its qualified
employees about the process to enroll in
a QHP through the SHOP.
(d) Employees hired outside of the
initial or annual open enrollment
period. Qualified employers must
provide employees hired outside of the
initial or annual open enrollment period
with information about the enrollment
process.
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51147
(e) Participation in the SHOP and
termination of coverage or enrollment
through the SHOP. (1) Changes affecting
participation. Employers must submit a
new single employer application to the
SHOP or withdraw from participating in
the SHOP if the employer makes a
change that could end its eligibility
under § 155.710 of this subchapter.
(2) If an employer receives a
determination of ineligibility to
participate in the SHOP or the SHOP
terminates its eligibility to participate in
the SHOP, the employer must notify the
issuer or issuers of QHPs in which their
group members are enrolled in coverage
of its ineligibility or termination of
eligibility within 5 business days of the
end of any applicable appeal process
under § 155.741, which could include
when the time to file an appeal lapses
without an appeal being filed, when the
appeal is rejected or dismissed, or when
the appeal process concludes with an
adjudication by the appeals entity, as
applicable.
(3) Employers must promptly notify
the issuer or issuers of QHPs in which
their group members are enrolled in
coverage if it wishes to terminate
coverage or enrollment through the
SHOP.
(f) Applicability date. The provisions
of this section apply for plan years
beginning on or after January 1, 2018.
PART 158—ISSUER USE OF PREMIUM
REVENUE: REPORTING AND REBATE
REQUIREMENTS
54. 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.
55. Section 158.170 is amended by
revising paragraph (b) introductory text
to read as follows:
■
§ 158.170
Allocation of expenses.
*
*
*
*
*
(b) Description of the methods used to
allocate expenses. The report required
in § 158.110 must include a detailed
description of the methods used to
allocate expenses, including incurred
claims, quality improvement expenses
(unless the report utilizes the percentage
of premium option described in
§ 158.221(b)(8), in which case the
allocation method description should
state so), Federal and State taxes and
licensing or regulatory fees, and other
non-claims costs, to each health
insurance market in each State. A
detailed description of each expense
element must be provided, including
how each specific expense meets the
criteria for the type of expense in which
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it is categorized, as well as the method
by which it was aggregated.
*
*
*
*
*
■ 56. Section 158.221 is amended by
adding paragraph (b)(8) to read as
follows:
§ 158.221 Formula for calculating an
issuer’s medical loss ratio.
*
*
*
*
*
(b) * * *
(8) Beginning with the 2017 MLR
reporting year, an issuer has the option
of reporting an amount equal to 0.8
percent of earned premium in the
relevant State and market in lieu of
reporting the issuer’s actual
expenditures for activities that improve
health care quality, as defined in
§§ 158.150 and 158.151.
*
*
*
*
*
■ 57. Section 158.301 is revised to read
as follows:
§ 158.301 Standard for adjustment to the
medical loss ratio.
The Secretary may adjust the MLR
standard that must be met by issuers
offering coverage in the individual
market in a State, as defined in section
2791 of the PHS Act, for a given MLR
reporting year if, in the Secretary’s
discretion, the Secretary determines that
there is a reasonable likelihood that an
adjustment to the 80 percent MLR
standard of section 2718(b)(1)(A)(ii) of
the Public Health Service Act will help
stabilize the individual market in that
State.
■ 58. Section 158.321 is revised to read
as follows:
(b) The information required in
paragraphs (a)(1) through (4) and (6) of
this section must be provided separately
for the issuer’s individual market plans
grouped by the following categories, as
applicable: On-Exchange, off-Exchange,
grandfathered health plans as defined in
§ 147.140 of this subchapter, coverage
that meets the criteria for transitional
policies outlined in applicable
guidance, and non-grandfathered single
risk pool coverage. The information
required in paragraph (a)(1) through (5)
of this section must be provided at the
issuer level.
(c) The State must also provide
information regarding whether any
issuer other than those described in
paragraph (a) of this section has
provided notice to the State’s insurance
commissioner, superintendent, or
comparable State authority that the
issuer will cease or begin offering
individual market coverage on the
Exchange, certain geographic areas, or
the entire individual market in the
State.
■ 59. Section 158.322 is revised to read
as follows:
§ 158.322 Proposal for adjusted medical
loss ratio.
A State must provide its own proposal
as to the adjustment it seeks to the MLR
standard. This proposal must include an
explanation of how an adjustment to the
MLR standard for the State’s individual
market will help stabilize the State’s
individual market.
■ 60. Section 158.330 is revised to read
as follows:
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§ 158.321 Information regarding the
State’s individual health insurance market.
§ 158.330 Criteria for assessing request
for adjustment to the medical loss ratio.
(a) Subject to § 158.320, the State
must provide, for each issuer who
actively offers coverage in the
individual market in the State, the
following information, in accordance
with paragraph (b) of this section, for
the preceding calendar year and, at the
State’s option, for the current year:
(1) Total earned premium and
incurred claims;
(2) Total number of enrollees (lifeyears and covered lives);
(3) Total agents’ and brokers’
commission expenses;
(4) Net underwriting gain;
(5) Risk-based capital level; and
(6) Whether the issuer has provided
notice to the State’s insurance
commissioner, superintendent, or
comparable State authority that the
issuer will cease or begin offering
individual market coverage on the
Exchange, certain geographic areas, or
the entire individual market in the
State.
The Secretary may consider the
following criteria in assessing whether
an adjustment to the 80 percent MLR
standard, as calculated in accordance
with this subpart, would be reasonably
likely to help stabilize the individual
market in a State that has requested
such adjustment:
(a) The number and financial
performance (based on data provided by
a State under § 158.321) of issuers
actively offering individual health
insurance coverage on- and offExchange, grandfathered health plans as
defined in § 147.140 of this subchapter,
coverage that meets the criteria for
transitional policies outlined in
applicable guidance, and nongrandfathered single risk pool coverage;
the number of issuers reasonably likely
to cease or begin offering individual
market coverage in the State; and the
likelihood that an adjustment to the 80
percent MLR standard could help
increase competition in the individual
VerDate Sep<11>2014
18:32 Nov 01, 2017
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Frm 00098
Fmt 4701
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market in the State, including in
underserved areas.
(b) Whether an adjustment to the 80
percent MLR standard for the individual
market may improve consumers’ access
to agents and brokers.
(c) The capacity of any new issuers or
issuers remaining in the individual
market to write additional business in
the event one or more issuers were to
cease offering individual market
coverage on the Exchange, in certain
geographic areas, or in the entire
individual market in the State.
(d) The impact on premiums charged,
and on benefits and cost sharing
provided, to consumers by issuers
remaining in or entering the individual
market in the event one or more issuers
were to cease or begin offering
individual market coverage on the
Exchange, in certain geographic areas,
or in the entire individual market in the
State.
(e) Any other relevant information
submitted by the State’s insurance
commissioner, superintendent, or
comparable official in the State’s
request.
■ 61. Section 158.341 is revised to read
as follows:
§ 158.341
Treatment as a public document.
A State’s request for an adjustment to
the MLR standard, and all information
submitted as part of its request, will be
treated as a public document.
Instructions for how to access
documents related to a State’s request
for an adjustment on the MLR standard
will be made available on the
Secretary’s Web site.
■ 62. Section 158.350 is revised to read
as follows:
§ 158.350 Subsequent requests for
adjustment to the medical loss ratio.
A State that has made a previous
request for an adjustment to the MLR
standard must, in addition to the other
information required by this subpart,
submit information as to what steps the
State has taken since its prior requests,
if any, to improve the stability of the
State’s individual market.
Dated: October 12, 2017.
Seema Verma,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: October 23, 2017.
Eric D. Hargan,
Acting Secretary, Department of Health and
Human Services.
[FR Doc. 2017–23599 Filed 10–27–17; 4:15 pm]
BILLING CODE 4120–01–P
E:\FR\FM\02NOP3.SGM
02NOP3
]]>Agencies
[Federal Register Volume 82, Number 211 (Thursday, November 2, 2017)]
[Proposed Rules]
[Pages 51052-51148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23599]
[[Page 51051]]
Vol. 82
Thursday,
No. 211
November 2, 2017
Part III
Department of Health and Human Services
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45 CFR Parts 147, 153, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2019; Proposed Rule
Federal Register / Vol. 82 , No. 211 / Thursday, November 2, 2017 /
Proposed Rules
[[Page 51052]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 153, 154, 155, 156, 157, and 158
[CMS-9930-P]
RIN 0938-AT12
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2019
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 and risk adjustment data
validation programs; cost-sharing parameters and cost-sharing
reductions; and user fees for Federally-facilitated Exchanges and
State-based Exchanges on the Federal platform. It proposes changes that
would enhance the role of States as related to essential health
benefits (EHB) and qualified health plan (QHP) certification; and would
provide States with additional flexibility in the operation and
establishment of Exchanges, including the Small Business Health Options
Program (SHOP) Exchanges. It includes proposed changes to standards
related to Exchanges; the required functions of the SHOPs; actuarial
value for stand-alone dental plans; the rate review program; the
medical loss ratio program; eligibility and enrollment; exemptions; 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 November 27,
2017.
ADDRESSES: In commenting, please refer to file code CMS-9930-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-9930-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-9930-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: Lindsey Murtagh, (301) 492-4106,
Rachel Arguello, (301) 492-4263, or Alper Ozinal, (301) 492-4178, for
general information.
Krutika Amin, (301) 492-5153, for matters related to risk
adjustment, and Federally-facilitated Exchange and State-based Exchange
on the Federal platform user fees.
Adrianne Patterson, (410) 786-0686 or Abigail Walker, (410) 786-
1725, for matters related to sequestration and administrative appeals
of financial transfers.
Melissa Jaffe, (301) 492-4129 or Adam Shaw, (410) 786-1091, for
matters related to risk adjustment data validation.
Lisa Cuozzo, (410)-786-1746, for matters related to rate review.
Jenny Chen, (301)-492-5156, for matters related to establishing a
State-based Exchange, and State-based Exchanges on the Federal
platform.
Emily Ames, (301) 492-4246, for matters related to Navigators and
non-Navigator assistance personnel.
Elissa Dines, (301) 492-4388, for matters related to employer-
sponsored coverage verification.
Kendra May, (301) 492-4477, for matters related to the requirement
to file an income tax return and reconcile APTC and terminations.
Carolyn Kraemer, (301) 492-4197, for matters related to special
enrollment periods under part 155.
Amanda Brander, (202) 690-7892, for matters related to exemptions
from the shared responsibility payment.
Terence Kane, (301) 492-4449, for matters related to income
inconsistencies.
Jacob Schnur, (410) 786-7703, for matters related to direct
enrollment.
Laura Eldon, (301) 492-4372, for matters related to the Federally-
facilitated SHOP.
Shilpa Gogna, (301) 492-4257, for matters related to SHOP in State-
based Exchanges.
Leigha Basini, (301) 492-4380, Rebecca Zimmermann, (301) 492-4396,
or Allison Yadsko, (410) 786-1740, for matters related to standardized
options, essential health benefits, stand-alone dental plans and other
standards for QHP issuers.
Pat Meisol, (410) 786-1917, for matters related to cost-sharing
reductions, and the premium adjustment percentage.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio program.
Cam Moultrie Clemmons, (206) 615-2338, for matters related to
minimum essential coverage.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
[[Page 51053]]
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.
Acronyms
Because of the many organizations and terms to which we refer by
acronym in this proposed rule, we are listing these acronyms and their
corresponding terms in alphabetical order below:
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
Code Internal Revenue Code of 1986 (26 U.S.C. 1, et seq.)
EDGE External Data Gathering Environment
EHB Essential health benefits
FFE Federally-facilitated Exchange
FF-SHOP Federally-facilitated Small Business Health Options Program
FPL Federal poverty level
FR Federal Register
FTI Federal tax information
HCC Hierarchical condition category
HHS United States Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
ICR Information collection requirements
IRS Internal Revenue Service
MEC Minimum essential coverage
MLR Medical loss ratio
NAIC National Association of Insurance Commissioners
NHEA National Health Expenditure Accounts
OIG Office of the Inspector General
OMB Office of Management and Budget
PHS Act Public Health Service Act
PMPM Per member per month
Patient Protection and Affordable Care Act or PPACA 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
PRA Paperwork Reduction Act of 1995
PTC Premium tax credit
QIA Quality improvement activities
QHP Qualified health plan
RBC Risk-based capital
RXCs Prescription drug utilization factors
SADPs Stand-alone dental plans
SBE State-based Exchange
SBE-FP State-based Exchange on the Federal platform
SHOP Small Business Health Options Program
SSA Social Security Administration
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 2019
A. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
B. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment Under the Affordable Care Act
C. Part 154--Health Insurance Issuer Rate Increases: Disclosure
and Review Requirements
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
F. Part 157--Employer Interactions With Exchanges and SHOP
Participation
G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Updates to the Risk Adjustment Model
C. ICRs Regarding Small Group Market Flexibility for Risk
Adjustment
D. ICRs Regarding Risk Adjustment Data Validation and 500
Billable Member Months
E. ICRs Regarding Health Insurance Issuer Rate Increases:
Disclosure and Review Requirements--Applicability
F. ICRs Regarding Rate Increases Subject to Review
G. ICRs Regarding the Small Business Health Options Program
H. ICRs Regarding States Defining the Essential Health Benefits
I. ICRs Regarding Medical Loss Ratio
J. Summary of Annual Burden Estimates for Proposed Requirements
K. Submission of PRA-Related Comments
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
I. Reducing Regulation and Controlling Regulatory Costs
I. Executive Summary
American Health Benefit Exchanges, or ``Exchanges'' (also called
``Marketplaces'') are entities established under the Patient Protection
and Affordable Care Act (PPACA) through which qualified individuals and
qualified employers can purchase health insurance coverage. Many
individuals who enroll in qualified health plans (QHPs) through
individual market Exchanges are eligible to receive a premium tax
credit (PTC) to reduce their costs for health insurance premiums, and
receive reductions in required cost-sharing payments to reduce out-of-
pocket expenses for healthcare services. The PPACA also established the
risk adjustment program, which is intended to mitigate the potential
impact of adverse selection and stabilize the price of health insurance
in the individual and small group markets, both on and off Exchanges.
Over time, issuer exits and increasing insurance rates have
threatened the stability of the individual and small group Exchanges in
many geographic areas. In previous rulemaking, we established
provisions and parameters to implement many PPACA provisions and
programs. In this proposed rule, we propose to amend these provisions
and parameters, with a focus on enhancing the role of States in these
programs and providing States with additional flexibilities, reducing
unnecessary regulatory burden on stakeholders, empowering consumers,
and improving affordability.
On January 20, 2017, the President issued an Executive Order which
stated that, to the maximum extent permitted by law, the Secretary of
HHS and heads of all other executive departments and agencies with
authorities and responsibilities under the PPACA should exercise all
authority and discretion available to them to waive, defer, grant
exemptions from, or delay the implementation of any provision or
requirement of the PPACA that would impose a fiscal burden on any State
or a cost, fee, tax, penalty, or regulatory burden on individuals,
families, healthcare providers, health insurers, patients, recipients
of healthcare services, purchasers of health insurance, or makers of
medical devices, products, or medications. In this proposed rule, we
are proposing, within the limitations of the current statute, to reduce
fiscal and regulatory burdens across different program areas, and to
support innovative health insurance models.
We propose several changes that would significantly expand the role
of States in the administration of the PPACA. We propose to provide
States with additional flexibility in the definition of essential
health benefits (EHBs) and outline potential future directions for
defining EHBs. In addition to granting States more flexibility
regulating their markets, we believe this change would permit States to
modify EHBs to increase affordability of health insurance in the
individual and small group markets. We also propose to explore
additional ways to support State-based Exchanges (SBEs) in adopting
innovative approaches to
[[Page 51054]]
operating and sustaining their Exchanges, and to make the State-based
Exchanges on the Federal platform (SBE-FP) model a more appealing and
viable model for States. We propose that States assume a larger role in
the QHP certification process for the Federally-facilitated Exchanges
(FFEs). This would confirm States' traditional role in overseeing their
health insurance markets, and reduce the issuer burden associated with
having to comply with duplicative State and Federal reviews.
This proposed rule also contains several policies that would
provide States with greater flexibility. We propose to provide States
with significantly more flexibility in how they operate a Small
Business Health Options Program (SHOP), permitting them to operate
these Exchanges more efficiently, potentially benefitting States,
issuers, employers and employees. We propose changes that would allow
for a more efficient SHOP, such that employers and employees could
enroll in SHOP coverage by working with a QHP issuer or SHOP-registered
agent or broker. Additionally, we propose to provide States more
flexibility regarding risk adjustment transfers in their markets. We
also propose to make it easier for States to apply for and be granted
an adjustment to the individual market medical loss ratio (MLR)
standard in their State. We believe this change would provide States
with an additional tool to help stabilize and provide relief in their
individual markets. Additionally, we seek comment related to the
inclusion of Federal and State taxes in MLR and rebate calculation, and
we propose other changes to the MLR program to reduce the burden on
issuers.
Risk adjustment continues to be a core program for stabilizing the
individual and small group markets both on and off Exchanges, and we
propose recalibrated parameters for the HHS risk adjustment
methodology. We also propose several changes related to the risk
adjustment data validation program that are intended to ensure the
integrity of the results of risk adjustment, while alleviating issuer
burden associated with participating in risk adjustment data
validation.
As we do every year in the HHS notice of benefit and payment
parameters, we propose updated parameters applicable in the individual
and small group markets. We propose the user fee rate for issuers
participating on FFEs and SBE-FPs for 2019 to be 3.5 and 3.0 percent of
premiums, respectively. We propose to update the premium adjustment
percentage for 2019, which is used to set the rate of increase for
several parameters detailed in the PPACA, including the maximum annual
limitation on cost sharing for 2019, the required contribution
percentage used to determine eligibility for certain exemptions under
section 5000A of the Code, and the assessable payment amounts under
section 4980H(a) and (b) of the Code. We propose to update the maximum
annual limitations on cost sharing for the 2019 benefit year for cost-
sharing reduction plan variations. We also propose changes to the cost-
sharing reduction reconciliation process.
We propose a number of changes related to rate review that are
intended to provide States with greater flexibility in the rate filing
process and reduce regulatory burden. Specifically, we propose to
exempt student health insurance coverage from Federal rate review
requirements, and to provide States with more flexibility regarding
timing of the rate review process established under 45 CFR part 154. We
also propose to modify the 10 percent threshold for reasonableness
review to a 15 percent default threshold, with States continuing to
have the flexibility to establish a different threshold.
Recognizing that Exchanges, including the FFEs, face resource
constraints, we also propose changes to the requirements regarding
Navigators, and the requirements regarding non-Navigator assistance
personnel subject to Sec. 155.215, to enable Exchanges to more easily
operate these programs with limited resources. Similarly, we also
propose to allow an agent, broker or issuer participating in direct
enrollment to have its selected third-party entity conduct operational
readiness reviews, rather than requiring those reviews to be conducted
by entities approved by HHS.
In this proposed rule, we propose relatively minor adjustments to
our programs and rules as we do each year. We propose a number of
incremental amendments to our policies around coverage, eligibility,
enrollment, and affordability exemptions.
We continue to be very interested in exploring ways to improve
Exchange program integrity. In this rule, we seek comment on a number
of program integrity items, including whether we should consider
shortening the length of time the Exchanges are authorized to obtain
enrollee tax information, as well as ways to prompt more timely
consumer reporting of changes in circumstances during the benefit year
that may impact an individual's eligibility for coverage and financial
assistance. In addition, we ask for comment on any additional program
integrity improvements that have not been outlined in this rule, but
could be beneficial in a future rulemaking.
Finally, we note that we intend to consider proposals in future
rulemaking that would help reduce drug costs and promote drug price
transparency. We also note that we intend to provide guidance on other
aspects of Exchange eligibility in the near future. In particular, we
intend to reconsider the appropriate thresholds for changes in income
that will trigger a data matching inconsistency, processes for denying
eligibility for advance subsidies for individuals who fail to reconcile
advance payments of the premium tax credit (APTC) on their Federal
income tax return, processes for matching enrollment data with the
Medicare and Medicaid programs, and the appropriate manner of
recalculating APTC following a midyear change in eligibility, and seek
comments on each of these issues as we prepare proposed rules on these
topics.
Instituting strong program safeguards to ensure that only
individuals who are eligible are enrolled in Exchange coverage, and
that they are only receiving the amount of financial assistance they
are eligible for, is essential to ensuring that the Exchanges operate
as intended, and is also a key priority for the Administration. We have
already taken action to strengthen safeguards around Exchange
eligibility, most recently through the implementation of the Special
Enrollment Verification initiative; however, we continue to be
interested in exploring ways to further safeguard Federal tax dollars
flowing through Exchanges.
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 ``Patient Protection and Affordable
Care Act'' or ``PPACA.''
Subtitles A and C of title I of the PPACA 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 PPACA, restricts the
variation in premium rates charged by a health insurance issuer for
non-grandfathered
[[Page 51055]]
health insurance coverage in the individual or small group market to
certain specified factors. These 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 PPACA. Section 1312(c) of the PPACA 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
PPACA.
Section 2702 of the PHS Act, as added by the PPACA, 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.\1\
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\1\ Before enactment of the Patient Protection and Affordable
Care Act, the Health Insurance Portability and Accountability Act of
1996 (HIPAA) amended the PHS Act (formerly section 2711) to
generally require guaranteed availability of coverage for employers
in the small group market.
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Section 2703 of the PHS Act, as added by the PPACA, and sections
2712 and 2741 of the PHS Act, as added by HIPAA prior to the enactment
of the PPACA, 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 PPACA, 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 PPACA, 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.'' \2\ 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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\2\ 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 PPACA provides that any standard or requirement
adopted by a State under title I of the PPACA, or any amendment made by
title I of the PPACA, is to be applied uniformly to all health plans in
each insurance market to which the standard and requirement apply.
Section 1302 of the PPACA provides for the establishment of an
essential health benefits 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 provided under 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 PPACA directs all issuers of QHPs to
cover the EHB package described in section 1302(a) of the PPACA,
including coverage of the services described in section 1302(b) of the
PPACA, to adhere to the cost-sharing limits described in section
1302(c) of the PPACA and to meet the AV levels established in section
1302(d) of the PPACA. 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 health insurance coverage, irrespective of
whether such coverage is offered through an Exchange. In addition,
section 2707(b) 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) of the PPACA.
Section 1302(d) of the PPACA describes the various levels of
coverage based on actuarial value (AV). Consistent with section
1302(d)(2)(A) of the PPACA, AV is calculated based on the provision of
EHB to a standard population. Section 1302(d)(3) of the PPACA directs
the Secretary to develop guidelines that allow for de minimis variation
in AV calculations.
Section 1311(b)(1)(B) of the PPACA directs that the Small Business
Health Options Program assist qualified small employers in facilitating
the enrollment of their employees in QHPs offered in the small group
market. Sections 1312(f)(1) and (2) of the PPACA define qualified
individuals and qualified employers. Under section 1312(f)(2)(B) of the
PPACA, beginning in 2017, States have the option to allow issuers to
offer QHPs in the large group market through an Exchange.\3\ Section
1312(a)(2) of the PPACA provides that in a SHOP, a qualified employer
may select a level of coverage, and that employees may then, in turn,
choose SHOP plans within the level selected by the qualified employer.
---------------------------------------------------------------------------
\3\ 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.
---------------------------------------------------------------------------
Section 1311(c)(1)(B) of the PPACA 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 PPACA requires the Secretary to continue
to operate, maintain, and update the Internet portal developed under
section 1103 of the PPACA to provide information to consumers and small
businesses on affordable health insurance coverage options.
Sections 1311(d)(4)(K) and 1311(i) of the PPACA direct all
Exchanges to establish a Navigator program.
Section 1311(c)(6)(C) of the PPACA establishes special enrollment
periods and section 1311(c)(6)(D) of the PPACA establishes the monthly
enrollment period for Indians, as defined by section 4 of the Indian
Health Care Improvement Act.
Section 1312(e) of the PPACA 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.
Section 1321(a) of the PPACA 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 PPACA. Section 1321(a)(1) of the PPACA directs the
Secretary to issue regulations that set standards for meeting the
requirements of title I of the PPACA with respect to, among other
[[Page 51056]]
things, the establishment and operation of Exchanges.
Sections 1313 and 1321 of the PPACA 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 PPACA
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 PPACA, HHS
has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the
PPACA 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 PPACA 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 PPACA provides that nothing in title I of
the PPACA should be construed to preempt any State law that does not
prevent the application of title I of the PPACA. Section 1311(k) of the
PPACA specifies that Exchanges may not establish rules that conflict
with or prevent the application of regulations issued by the Secretary.
Section 1343 of the PPACA 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.
Section 1402 of the PPACA provides 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. This section also provides for
reductions in cost sharing for Indians enrolled in QHPs at any metal
level.
Section 5000A of the Code, as added by section 1501(b) of the
PPACA, requires all applicable individuals to maintain minimum
essential coverage (MEC) for each month or make an individual shared
responsibility payment. Section 5000A(f) of the Code defines MEC 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 MEC.
The Protecting Affordable Coverage for Employees Act (Pub. L. 114-
60) amended section 1304(b) of the PPACA and section 2791(e) of the PHS
Act to amend the definition of small employer in 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 \4\
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\4\ By premium stabilization program, we are referring to the
risk adjustment, risk corridors and reinsurance programs established
by the PPACA.
---------------------------------------------------------------------------
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).
In the December 2, 2015 Federal Register (80 FR 75487), we
published a proposed rule outlining the benefit and payment parameters
for the 2017 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 2017 Payment Notice). We published the 2017 Payment Notice
final rule in the March 8, 2016 Federal Register (81 FR 12203).
In the September 6, 2016 Federal Register (81 FR 61455), we
published a proposed rule outlining the benefit and payment parameters
for the 2018 benefit year, and to further promote stable premiums in
the individual and small group markets. We proposed updates to the risk
adjustment methodology, new policies around the use of external data
for recalibration of our risk adjustment models, and amendments to the
risk adjustment data validation process (proposed 2018 Payment Notice).
We published the 2018 Payment Notice final rule in the December 22,
2016 Federal Register (81 FR 94058).
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
[[Page 51057]]
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 and SHOP, 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 additional 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.
In an interim final rule, published in the May 11, 2016 Federal
Register (81 FR 29146), we made amendments to the parameters of certain
special enrollment periods (2016 Interim Final Rule). We finalized
these in the 2018 Payment Notice final rule in the December 22, 2016
Federal Register (81 FR 94058). In the April 18, 2017 Market
Stabilization final rule Federal Register (82 FR 18346), we amended
standards relating to special enrollment periods and QHP certification.
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). In the April 18, 2017 Market
Stabilization final rule (82 FR 18346), we expanded the de minimis
range applicable to plan metal levels.
---------------------------------------------------------------------------
\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.
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5. Minimum Essential Coverage
In the February 1, 2013 Federal Register (78 FR 7348), we published
a proposed rule that designates other health benefits coverage as MEC
and outlines substantive and procedural requirements that other types
of coverage must fulfill in order to be recognized as MEC. The
provisions were finalized in the July 1, 2013 Federal Register (78 FR
39494).
In the November 26, 2014 Federal Register (79 FR 70674), we
published a proposed rule seeking comments on whether State high risk
pools should be permanently designated as MEC or whether the
designation should be time-limited. In the February 27, 2015 Federal
Register (80 FR 10750), we designated State high risk pools established
on or before November 26, 2014 as MEC.
6. 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). The 2018 Payment Notice final
rule in the December 22, 2016 Federal Register (81 FR 94058) provided
additional guidance on guaranteed availability and guaranteed
renewability. In the April 18, 2017 Market Stabilization final rule (82
FR 18346), we released further guidance related to guaranteed
availability.
7. 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 30239), the February 27, 2015 Federal Register
(80 FR 10749), the March 8, 2016 Federal Register (81 FR 12203) and the
December 22, 2016 Federal Register (81 FR 94058).
8. 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). The medical loss ratio program requirements were amended in
final rules published in the March 11, 2014 Federal Register (79 FR
13743), the May 27, 2014 Federal Register (79 FR 30339), the February
27, 2015 Federal Register (80 FR 10749), the March 8, 2016 Federal
Register (81 FR 12203), and the December 22, 2016 Federal Register (81
FR 94183).
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
[[Page 51058]]
have held a number of listening sessions with consumers, providers,
employers, health plans, and the actuarial community to gather public
input. We have solicited input from State representatives on numerous
topics, particularly essential health benefits, QHP certification and
Exchange establishment. 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.
HHS also received several thousand unique comments in response to a
request for information, entitled ``Reducing Regulatory Burdens Imposed
by the Patient Protection and Affordable Care Act and Improving
Healthcare Choices to Empower Patients'', published in the June 12,
2017 Federal Register (82 FR 26885) (Request for Information). Review
of these comments is ongoing, and we anticipate continuing to address
comments in future rulemaking and guidance.
C. Structure of Proposed Rule
The regulations outlined in this proposed rule would be codified in
45 CFR parts 147, 153, 154, 155, 156, 157, and 158.
The proposed regulations in part 147 would amend the rules
regarding fair health insurance premiums and guaranteed availability to
reflect proposed changes related to the SHOPs and special enrollment
periods.
The proposed regulations in part 153 propose to recalibrate the
risk adjustment models consistent with the methodology finalized for
the 2018 benefit year with slight modifications to the drug classes
included in the 2019 benefit year adult models and the incorporation of
blended MarketScan[supreg] and the most recent enrollee-level External
Data Gathering Environment (EDGE) data. The proposed regulations
address high-cost risk pooling, where we are proposing to implement the
same parameters that applied to the 2018 benefit year to the 2019
benefit year. The proposed regulations in part 153 also include the
risk adjustment user fee and modifications to risk adjustment data
validation. We also propose State flexibility to the risk adjustment
transfers starting for the 2019 benefit year.
The proposed regulations in part 154 propose certain modifications
to enhance State flexibility for the rate review program. We propose to
exempt student health insurance coverage from Federal rate review
requirements. We propose to raise the default threshold for review of
reasonableness in the rate review process from 10 percent to 15
percent. We also propose to allow States with Effective Rate Review
Programs to set later submission deadlines for rate filings from
issuers that offer non-QHPs only. In addition, we propose to change the
notification period for States with Effective Rate Review Programs to
notify HHS prior to posting rate increases (from 30 days to 5 business
days).
The proposed regulations in part 155 include modifications to the
functions of an Exchange, and a new approach to operational readiness
reviews for direct enrollment partners which would allow agents,
brokers, and issuers to select their own third-party entities for
conducting those reviews. We propose modifications to the rules around
verification of eligibility. We also propose to increase flexibility in
the Navigator program by removing the requirement that each Exchange
must have at least two Navigator entities, one of which must be a
community and consumer focused non-profit, and to remove the standard
requiring physical presence of the Navigator entity in the Exchange
service area. We propose to modify the parameters around certain
special enrollment periods. We propose to modify the effective date
options for enrollee-initiated terminations, and amend the
affordability exemption so that it may be based on the lowest cost
Exchange plan if there is no bronze level plan sold through the
Exchange in that rating area.
The proposed regulations in part 156 include changes to essential
health benefits and the QHP certification process. 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 2019. We propose to
update the FFE and SBE-FP user fee rates for the 2019 benefit year for
all issuers participating on the FFEs or SBE-FPs. The proposed
regulations in part 156 would designate as MEC Children's Health
Insurance Program (CHIP) buy-in programs that provide identical
coverage to the State's CHIP program under title XXI of the Social
Security Act. The regulations at part 156 also include proposals
related to actuarial value for stand-alone dental plans (SADPs) and the
administrative appeals right with respect to the amount of the advance
payment of cost-sharing reductions.
The proposed amendments to the regulations in parts 155, 156, and
157 include proposals that would provide SHOPs with additional
operational flexibility, and would modify the requirements for issuers,
employers, and employees interacting with SHOPs.
The proposed amendments to the regulations in part 158 propose
revisions related to reporting quality improvement activity expenses as
part of the formula for calculating MLR, and revisions related to State
requests for adjustment to the individual market MLR standard.
III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2019
A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Fair Health Insurance Premiums (Sec. 147.102)
As discussed elsewhere in this proposed rule, we are proposing
substantial changes to the requirements applicable to SHOPs to provide
those programs with the flexibility to operate in a leaner fashion, a
flexibility that we intend to utilize in the FF-SHOPs. As part of these
changes and as discussed in the preamble to Sec. Sec. 156.285 and
156.286, we are proposing that, effective on the effective date of the
final rule, if finalized as proposed, the requirement in Sec.
156.285(a)(4)(ii) regarding premium rating standards in the FF-SHOPs
would not apply for plan years beginning on or after January 1, 2018.
Therefore, we propose to delete from Sec. 147.102(c)(3)(iii)(D) a
reference to Sec. 156.285(a)(4), and to replace the reference to FF-
SHOPs with a reference to SHOPs generally, to reflect that, under the
proposed approach for SHOPs, some SHOPs may want to prohibit issuers
from offering average enrollee premiums. We seek comment on this
proposal and on whether issuers offering coverage through SHOPs should
always be required to offer average enrollee premiums, or do so only if
required under applicable State law.
2. Guaranteed Availability of Coverage (Sec. 147.104)
As discussed elsewhere in this proposed rule, we are proposing
substantial changes to the requirements applicable to SHOPs to provide
them with the flexibility to operate in a leaner
[[Page 51059]]
fashion, a flexibility that we intend to utilize in the FF-SHOPs. Among
those changes, we propose that, effective on the effective date of the
final rule, if finalized as proposed, the requirements in Sec. 156.285
would apply for plan years starting before January 1, 2018. We also
propose a new Sec. 156.286, which specifies those requirements
contained in Sec. 156.285 that, effective on the effective date of the
final rule, if finalized as proposed, would continue to apply for plan
years starting on or after January 1, 2018. Among those requirements is
the requirement in Sec. 156.285(e) which permits a QHP offered in the
SHOP to apply group participation rules under certain circumstances.
This provision is listed in proposed Sec. 156.286(e). The marketwide
regulations at Sec. 147.104(b)(1)(i)(B) currently reference Sec.
156.285(e), and we propose to add a reference to Sec. 156.286(e), to
clarify that, effective on the effective date of the final rule, if
finalized as proposed, for plans years that start after January 1,
2018, QHPs offered in the SHOP may restrict the availability of
coverage with respect to a group health plan that cannot comply with
group participation rules, to an annual enrollment period of November
15 through December 15 of each calendar year.
These regulations also propose to remove the small group coverage
effective dates that are found in the SHOP regulations at Sec. 155.725
with respect to plan years beginning on or after January 1, 2018,
effective on the effective date of the final rule, if finalized as
proposed. However, there are currently requirements in Sec.
147.104(b)(1)(i)(C) that, by cross-referencing Sec. 155.725, apply
those same requirements marketwide, and we do not propose to remove
that marketwide requirement. We propose changes to Sec. 147.104 to
reflect these proposed changes. Specifically, we propose to eliminate,
from Sec. 147.104(b)(1)(i)(C), the cross-reference to Sec. 155.725.
We propose in place of the cross-reference to explicitly specify in
Sec. 147.104(b)(1)(i)(C) those same coverage effective dates for
coverage in the small group market, and for the large group market if
such coverage is offered through a SHOP, that would be eliminated from
the SHOP regulations under our proposal for Sec. 155.725.
We propose to remove paragraph Sec. 147.104(b)(1)(iii), along with
the cross-reference to it in Sec. 147.104(b)(1)(ii), as paragraph
(b)(1)(iii) applies to plan selections made in 2013, and is therefore
no longer necessary.
Section 147.104(b)(2)(i) extends several of the special enrollment
periods that apply to issuers on the Exchange, to all issuers in the
individual market. Although Sec. 147.104(b)(2)(i) is intended to
specify which special enrollment periods offered through the Exchange
must also be offered by health insurance issuers with respect to
coverage offered outside of an Exchange, the paragraph as currently
written could be read to apply the exceptions to any coverage offered
by a health insurance issuer in the individual market. We recognize the
potential for confusion, as coverage offered through an Exchange is
offered by ``a health insurance issuer in the individual market,'' but
this coverage is subject to the special enrollment rule at Sec.
155.420(d), which is intended to require special enrollment periods for
triggers including those listed in the exceptions in paragraph
(b)(2)(i). Therefore, for purposes of clarification, we propose to
amend that phrase in Sec. 147.104(b)(2)(i) to clarify that the
exceptions in the paragraph only apply with respect to coverage offered
outside of the Exchange in the individual market.
With respect to the subset of special enrollment periods in Sec.
155.420 that apply off-Exchange, current regulations at Sec.
147.104(b)(2)(ii) state that, in applying Sec. 147.104(b)(2), a
reference in Sec. 155.420 to a ``QHP'' is deemed to refer to a plan, a
reference to ``the Exchange'' is deemed to refer to the applicable
State authority, and a reference to a ``qualified individual'' is
deemed to refer to an individual in the individual market. As discussed
in the preamble to Sec. 155.420, we are proposing a change to Sec.
155.420(a)(5) to exempt qualified individuals from the prior coverage
requirement that applies to certain special enrollment periods if for
at least 1 of the 60 days prior to the date of their qualifying event
they lived in a service area where there were no QHPs offered through
an Exchange. Section 155.420(a)(5) applies to qualifying individuals
seeking off-Exchange coverage through an applicable special enrollment
period, so we propose that this exception for individuals living in a
service area where there were no QHPs offered through an Exchange would
also apply.\7\ However, in this instance the reference to ``QHP''
should not be deemed to refer to a plan for purposes of applying Sec.
147.104(b)(2). Therefore, we propose to amend Sec. 147.104(b)(2)(ii)
to state that a reference in Sec. 155.420 (other than in Sec.
155.420(a)(5)) to a ``QHP'' is deemed to refer to a plan, a reference
to ``the Exchange'' is deemed to refer to the applicable State
authority, and a reference to a ``qualified individual'' is deemed to
refer to an individual in the individual market.
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\7\ As stated in the preamble to Sec. 155.420, the exception to
the requirement to have previous coverage is intended to relieve
individuals of that requirement when there was no affordable
coverage (that is, coverage that could be purchased through an
Exchange to which APTC might apply) available in their previous
service area. We believe affordability is key to this exception, and
therefore, that the scope of the exception should apply equally,
regardless of whether the individual is seeking to purchase coverage
inside or outside an Exchange during the special enrollment periods
for which this exception applies; that is, the exception should
apply if there was no such affordable coverage available in the
individual's previous service area (regardless of whether or not any
coverage was being actively marketed in that service area outside
the Exchange). Also, when an individual seeks to purchase coverage
outside an Exchange during such a special enrollment period, we
believe it might be unreasonably difficult for an issuer to
determine if at least one issuer was actively marketing coverage in
the individual's previous service area outside the Exchange, as
opposed to determining if at least one issuer was making coverage
available in that service area specifically through an Exchange. We
solicit comments on this approach.
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We seek comment on these proposals.
Among the special enrollment periods in Sec. 155.420 that apply
off-Exchange are those specified in Sec. 155.420(d)(2)(i), under which
a qualified individual gains a dependent or becomes a new dependent
through marriage, birth, adoption, placement for adoption, or placement
in foster care, or through a child support order or other court order.
As applied to on-Exchange coverage under these special enrollment
periods, an existing dependent may enroll in or change their QHP
enrollment through these special enrollment periods when a qualified
individual gains a dependent or becomes a new dependent under the
circumstances described in Sec. 155.420(d)(2)(i) and the requirement
in Sec. 155.420(a)(4)(i) that the new dependent must be allowed to
enroll in the QHP in which the family is already enrolled is not
applicable. Under the HIPAA special enrollment provisions that continue
to apply to group health plans and health insurance issuers in
connection with group health coverage, there are similar special
enrollment periods when a child becomes a dependent of the employee
through marriage, birth, adoption, or placement for adoption.\8\ The
HIPAA regulations specify that, under such circumstances, those special
enrollment periods apply only to dependents who become a dependent
through marriage, birth, adoption, or placement for adoption (that is,
new dependents). We seek comment on whether, in the off-Exchange
individual market, the special enrollment periods for when an
individual gains a dependent or
[[Page 51060]]
becomes a new dependent under the circumstances described in Sec.
155.420(d)(2)(i) should apply to new and existing dependents (as is the
case in the Exchanges when the requirement in Sec. 155.420(a)(4)(i)
that the new dependent must be allowed to enroll in the QHP in which
the family is currently enrolled is not applicable), whether they
should apply only to new dependents (consistent with the HIPAA group
market regulations), or whether we should adopt some other approach,
such as affording the special enrollment periods to some, but not all
categories of existing dependents.
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\8\ See Sec. 146.117(b).
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B. 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 2018,\9\ both the transitional
reinsurance program and permanent risk adjustment program are subject
to the fiscal year 2018 sequestration. The Federal government's 2018
fiscal year begins October 1, 2017. Although the 2016 benefit year is
the final year of the transitional reinsurance program, HHS will
continue to make reinsurance payments in the 2018 fiscal year, as the
second contribution collection deadline for the 2016 benefit year is
November 15, 2017. Therefore, the reinsurance program will be
sequestered at a rate of 6.6 percent for payments made from fiscal year
2018 resources (that is, funds collected during the 2018 fiscal year).
The risk adjustment program will also be sequestered at a rate of 6.6
percent for payments made from fiscal year 2018 resources (that is,
funds collected during the 2018 fiscal year).
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\9\ Available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/sequestration_reports/2018_jc_sequestration_report_may2017_potus.pdf.
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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 the
reinsurance and risk adjustment programs, the funds that are
sequestered in fiscal year 2018 from the reinsurance and risk
adjustment programs will become available for payment to issuers in
fiscal year 2019 without further Congressional action. If 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 Risk Adjustment Program
In subparts D and G of 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 PPACA
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. HHS will be operating risk
adjustment in every State beginning for the 2017 benefit year, and did
not receive any applications from States to operate risk adjustment for
the 2019 benefit year.
HHS continues to evaluate the risk adjustment program, including by
reviewing comments received in response to the Request for Information,
and intends to propose changes in a manner that promotes transparency,
considers stakeholder feedback and provides adequate notice to issuers,
while upholding the integrity and accuracy of the program.
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 risk assigned to an individual's age,
sex, and diagnoses are added together to produce an individual risk
score. Additionally, in the adult models, we added enrollment duration
factors beginning for the 2017 benefit year, and prescription drug
utilization factors (RXCs) beginning for the 2018 benefit year, in the
calculation of enrollees' risk scores. Infant risk scores are
determined by inclusion in one of 25 mutually exclusive groups, based
on the infant's maturity and the severity of diagnoses. If applicable,
the risk score for adults, children or infants is multiplied by a cost-
sharing reductions adjustment.
The enrollment-weighted average risk score of all enrollees in a
particular risk adjustment covered plan (also referred to as 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
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)
For the 2019 benefit year risk adjustment model, HHS will continue
to incorporate the methodological improvements finalized in previous
rulemaking, such as incorporating preventive services in our simulation
of plan liability, using more granular trend rates to better reflect
the growth in specialty drug expenditures and drugs generally as
compared to medical and surgical expenditures, accounting for partial
year enrollment in the adult models, including prescription drug
utilization factors in the adult models, adjusting the risk adjustment
model and transfers to account for high-cost enrollees, and removing a
portion of the premiums in the transfer formula to account for a
portion of administrative costs that do not vary with claims. For the
2019 benefit year, we propose to recalibrate the risk adjustment models
using the methodology finalized for the 2018 benefit year, with small
modifications to the drug classes included in the 2019 benefit year
adult models, and incorporation of the 2016 benefit year EDGE data in
the 2019 benefit year risk adjustment model recalibration.
We seek comment on these proposals.
i. Recalibration Using EDGE Data
To recalibrate the 2016, 2017 and 2018 benefit year risk adjustment
models, we used the three most recent years of Truven
MarketScan[supreg] data. This approach allowed for using the blended,
or averaged, coefficients from 3 years of separately solved models,
which promotes stability for the risk adjustment coefficients year-to-
year, particularly for rare conditions with small sample sizes. We
finalized in the 2018 Payment Notice the collection of enrollee-level
EDGE data and the recalibration of the risk adjustment model for the
2019 benefit year using 2016 benefit year EDGE data. We believe that
blending the coefficients calculated from the 2016 benefit year EDGE
enrollee-level data with MarketScan[supreg] data will provide stability
within the risk adjustment program and minimize
[[Page 51061]]
volatility in changes to risk scores from the 2018 to 2019 benefit
years due to differences in the datasets' underlying populations. As
such, we propose blending 3 years of data to recalibrate the
coefficients used in the risk adjustment model and, for the 2019
benefit year, blending separately solved coefficients from the 2016
benefit year EDGE enrollee-level data and the 2014 and 2015
MarketScan[supreg] data using the methodology that will be finalized in
the 2019 Payment Notice final rule. Given the timing of the 2019
Payment Notice and the significant analysis necessary to develop the
2016 benefit year EDGE recalibration dataset, we are not able to
incorporate the 2016 benefit year EDGE data in this proposed rule.
Therefore, we use the 2014 and 2015 MarketScan[supreg] data for the
coefficients in this proposed rule. We propose to finalize the 2019
benefit year blended coefficients with the separately solved models
from the 2016 benefit year EDGE enrollee-level data with the 2014 and
2015 MarketScan[supreg] data. This approach is similar to our approach
in previous years, in which we updated the final coefficients using
data from the most recently available benefit year.\10\ We expect to
publish the final risk adjustment model coefficients for the 2019
benefit year in the final rule. However, we seek comment on whether we
should publish the final risk adjustment model coefficients in guidance
in the spring of 2018, prior to rate setting for the 2019 benefit year,
similar to our approach for publishing the 2018 benefit year risk
adjustment coefficients, if we need additional time to analyze the 2016
enrollee-level EDGE data. Under either approach, the final risk
adjustment model coefficients for the 2019 benefit year would be
determined using the methodology that we finalize in the 2019 Payment
Notice final rule, and would be published either in the final rule or
in guidance prior to the 2019 benefit year rate setting. Additionally,
if we find significant demographic or distributional differences in the
enrollee-level EDGE data compared to the MarketScan data, we seek
comment on whether we should make adjustments to the risk adjustment
recalibration model age-sex, HCC and RXC categories for the final 2019
benefit year. In such a case, we would make adjustments to the models
to better align them with the enrollee-level EDGE data, to improve the
prediction of plan liability. The risk adjustment model coefficients
listed in Tables 2, 4, and 5 are blended coefficients using the 2014
and 2015 MarketScan[supreg] data.
---------------------------------------------------------------------------
\10\ See, for example, 2018 Payment Notice final rule, 81 FR
94058 (December 22, 2016).
---------------------------------------------------------------------------
We seek comment on our proposal to determine coefficients based on
a blend of 2014 and 2015 MarketScan[supreg] data and 2016 enrollee-
level EDGE data using the methodology that will be finalized in the
2019 Payment Notice final rule in the final rule or through guidance.
We also seek comment on the proposed methodology to equally weight the
separately solved model coefficients from the 2014 MarketScan[supreg],
2015 MarketScan[supreg], and 2016 enrollee-level EDGE data for the
final coefficients, instead of using only the 2016 enrollee-level EDGE
data to recalibrate the risk adjustment model coefficients for the 2019
benefit year.
ii. Prescription Drugs
In the 2018 Payment Notice, we finalized the inclusion of twelve
RXCs that interact with diagnoses (hierarchical condition categories
(HCCs)), or drug-diagnosis (RXC-HCC) pairs, in the adult risk
adjustment models for the 2018 benefit year. Ten of the RXC-HCC pairs
have three levels of incremental predicted costs (diagnosis-only,
prescription drug-only, and both diagnosis and prescription drug),
indicating that they can be used to impute a particular diagnosis. The
2018 benefit year risk adjustment adult models also included two RXC-
HCC pairs that are used for severity-only--that is, they predict
incremental costs for enrollees with the diagnosis-only, or with both
the diagnosis and the prescription drug. For enrollees without the
associated diagnoses documented for these severity-only RXC-HCC pairs,
the presence of the drug alone would not lead to the imputation of
additional plan liability costs attributed to the plan.
For the 2019 benefit year, we propose to remove the two severity-
only RXCs (RXC 11: Ammonia Detoxicants, and RXC 12: Diuretics, Loop and
Select Potassium-Sparing). Both severity-only RXCs have low average
costs per enrollee per year and were constrained to the average cost of
the drugs to avoid overcompensating issuers for these RXCs.
Constraining these RXCs removed overprescribing or gaming incentives to
prescribe a low-cost drug to receive a much larger risk adjustment
payment. However, after constraints, the two severity-only RXCs have
extremely small coefficients that no longer predict meaningful
incremental plan risk associated with a severe health condition.
Therefore, we propose eliminating these two RXCs from the model. We
believe that the remaining RXCs do not engender significant gaming
concerns due to the cost and side-effects of the drugs if prescribed
without cause. As we noted in the 2018 Payment Notice, where the risk
of unintended effects on provider prescribing behavior is low, we are
continuing to include a small number of prescription drug classes as
predictors of risk and plan liability. For the remaining RXCs, there is
a high rate of presence of a diagnosis code in the associated HCC in
the MarketScan[supreg] data, indicating a positive predictive value for
using these RXCs to impute missing diagnoses. Additionally, as we have
previously noted, we intend to monitor prescription drug utilization
for unintended effects, and may propose to remove drug classes based on
such evidence in future rulemaking. Table 1 contains the proposed list
of prescription drug factors for the 2019 benefit year risk adjustment
model. We will evaluate the effects of incorporating prescription drugs
in the adult models to determine whether to continue, broaden or reduce
the impact of this set of factors on the HHS risk adjustment models.
Additionally, we note that commenters on the Request for Information
support the inclusion of prescription drugs in the risk adjustment
methodology.
We seek comment on this proposal.
Table 1--Proposed Drug-Diagnosis (RXC-HCC) Pairs for the 2019 Adult Model
----------------------------------------------------------------------------------------------------------------
RXC RXC label HCC HCC label Proposed RXC use
----------------------------------------------------------------------------------------------------------------
RXC 01.............. Anti-HIV Agents.... 001................ HIV/AIDS............... imputation/severity.
RXC 02.............. Anti-Hepatitis C 037C, 036, 035, 034 Chronic Hepatitis C, imputation/severity.
(HCV) Agents. Cirrhosis of Liver,
End-Stage Liver
Disease, and Liver
Transplant Status/
Complications.
RXC 03.............. Antiarrhythmics.... 142................ Specified Heart imputation/severity.
Arrhythmias.
[[Page 51062]]
RXC 04.............. Phosphate Binders.. 184, 183, 187, 188. End Stage Renal imputation/severity.
Disease, Kidney
Transplant Status,
Chronic Kidney
Disease, Stage 5,
Chronic Kidney
Disease, Severe (Stage
4).
RXC 05.............. Inflammatory Bowel 048, 041........... Inflammatory Bowel imputation/severity.
Disease Agents. Disease, Intestine
Transplant Status/
Complications.
RXC 06.............. Insulin............ 019, 020, 021, 018. Diabetes with Acute imputation/severity.
Complications;
Diabetes with Chronic
Complications;
Diabetes without
Complication, Pancreas
Transplant Status/
Complications.
RXC 07.............. Anti-Diabetic 019, 020, 021, 018. Diabetes with Acute imputation/severity.
Agents, Except Complications,
Insulin and Diabetes with Chronic
Metformin Only. Complications,
Diabetes without
Complication, Pancreas
Transplant Status/
Complications.
RXC 08.............. Multiple Sclerosis 118................ Multiple Sclerosis..... imputation/severity.
Agents.
RXC 09.............. Immune Suppressants 056, 057, 048, 041. Rheumatoid Arthritis imputation/severity.
and and Specified
Immunomodulators. Autoimmune Disorders,
Systemic Lupus
Erythematosus and
Other Autoimmune
Disorders,
Inflammatory Bowel
Disease, Intestine
Transplant Status/
Complications.
RXC 10.............. Cystic Fibrosis 159, 158........... Cystic Fibrosis, Lung imputation/severity.
Agents. Transplant Status/
Complications.
----------------------------------------------------------------------------------------------------------------
iii. High-Cost Risk Pool Adjustment
HHS finalized a high-cost risk pool adjustment in the 2018 Payment
Notice to account for the incorporation of risk associated with high-
cost enrollees in the risk adjustment model. Specifically, we finalized
adjusting the risk adjustment model for high-cost enrollees beginning
for the 2018 benefit year by excluding a percentage of costs above a
certain threshold level in the calculation of enrollee-level plan
liability risk scores so that risk adjustment factors are calculated
without the high-cost risk, because the average risk associated with
HCCs and RXCs is better accounted for without the inclusion of the
high-cost enrollees. In addition, to account for issuers' risk
associated with the high-cost enrollees, issuers will be compensated
for a percentage of costs above the threshold. We set the threshold and
percentage of costs at a level that would continue to incentivize
issuers to control costs while improving the risk prediction of the
risk adjustment model. Issuers with high-cost enrollees will receive a
payment for the percentage of costs above the threshold in their
respective transfers. Using claims data submitted to the EDGE server by
issuers of risk adjustment covered plans, HHS will calculate the total
amount of paid claims costs for high-cost enrollees based on the
threshold and the coinsurance rate. HHS will then calculate a charge as
a percentage of the issuers' total premiums in the individual
(including catastrophic and non-catastrophic plans and merged market
plans), or small group markets, which will be applied to the total
transfer amount in that market, maintaining the balance of payments and
charges within the risk adjustment program. In the 2018 Payment Notice,
we finalized a threshold of $1 million and a coinsurance rate of 60
percent across all States for the individual (including catastrophic
and non-catastrophic plans and merged market plans) and small group
markets for the 2018 benefit year.
For the 2019 benefit year, we are proposing to maintain the same
parameters that would apply to the 2018 benefit year. Therefore, we
propose to maintain a $1 million threshold and 60 percent coinsurance
rate for the high-cost risk pool for the 2019 benefit year risk
adjustment program. We believe this threshold and coinsurance rate
would result in total payments or charges nationally that are very
small as a percentage of premiums for issuers, and will prevent States
and issuers with very high-cost enrollees from bearing a
disproportionate amount of unpredictable risk. We seek comment on the
proposed parameters of the high-cost risk pool for the 2019 benefit
year risk adjustment model.
Comments in response to the Request for Information noted the
benefits of incorporating the high-cost risk pool in the risk
adjustment methodology. We have also received feedback from
stakeholders on the structure of the high-cost risk pool, including
that the pool should be multi-tiered, with multiple thresholds and
increased coinsurance as the thresholds increase to account for the
reduced number of enrollees at higher thresholds where costs to an
issuer are catastrophic. We seek comment on alternative methods for
reimbursing issuers for exceptionally high-cost enrollees through the
high-cost risk pool and improving the calculation of plan liability in
the HHS-operated risk adjustment models for future benefit years.
c. List of Factors To Be Employed in the Risk Adjustment Model (Sec.
153.320)
The proposed factors resulting from the blended factors from the
2014 and 2015 MarketScan[supreg] data separately solved models (with
the incorporation of the partial year enrollment adjustment and
prescription drugs reflected in the adult models only) are shown in the
Tables 2, 4, and 5. The adult, child, and infant models have been
truncated to account for the high-cost enrollee pool payment parameters
($1 million threshold, 60 percent coinsurance) finalized in the 2018
Payment Notice. As discussed in the preceding section, we are proposing
to keep the 2019 benefit year high-cost enrollee risk pool payment
parameters the same as those finalized for the 2018 benefit year.
Table 2 contains factors for each adult model, including the age-
sex, HCCs, RXCs and HCC-RXC interaction coefficients. As we have
previously noted,\11\ some interactions of RXCs and HCCs have negative
coefficients; however, this does not mean that an enrollee's risk score
decreases due to the presence of an RXC, an HCC, or both.
---------------------------------------------------------------------------
\11\ 2018 Benefit Year Final HHS Risk Adjustment Model
Coefficients. April 18, 2017. Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------
Table 3 contains the HHS HCCs in the severity illness indicator
variable. Table 4 contains the factors for each child model. Table 5
contains the factors for each infant model. Tables 6 and 7 contain the
HCCs included in the infant model maturity and severity categories,
respectively.
[[Page 51063]]
Table 2--Proposed Adult Risk Adjustment Model Factors for 2019 Benefit Year \A\
----------------------------------------------------------------------------------------------------------------
HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male..... 0.174 0.138 0.094 0.052 0.050
Age 25-29, Male..... 0.151 0.116 0.073 0.030 0.028
Age 30-34, Male..... 0.191 0.147 0.093 0.039 0.036
Age 35-39, Male..... 0.252 0.198 0.132 0.065 0.062
Age 40-44, Male..... 0.321 0.258 0.182 0.104 0.101
Age 45-49, Male..... 0.385 0.313 0.227 0.138 0.134
Age 50-54, Male..... 0.510 0.428 0.328 0.222 0.217
Age 55-59, Male..... 0.577 0.483 0.372 0.253 0.247
Age 60-64, Male..... 0.647 0.538 0.411 0.271 0.264
Age 21-24, Female... 0.286 0.232 0.163 0.093 0.090
Age 25-29, Female... 0.323 0.261 0.185 0.104 0.100
Age 30-34, Female... 0.449 0.372 0.281 0.188 0.184
Age 35-39, Female... 0.540 0.454 0.355 0.257 0.253
Age 40-44, Female... 0.598 0.502 0.392 0.281 0.276
Age 45-49, Female... 0.607 0.506 0.390 0.268 0.263
Age 50-54, Female... 0.686 0.581 0.456 0.323 0.317
Age 55-59, Female... 0.674 0.565 0.436 0.294 0.288
Age 60-64, Female... 0.699 0.579 0.441 0.285 0.277
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HCC001.......................... HIV/AIDS............ 0.520 0.434 0.349 0.275 0.271
HCC002.......................... Septicemia, Sepsis, 8.152 7.980 7.865 7.920 7.924
Systemic
Inflammatory
Response Syndrome/
Shock.
HCC003.......................... Central Nervous 5.518 5.438 5.379 5.405 5.407
System Infections,
Except Viral
Meningitis.
HCC004.......................... Viral or Unspecified 4.063 3.867 3.741 3.677 3.676
Meningitis.
HCC006.......................... Opportunistic 5.606 5.522 5.468 5.439 5.438
Infections.
HCC008.......................... Metastatic Cancer... 21.369 20.985 20.694 20.753 20.756
HCC009.......................... Lung, Brain, and 12.190 11.902 11.689 11.686 11.687
Other Severe
Cancers, Including
Pediatric Acute
Lymphoid Leukemia.
HCC010.......................... Non-Hodgkin's 5.316 5.119 4.971 4.910 4.907
Lymphomas and Other
Cancers and Tumors.
HCC011.......................... Colorectal, Breast 4.295 4.100 3.948 3.888 3.885
(Age < 50), Kidney,
and Other Cancers.
HCC012.......................... Breast (Age 50+) and 2.528 2.386 2.275 2.212 2.209
Prostate Cancer,
Benign/Uncertain
Brain Tumors, and
Other Cancers and
Tumors.
HCC013.......................... Thyroid Cancer, 1.195 1.076 0.976 0.869 0.864
Melanoma,
Neurofibromatosis,
and Other Cancers
and Tumors.
HCC018.......................... Pancreas Transplant 4.522 4.340 4.216 4.238 4.239
Status/
Complications.
HCC019.......................... Diabetes with Acute 0.624 0.555 0.490 0.416 0.412
Complications.
HCC020.......................... Diabetes with 0.624 0.555 0.490 0.416 0.412
Chronic
Complications.
HCC021.......................... Diabetes without 0.624 0.555 0.490 0.416 0.412
Complication.
HCC023.......................... Protein-Calorie 11.390 11.380 11.365 11.434 11.438
Malnutrition.
HCC026.......................... Mucopolysaccharidosi 2.122 2.025 1.949 1.887 1.884
s.
HCC027.......................... Lipidoses and 2.122 2.025 1.949 1.887 1.884
Glycogenosis.
HCC029.......................... Amyloidosis, 2.122 2.025 1.949 1.887 1.884
Porphyria, and
Other Metabolic
Disorders.
HCC030.......................... Adrenal, Pituitary, 2.122 2.025 1.949 1.887 1.884
and Other
Significant
Endocrine Disorders.
HCC034.......................... Liver Transplant 10.018 9.924 9.866 9.856 9.856
Status/
Complications.
HCC035.......................... End-Stage Liver 5.862 5.675 5.548 5.558 5.559
Disease.
HCC036.......................... Cirrhosis of Liver.. 2.158 2.040 1.962 1.918 1.916
HCC037_1........................ Chronic Viral 0.430 0.327 0.283 0.259 0.258
Hepatitis C.
HCC037_2........................ Chronic Hepatitis, 0.430 0.327 0.283 0.259 0.258
Other/Unspecified.
HCC038.......................... Acute Liver Failure/ 4.242 4.105 4.008 3.986 3.985
Disease, Including
Neonatal Hepatitis.
HCC041.......................... Intestine Transplant 29.207 29.126 29.062 29.112 29.112
Status/
Complications.
HCC042.......................... Peritonitis/ 9.688 9.465 9.302 9.321 9.323
Gastrointestinal
Perforation/
Necrotizing
Enterocolitis.
HCC045.......................... Intestinal 5.465 5.238 5.087 5.089 5.090
Obstruction.
HCC046.......................... Chronic Pancreatitis 4.522 4.340 4.216 4.238 4.239
HCC047.......................... Acute Pancreatitis/ 2.204 2.054 1.947 1.882 1.880
Other Pancreatic
Disorders and
Intestinal
Malabsorption.
HCC048.......................... Inflammatory Bowel 2.094 1.926 1.795 1.702 1.698
Disease.
HCC054.......................... Necrotizing 5.492 5.329 5.207 5.219 5.220
Fasciitis.
HCC055.......................... Bone/Joint/Muscle 5.492 5.329 5.207 5.219 5.220
Infections/Necrosis.
HCC056.......................... Rheumatoid Arthritis 3.393 3.217 3.077 3.031 3.029
and Specified
Autoimmune
Disorders.
HCC057.......................... Systemic Lupus 1.032 0.923 0.831 0.726 0.720
Erythematosus and
Other Autoimmune
Disorders.
HCC061.......................... Osteogenesis 2.586 2.421 2.290 2.217 2.213
Imperfecta and
Other
Osteodystrophies.
HCC062.......................... Congenital/ 2.586 2.421 2.290 2.217 2.213
Developmental
Skeletal and
Connective Tissue
Disorders.
HCC063.......................... Cleft Lip/Cleft 1.108 0.963 0.856 0.777 0.773
Palate.
HCC066.......................... Hemophilia.......... 43.857 43.613 43.412 43.412 43.412
HCC067.......................... Myelodysplastic 11.329 11.211 11.123 11.130 11.132
Syndromes and
Myelofibrosis.
HCC068.......................... Aplastic Anemia..... 11.329 11.211 11.123 11.130 11.132
HCC069.......................... Acquired Hemolytic 7.452 7.322 7.217 7.188 7.187
Anemia, Including
Hemolytic Disease
of Newborn.
HCC070.......................... Sickle Cell Anemia 7.452 7.322 7.217 7.188 7.187
(Hb-SS).
HCC071.......................... Thalassemia Major... 7.452 7.322 7.217 7.188 7.187
HCC073.......................... Combined and Other 5.031 4.913 4.827 4.827 4.827
Severe
Immunodeficiencies.
HCC074.......................... Disorders of the 5.031 4.913 4.827 4.827 4.827
Immune Mechanism.
HCC075.......................... Coagulation Defects 2.419 2.339 2.274 2.237 2.235
and Other Specified
Hematological
Disorders.
HCC081.......................... Drug Psychosis...... 3.864 3.647 3.486 3.379 3.373
HCC082.......................... Drug Dependence..... 3.864 3.647 3.486 3.379 3.373
HCC087.......................... Schizophrenia....... 3.093 2.866 2.702 2.629 2.626
HCC088.......................... Major Depressive and 1.545 1.407 1.297 1.191 1.186
Bipolar Disorders.
HCC089.......................... Reactive and 1.545 1.407 1.297 1.191 1.186
Unspecified
Psychosis,
Delusional
Disorders.
HCC090.......................... Personality 1.055 0.948 0.846 0.736 0.731
Disorders.
[[Page 51064]]
HCC094.......................... Anorexia/Bulimia 2.381 2.241 2.130 2.064 2.061
Nervosa.
HCC096.......................... Prader-Willi, Patau, 2.057 1.952 1.870 1.810 1.807
Edwards, and
Autosomal Deletion
Syndromes.
HCC097.......................... Down Syndrome, 0.845 0.758 0.679 0.599 0.595
Fragile X, Other
Chromosomal
Anomalies, and
Congenital
Malformation
Syndromes.
HCC102.......................... Autistic Disorder... 1.055 0.948 0.846 0.736 0.731
HCC103.......................... Pervasive 1.055 0.948 0.846 0.736 0.731
Developmental
Disorders, Except
Autistic Disorder.
HCC106.......................... Traumatic Complete 9.063 8.932 8.834 8.822 8.821
Lesion Cervical
Spinal Cord.
HCC107.......................... Quadriplegia........ 9.063 8.932 8.834 8.822 8.821
HCC108.......................... Traumatic Complete 7.368 7.239 7.144 7.121 7.120
Lesion Dorsal
Spinal Cord.
HCC109.......................... Paraplegia.......... 7.368 7.239 7.144 7.121 7.120
HCC110.......................... Spinal Cord 5.019 4.833 4.698 4.663 4.662
Disorders/Injuries.
HCC111.......................... Amyotrophic Lateral 2.107 1.911 1.772 1.707 1.705
Sclerosis and Other
Anterior Horn Cell
Disease.
HCC112.......................... Quadriplegic 0.433 0.289 0.181 0.108 0.107
Cerebral Palsy.
HCC113.......................... Cerebral Palsy, 0.364 0.264 0.181 0.108 0.107
Except Quadriplegic.
HCC114.......................... Spina Bifida and 0.016 0.000 0.000 0.000 0.000
Other Brain/Spinal/
Nervous System
Congenital
Anomalies.
HCC115.......................... Myasthenia Gravis/ 5.116 4.991 4.900 4.882 4.881
Myoneural Disorders
and Guillain-Barre
Syndrome/
Inflammatory and
Toxic Neuropathy.
HCC117.......................... Muscular Dystrophy.. 2.109 1.970 1.873 1.783 1.778
HCC118.......................... Multiple Sclerosis.. 8.046 7.788 7.595 7.579 7.578
HCC119.......................... Parkinson's, 2.109 1.970 1.873 1.783 1.778
Huntington's, and
Spinocerebellar
Disease, and Other
Neurodegenerative
Disorders.
HCC120.......................... Seizure Disorders 1.423 1.288 1.183 1.100 1.096
and Convulsions.
HCC121.......................... Hydrocephalus....... 4.823 4.717 4.628 4.597 4.596
HCC122.......................... Non-Traumatic Coma, 8.085 7.965 7.866 7.861 7.860
and Brain
Compression/Anoxic
Damage.
HCC125.......................... Respirator 27.074 27.045 27.016 27.096 27.100
Dependence/
Tracheostomy Status.
HCC126.......................... Respiratory Arrest.. 8.400 8.265 8.168 8.241 8.245
HCC127.......................... Cardio-Respiratory 8.400 8.265 8.168 8.241 8.245
Failure and Shock,
Including
Respiratory
Distress Syndromes.
HCC128.......................... Heart Assistive 27.593 27.404 27.268 27.331 27.336
Device/Artificial
Heart.
HCC129.......................... Heart Transplant.... 27.593 27.404 27.268 27.331 27.336
HCC130.......................... Congestive Heart 2.847 2.758 2.693 2.686 2.686
Failure.
HCC131.......................... Acute Myocardial 8.501 8.214 8.005 8.114 8.120
Infarction.
HCC132.......................... Unstable Angina and 4.515 4.281 4.129 4.132 4.133
Other Acute
Ischemic Heart
Disease.
HCC135.......................... Heart Infection/ 5.135 5.022 4.938 4.908 4.907
Inflammation,
Except Rheumatic.
HCC142.......................... Specified Heart 2.365 2.241 2.148 2.080 2.077
Arrhythmias.
HCC145.......................... Intracranial 7.686 7.448 7.279 7.270 7.270
Hemorrhage.
HCC146.......................... Ischemic or 2.324 2.176 2.085 2.079 2.079
Unspecified Stroke.
HCC149.......................... Cerebral Aneurysm 3.171 3.011 2.895 2.840 2.837
and Arteriovenous
Malformation.
HCC150.......................... Hemiplegia/ 4.396 4.314 4.257 4.306 4.309
Hemiparesis.
HCC151.......................... Monoplegia, Other 2.634 2.522 2.444 2.414 2.413
Paralytic Syndromes.
HCC153.......................... Atherosclerosis of 9.113 9.051 9.004 9.096 9.101
the Extremities
with Ulceration or
Gangrene.
HCC154.......................... Vascular Disease 6.411 6.255 6.143 6.133 6.133
with Complications.
HCC156.......................... Pulmonary Embolism 3.132 2.995 2.895 2.850 2.848
and Deep Vein
Thrombosis.
HCC158.......................... Lung Transplant 25.523 25.380 25.270 25.354 25.358
Status/
Complications.
HCC159.......................... Cystic Fibrosis..... 11.222 10.969 10.767 10.781 10.782
HCC160.......................... Chronic Obstructive 0.859 0.766 0.683 0.595 0.591
Pulmonary Disease,
Including
Bronchiectasis.
HCC161.......................... Asthma.............. 0.859 0.766 0.683 0.595 0.591
HCC162.......................... Fibrosis of Lung and 1.724 1.629 1.562 1.510 1.507
Other Lung
Disorders.
HCC163.......................... Aspiration and 5.920 5.866 5.827 5.835 5.836
Specified Bacterial
Pneumonias and
Other Severe Lung
Infections.
HCC183.......................... Kidney Transplant 7.636 7.438 7.304 7.276 7.276
Status.
HCC184.......................... End Stage Renal 31.427 31.237 31.086 31.232 31.238
Disease.
HCC187.......................... Chronic Kidney 1.369 1.313 1.276 1.285 1.286
Disease, Stage 5.
HCC188.......................... Chronic Kidney 1.369 1.313 1.276 1.285 1.286
Disease, Stage 4.
HCC203.......................... Ectopic and Molar 1.219 1.074 0.947 0.745 0.733
Pregnancy, Except
with Renal Failure,
Shock, or Embolism.
HCC204.......................... Miscarriage with 1.219 1.074 0.947 0.745 0.733
Complications.
HCC205.......................... Miscarriage with No 1.219 1.074 0.947 0.745 0.733
or Minor
Complications.
HCC207.......................... Completed Pregnancy 3.243 2.827 2.608 2.399 2.398
With Major
Complications.
HCC208.......................... Completed Pregnancy 3.243 2.827 2.608 2.399 2.398
With Complications.
HCC209.......................... Completed Pregnancy 3.243 2.827 2.608 2.399 2.398
with No or Minor
Complications.
HCC217.......................... Chronic Ulcer of 1.958 1.865 1.801 1.788 1.788
Skin, Except
Pressure.
HCC226.......................... Hip Fractures and 8.626 8.433 8.291 8.324 8.326
Pathological
Vertebral or
Humerus Fractures.
HCC227.......................... Pathological 2.240 2.124 2.033 1.957 1.954
Fractures, Except
of Vertebrae, Hip,
or Humerus.
HCC251.......................... Stem Cell, Including 23.527 23.526 23.520 23.544 23.544
Bone Marrow,
Transplant Status/
Complications.
HCC253.......................... Artificial Openings 8.149 8.067 8.005 8.041 8.043
for Feeding or
Elimination.
HCC254.......................... Amputation Status, 3.928 3.819 3.740 3.770 3.772
Lower Limb/
Amputation
Complications.
----------------------------------------------------------------------------------------------------------------
Interaction Factors
----------------------------------------------------------------------------------------------------------------
SEVERE x HCC006................. Severe illness x 8.221 8.406 8.532 8.658 8.663
Opportunistic
Infections.
SEVERE x HCC008................. Severe illness x 8.221 8.406 8.532 8.658 8.663
Metastatic Cancer.
SEVERE x HCC009................. Severe illness x 8.221 8.406 8.532 8.658 8.663
Lung, Brain, and
Other Severe
Cancers, Including
Pediatric Acute
Lymphoid Leukemia.
SEVERE x HCC010................. Severe illness x Non- 8.221 8.406 8.532 8.658 8.663
Hodgkin's Lymphomas
and Other Cancers
and Tumors.
SEVERE x HCC115................. Severe illness x 8.221 8.406 8.532 8.658 8.663
Myasthenia Gravis/
Myoneural Disorders
and Guillain-Barre
Syndrome/
Inflammatory and
Toxic Neuropathy.
SEVERE x HCC135................. Severe illness x 8.221 8.406 8.532 8.658 8.663
Heart Infection/
Inflammation,
Except Rheumatic.
SEVERE x HCC145................. Severe illness x 8.221 8.406 8.532 8.658 8.663
Intracranial
Hemorrhage.
[[Page 51065]]
SEVERE x G06.................... Severe illness x HCC 8.221 8.406 8.532 8.658 8.663
group G06 (G06 is
HCC Group 6 which
includes the
following HCCs in
the blood disease
category: 67, 68).
SEVERE x G08.................... Severe illness x HCC 8.221 8.406 8.532 8.658 8.663
group G08 (G08 is
HCC Group 8 which
includes the
following HCCs in
the blood disease
category: 73, 74).
SEVERE x HCC035................. Severe illness x End- 1.816 1.916 1.979 2.088 2.092
Stage Liver Disease.
SEVERE x HCC038................. Severe illness x 1.816 1.916 1.979 2.088 2.092
Acute Liver Failure/
Disease, Including
Neonatal Hepatitis.
SEVERE x HCC153................. Severe illness x 1.816 1.916 1.979 2.088 2.092
Atherosclerosis of
the Extremities
with Ulceration or
Gangrene.
SEVERE x HCC154................. Severe illness x 1.816 1.916 1.979 2.088 2.092
Vascular Disease
with Complications.
SEVERE x HCC163................. Severe illness x 1.816 1.916 1.979 2.088 2.092
Aspiration and
Specified Bacterial
Pneumonias and
Other Severe Lung
Infections.
SEVERE x HCC253................. Severe illness x 1.816 1.916 1.979 2.088 2.092
Artificial Openings
for Feeding or
Elimination.
SEVERE x G03.................... Severe illness x HCC 1.816 1.916 1.979 2.088 2.092
group G03 (G03 is
HCC Group 3 which
includes the
following HCCs in
the musculoskeletal
disease category:
54, 55).
----------------------------------------------------------------------------------------------------------------
Enrollment Duration Factors
----------------------------------------------------------------------------------------------------------------
One month of 0.491 0.431 0.385 0.363 0.363
enrollment.
Two months of 0.439 0.384 0.337 0.317 0.316
enrollment.
Three months of 0.356 0.308 0.264 0.245 0.244
enrollment.
Four months of 0.302 0.261 0.222 0.204 0.204
enrollment.
Five months of 0.263 0.229 0.195 0.179 0.178
enrollment.
Six months of 0.220 0.193 0.164 0.148 0.147
enrollment.
Seven months of 0.217 0.191 0.164 0.148 0.147
enrollment.
Eight months of 0.160 0.141 0.121 0.109 0.109
enrollment.
Nine months of 0.121 0.107 0.095 0.088 0.088
enrollment.
Ten months of 0.106 0.098 0.090 0.086 0.086
enrollment.
Eleven months of 0.097 0.091 0.085 0.083 0.083
enrollment.
----------------------------------------------------------------------------------------------------------------
Prescription Drug Factors
----------------------------------------------------------------------------------------------------------------
RXC 01.......................... Anti-HIV Agents..... 7.903 7.394 7.016 6.869 6.863
RXC 02.......................... Anti-Hepatitis C 42.192 41.724 41.357 41.522 41.530
(HCV) Agents.
RXC 03.......................... Antiarrhythmics..... 0.115 0.115 0.115 0.115 0.115
RXC 04.......................... Phosphate Binders... 0.640 0.640 0.640 0.640 0.640
RXC 05.......................... Inflammatory Bowel 1.926 1.751 1.620 1.446 1.437
Disease Agents.
RXC 06.......................... Insulin............. 1.520 1.384 1.235 1.059 1.049
RXC 07.......................... Anti-Diabetic 0.499 0.437 0.369 0.282 0.277
Agents, Except
Insulin and
Metformin Only.
RXC 08.......................... Multiple Sclerosis 20.967 20.276 19.754 19.796 19.801
Agents.
RXC 09.......................... Immune Suppressants 12.856 12.303 11.895 11.956 11.959
and
Immunomodulators.
RXC 10.......................... Cystic Fibrosis 10.619 10.340 10.149 10.250 10.255
Agents.
RXC 01 x HCC001................. Additional effect 2.849 2.926 2.995 3.292 3.306
for enrollees with
RxC 01 (Anti-HIV
Agents) and HCC 001
(HIV/AIDS).
RXC 02 x HCC037_1, 036, 035, 034 Additional effect 3.993 4.162 4.267 4.300 4.301
for enrollees with
RxC 02 (Anti-
Hepatitis C (HCV)
Agents) and (HCC
037_1 (Chronic
Viral Hepatitis C)
or 036 (Cirrhosis
of Liver) or 035
(End-Stage Liver
Disease) or 034
(Liver Transplant
Status/
Complications)).
RXC 03 x HCC142................. Additional effect 0.000 0.000 0.000 0.000 0.000
for enrollees with
RxC 03
(Antiarrhythmics)
and HCC 142
(Specified Heart
Arrhythmias).
RXC 04 x HCC184, 183, 187, 188.. Additional effect 0.000 0.000 0.000 0.000 0.000
for enrollees with
RxC 04 (Phosphate
Binders) and (HCC
184 (End Stage
Renal Disease) or
183 (Kidney
Transplant Status)
or 187 (Chronic
Kidney Disease,
Stage 5) or 188
(Chronic Kidney
Disease, Severe
Stage 4)).
RXC 05 x HCC048, 041............ Additional effect -1.002 -0.915 -0.829 -0.721 -0.715
for enrollees with
RxC 05
(Inflammatory Bowel
Disease Agents) and
(HCC 048
(Inflammatory Bowel
Disease) or 041
(Intestine
Transplant Status/
Complications)).
RXC 06 x HCC018, 019, 020, 021.. Additional effect 0.444 0.410 0.463 0.550 0.555
for enrollees with
RxC 06 (Insulin)
and (HCC 018
(Pancreas
Transplant Status/
Complications) or
019 (Diabetes with
Acute
Complications) or
020 (Diabetes with
Chronic
Complications) or
021 (Diabetes
without
Complication)).
RXC 07 x HCC018, 019, 020, 021.. Additional effect -0.174 -0.161 -0.129 -0.129 -0.130
for enrollees with
RxC 07 (Anti-
Diabetic Agents,
Except Insulin and
Metformin Only) and
(HCC 018 (Pancreas
Transplant Status/
Complications) or
019 (Diabetes with
Acute
Complications) or
020 (Diabetes with
Chronic
Complications) or
021 (Diabetes
without
Complication)).
RXC 08 x HCC118................. Additional effect -4.718 -4.268 -3.935 -3.822 -3.819
for enrollees with
RxC 08 (Multiple
Sclerosis Agents)
and HCC 118
(Multiple
Sclerosis).
RXC 09 x HCC056 or 057 and 048 Additional effect -0.505 -0.528 -0.536 -0.574 -0.576
or 041. for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and (HCC 048
(Inflammatory Bowel
Disease) or 041
(Intestine
Transplant Status/
Complications)) and
(HCC 056
(Rheumatoid
Arthritis and
Specified
Autoimmune
Disorders) or 057
(Systemic Lupus
Erythematosus and
Other Autoimmune
Disorders)).
RXC 09 x HCC056................. Additional effect -2.712 -2.470 -2.285 -2.173 -2.168
for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and HCC 056
(Rheumatoid
Arthritis and
Specified
Autoimmune
Disorders).
RXC 09 x HCC057................. Additional effect -0.434 -0.272 -0.144 0.012 0.020
for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and HCC 057
(Systemic Lupus
Erythematosus and
Other Autoimmune
Disorders).
RXC 09 x HCC048, 041............ Additional effect 1.311 1.573 1.744 1.909 1.917
for enrollees with
RxC 09 (Immune
Suppressants and
Immunomodulators)
and (HCC 048
(Inflammatory Bowel
Disease) or 041
(Intestine
Transplant Status/
Complications)).
[[Page 51066]]
RXC 10 x HCC159, 158............ Additional effect 29.675 29.853 29.949 29.967 29.967
for enrollees with
RxC 10 (Cystic
Fibrosis Agents)
and (HCC 159
(Cystic Fibrosis)
or 158 (Lung
Transplant Status/
Complications)).
----------------------------------------------------------------------------------------------------------------
\A\ The proposed risk adjustment model factors for the 2019 benefit year include blended coefficients based on
separately solved 2014 and 2015 MarketScan[supreg] data. We are proposing to finalize the 2019 benefit year
risk adjustment model factors based on blended factors from separately solved models using the 2014 and 2015
MarketScan[supreg] data, and the 2016 benefit year enrollee-level EDGE data.
Table 3--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 4--Proposed Child Risk Adjustment Model Factors for 2019 Benefit Year
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male................... 0.194 0.139 0.077 0.023 0.020
Age 5-9, Male................... 0.130 0.091 0.043 0.004 0.002
Age 10-14, Male................. 0.199 0.156 0.099 0.056 0.054
Age 15-20, Male................. 0.268 0.218 0.156 0.102 0.100
Age 2-4, Female................. 0.147 0.100 0.047 0.007 0.005
Age 5-9, Female................. 0.104 0.069 0.029 0.002 0.001
Age 10-14, Female............... 0.189 0.147 0.095 0.057 0.055
Age 15-20, Female............... 0.298 0.239 0.167 0.100 0.097
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................ 5.744 5.340 5.034 4.949 4.944
Septicemia, Sepsis, Systemic 13.174 13.022 12.922 12.938 12.940
Inflammatory Response Syndrome/
Shock..........................
Central Nervous System 7.345 7.194 7.085 7.094 7.095
Infections, Except Viral
Meningitis.....................
Viral or Unspecified Meningitis. 3.062 2.879 2.757 2.629 2.625
Opportunistic Infections........ 16.688 16.642 16.604 16.594 16.593
Metastatic Cancer............... 30.079 29.879 29.711 29.715 29.715
Lung, Brain, and Other Severe 9.654 9.442 9.264 9.190 9.186
Cancers, Including Pediatric
Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and 8.104 7.883 7.707 7.615 7.611
Other Cancers and Tumors.......
Colorectal, Breast (Age <50), 2.866 2.706 2.572 2.460 2.454
Kidney, and Other Cancers......
Breast (Age 50+) and Prostate 2.866 2.706 2.572 2.460 2.454
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.........................
Thyroid Cancer, Melanoma, 1.218 1.090 0.977 0.858 0.852
Neurofibromatosis, and Other
Cancers and Tumors.............
Pancreas Transplant Status/ 21.519 21.274 21.082 21.114 21.116
Complications..................
Diabetes with Acute 2.422 2.129 1.939 1.683 1.672
Complications..................
Diabetes with Chronic 2.422 2.129 1.939 1.683 1.672
Complications..................
Diabetes without Complication... 2.422 2.129 1.939 1.683 1.672
Protein-Calorie Malnutrition.... 11.421 11.335 11.264 11.302 11.304
Mucopolysaccharidosis........... 8.584 8.361 8.176 8.141 8.139
Lipidoses and Glycogenosis...... 8.584 8.361 8.176 8.141 8.139
Congenital Metabolic Disorders, 8.584 8.361 8.176 8.141 8.139
Not Elsewhere Classified.......
Amyloidosis, Porphyria, and 8.584 8.361 8.176 8.141 8.139
Other Metabolic Disorders......
Adrenal, Pituitary, and Other 8.584 8.361 8.176 8.141 8.139
Significant Endocrine Disorders
Liver Transplant Status/ 21.519 21.274 21.082 21.114 21.116
Complications..................
End-Stage Liver Disease......... 11.016 10.865 10.767 10.761 10.761
Cirrhosis of Liver.............. 6.158 6.041 5.950 5.916 5.914
Chronic Viral Hepatitis C....... 6.888 6.742 6.621 6.604 6.604
Chronic Hepatitis, Other/ 1.679 1.571 1.470 1.385 1.381
Unspecified....................
Acute Liver Failure/Disease, 10.719 10.579 10.476 10.479 10.480
Including Neonatal Hepatitis...
Intestine Transplant Status/ 21.519 21.274 21.082 21.114 21.116
Complications..................
[[Page 51067]]
Peritonitis/Gastrointestinal 10.481 10.202 9.989 9.995 9.996
Perforation/Necrotizing
Enterocolitis..................
Intestinal Obstruction.......... 3.953 3.763 3.613 3.521 3.518
Chronic Pancreatitis............ 10.876 10.686 10.549 10.567 10.569
Acute Pancreatitis/Other 2.107 1.992 1.891 1.793 1.788
Pancreatic Disorders and
Intestinal Malabsorption.......
Inflammatory Bowel Disease...... 6.687 6.344 6.085 5.986 5.981
Necrotizing Fasciitis........... 3.868 3.678 3.524 3.459 3.456
Bone/Joint/Muscle Infections/ 3.868 3.678 3.524 3.459 3.456
Necrosis.......................
Rheumatoid Arthritis and 4.271 4.056 3.872 3.782 3.778
Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and 1.227 1.111 0.999 0.872 0.867
Other Autoimmune Disorders.....
Osteogenesis Imperfecta and 1.364 1.258 1.162 1.079 1.075
Other Osteodystrophies.........
Congenital/Developmental 1.364 1.258 1.162 1.079 1.075
Skeletal and Connective Tissue
Disorders......................
Cleft Lip/Cleft Palate.......... 1.407 1.241 1.107 0.982 0.977
Hemophilia...................... 55.787 55.354 55.012 54.989 54.988
Myelodysplastic Syndromes and 12.015 11.906 11.825 11.801 11.800
Myelofibrosis..................
Aplastic Anemia................. 12.015 11.906 11.825 11.801 11.800
Acquired Hemolytic Anemia, 6.603 6.387 6.217 6.130 6.126
Including Hemolytic Disease of
Newborn........................
Sickle Cell Anemia (Hb-SS)...... 6.603 6.387 6.217 6.130 6.126
Thalassemia Major............... 6.603 6.387 6.217 6.130 6.126
Combined and Other Severe 6.007 5.869 5.759 5.696 5.693
Immunodeficiencies.............
Disorders of the Immune 6.007 5.869 5.759 5.696 5.693
Mechanism......................
Coagulation Defects and Other 4.186 4.074 3.976 3.905 3.902
Specified Hematological
Disorders......................
Drug Psychosis.................. 5.541 5.318 5.157 5.092 5.090
Drug Dependence................. 5.541 5.318 5.157 5.092 5.090
Schizophrenia................... 4.669 4.332 4.086 3.973 3.968
Major Depressive and Bipolar 1.809 1.621 1.462 1.283 1.275
Disorders......................
Reactive and Unspecified 1.681 1.507 1.356 1.179 1.171
Psychosis, Delusional Disorders
Personality Disorders........... 0.678 0.582 0.476 0.338 0.332
Anorexia/Bulimia Nervosa........ 2.792 2.619 2.478 2.413 2.409
Prader-Willi, Patau, Edwards, 2.339 2.176 2.067 2.032 2.031
and Autosomal Deletion
Syndromes......................
Down Syndrome, Fragile X, Other 1.838 1.693 1.582 1.491 1.487
Chromosomal Anomalies, and
Congenital Malformation
Syndromes......................
Autistic Disorder............... 1.513 1.364 1.228 1.070 1.063
Pervasive Developmental 0.737 0.640 0.528 0.382 0.375
Disorders, Except Autistic
Disorder.......................
Traumatic Complete Lesion 12.154 12.087 12.058 12.138 12.142
Cervical Spinal Cord...........
Quadriplegia.................... 12.154 12.087 12.058 12.138 12.142
Traumatic Complete Lesion Dorsal 10.641 10.489 10.347 10.348 10.348
Spinal Cord....................
Paraplegia...................... 10.641 10.489 10.347 10.348 10.348
Spinal Cord Disorders/Injuries.. 3.473 3.289 3.147 3.055 3.051
Amyotrophic Lateral Sclerosis 7.137 6.947 6.796 6.711 6.706
and Other Anterior Horn Cell
Disease........................
Quadriplegic Cerebral Palsy..... 3.125 2.921 2.787 2.797 2.797
Cerebral Palsy, Except 0.730 0.588 0.484 0.395 0.391
Quadriplegic...................
Spina Bifida and Other Brain/ 1.219 1.108 1.019 0.949 0.946
Spinal/Nervous System
Congenital Anomalies...........
Myasthenia Gravis/Myoneural 8.961 8.809 8.687 8.653 8.652
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.....................
Muscular Dystrophy.............. 2.675 2.515 2.397 2.310 2.307
Multiple Sclerosis.............. 9.417 9.117 8.880 8.847 8.846
Parkinson's, Huntington's, and 2.675 2.515 2.397 2.310 2.307
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders......................
Seizure Disorders and 1.887 1.743 1.611 1.470 1.463
Convulsions....................
Hydrocephalus................... 3.800 3.697 3.620 3.605 3.605
Non-Traumatic Coma, and Brain 5.359 5.248 5.156 5.116 5.114
Compression/Anoxic Damage......
Respirator Dependence/ 31.233 31.127 31.052 31.184 31.190
Tracheostomy Status............
Respiratory Arrest.............. 9.997 9.799 9.667 9.653 9.653
Cardio-Respiratory Failure and 9.997 9.799 9.667 9.653 9.653
Shock, Including Respiratory
Distress Syndromes.............
Heart Assistive Device/ 21.519 21.274 21.082 21.114 21.116
Artificial Heart...............
Heart Transplant................ 21.519 21.274 21.082 21.114 21.116
Congestive Heart Failure........ 5.652 5.562 5.482 5.438 5.435
Acute Myocardial Infarction..... 4.541 4.481 4.446 4.422 4.421
Unstable Angina and Other Acute 4.541 4.481 4.446 4.422 4.421
Ischemic Heart Disease.........
Heart Infection/Inflammation, 11.390 11.285 11.206 11.181 11.179
Except Rheumatic...............
[[Page 51068]]
Hypoplastic Left Heart Syndrome 5.172 5.012 4.857 4.735 4.729
and Other Severe Congenital
Heart Disorders................
Major Congenital Heart/ 1.451 1.360 1.244 1.128 1.122
Circulatory Disorders..........
Atrial and Ventricular Septal 0.894 0.810 0.707 0.612 0.609
Defects, Patent Ductus
Arteriosus, and Other
Congenital Heart/Circulatory
Disorders......................
Specified Heart Arrhythmias..... 3.536 3.385 3.253 3.178 3.175
Intracranial Hemorrhage......... 12.297 12.087 11.936 11.925 11.925
Ischemic or Unspecified Stroke.. 6.626 6.537 6.482 6.494 6.494
Cerebral Aneurysm and 3.425 3.247 3.122 3.047 3.043
Arteriovenous Malformation.....
Hemiplegia/Hemiparesis.......... 3.713 3.626 3.568 3.555 3.555
Monoplegia, Other Paralytic 2.871 2.748 2.664 2.635 2.635
Syndromes......................
Atherosclerosis of the 10.177 9.954 9.794 9.715 9.712
Extremities with Ulceration or
Gangrene.......................
Vascular Disease with 15.267 15.144 15.047 15.063 15.063
Complications..................
Pulmonary Embolism and Deep Vein 12.509 12.400 12.319 12.358 12.360
Thrombosis.....................
Lung Transplant Status/ 21.519 21.274 21.082 21.114 21.116
Complications..................
Cystic Fibrosis................. 21.519 21.274 21.082 21.114 21.116
Chronic Obstructive Pulmonary 0.364 0.303 0.220 0.128 0.123
Disease, Including
Bronchiectasis.................
Asthma.......................... 0.364 0.303 0.220 0.128 0.123
Fibrosis of Lung and Other Lung 3.740 3.635 3.537 3.471 3.469
Disorders......................
Aspiration and Specified 8.744 8.694 8.652 8.688 8.690
Bacterial Pneumonias and Other
Severe Lung Infections.........
Kidney Transplant Status........ 13.420 13.163 12.976 12.979 12.978
End Stage Renal Disease......... 33.178 33.107 33.050 33.146 33.150
Chronic Kidney Disease, Stage 5. 1.895 1.768 1.660 1.557 1.555
Chronic Kidney Disease, Severe 1.895 1.768 1.660 1.557 1.555
(Stage 4)......................
Ectopic and Molar Pregnancy, 1.049 0.899 0.765 0.553 0.542
Except with Renal Failure,
Shock, or Embolism.............
Miscarriage with Complications.. 1.049 0.899 0.765 0.553 0.542
Miscarriage with No or Minor 1.049 0.899 0.765 0.553 0.542
Complications..................
Completed Pregnancy With Major 2.784 2.404 2.197 1.961 1.958
Complications..................
Completed Pregnancy With 2.784 2.404 2.197 1.961 1.958
Complications..................
Completed Pregnancy with No or 2.784 2.404 2.197 1.961 1.958
Minor Complications............
Chronic Ulcer of Skin, Except 2.025 1.939 1.854 1.785 1.781
Pressure.......................
Hip Fractures and Pathological 5.331 5.100 4.905 4.806 4.802
Vertebral or Humerus Fractures.
Pathological Fractures, Except 1.417 1.296 1.168 1.028 1.019
of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone 21.519 21.274 21.082 21.114 21.116
Marrow, Transplant Status/
Complications..................
Artificial Openings for Feeding 11.532 11.432 11.368 11.481 11.487
or Elimination.................
Amputation Status, Lower Limb/ 7.235 7.007 6.844 6.738 6.734
Amputation Complications.......
----------------------------------------------------------------------------------------------------------------
Table 5--Proposed Infant Risk Adjustment Model Factors for 2019 Benefit Year
----------------------------------------------------------------------------------------------------------------
Group Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity 268.917 267.690 266.660 266.665 266.666
Level 5 (Highest)..............
Extremely Immature * Severity 164.057 162.851 161.848 161.805 161.804
Level 4........................
Extremely Immature * Severity 34.929 34.068 33.319 33.095 33.090
Level 3........................
Extremely Immature * Severity 34.929 34.068 33.319 33.095 33.090
Level 2........................
Extremely Immature * Severity 34.929 34.068 33.319 33.095 33.090
Level 1 (Lowest)...............
Immature * Severity Level 5 163.691 162.498 161.499 161.501 161.503
(Highest)......................
Immature * Severity Level 4..... 72.779 71.594 70.608 70.581 70.582
Immature * Severity Level 3..... 33.416 32.404 31.556 31.393 31.387
Immature * Severity Level 2..... 24.515 23.529 22.711 22.500 22.490
Immature * Severity Level 1 24.515 23.529 22.711 22.500 22.490
(Lowest).......................
Premature/Multiples * Severity 118.666 117.511 116.565 116.511 116.512
Level 5 (Highest)..............
Premature/Multiples * Severity 26.998 25.884 24.983 24.819 24.815
Level 4........................
Premature/Multiples * Severity 13.865 13.000 12.294 11.914 11.898
Level 3........................
Premature/Multiples * Severity 7.702 7.015 6.435 5.861 5.832
Level 2........................
Premature/Multiples * Severity 5.180 4.663 4.139 3.538 3.508
Level 1 (Lowest)...............
Term * Severity Level 5 94.243 93.167 92.263 92.087 92.080
(Highest)......................
Term * Severity Level 4......... 14.247 13.396 12.715 12.261 12.242
Term * Severity Level 3......... 5.672 5.124 4.602 3.974 3.940
Term * Severity Level 2......... 3.403 2.987 2.524 1.843 1.808
Term * Severity Level 1 (Lowest) 1.530 1.305 0.896 0.365 0.345
Age1 * Severity Level 5 49.506 48.891 48.377 48.287 48.283
(Highest)......................
Age1 * Severity Level 4......... 8.229 7.779 7.399 7.151 7.141
[[Page 51069]]
Age1 * Severity Level 3......... 2.945 2.674 2.388 2.123 2.112
Age1 * Severity Level 2......... 1.913 1.697 1.446 1.161 1.147
Age1 * Severity Level 1 (Lowest) 0.513 0.420 0.276 0.179 0.175
Age 0 Male...................... 0.575 0.533 0.515 0.461 0.456
Age 1 Male...................... 0.115 0.100 0.088 0.060 0.059
----------------------------------------------------------------------------------------------------------------
Table 6--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
1,000-1,499 Grams.
Immature..................... Premature Newborns, Including Birthweight
1,500-1,999 Grams.
Premature/Multiples.......... Premature Newborns, Including Birthweight
2,000-2,499 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 7--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.
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.
[[Page 51070]]
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.
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.
------------------------------------------------------------------------
[[Page 51071]]
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 healthcare services by
enrollees receiving cost-sharing reductions (induced demand) in all
States where HHS operates risk adjustment. The proposed cost-sharing
reductions adjustment factors for the 2019 benefit year risk adjustment
are unchanged from those finalized in the 2018 Payment Notice, and are
set forth in Table 8. These adjustments would be effective for 2016,
2017, 2018, and 2019 risk adjustment, and would be multiplied against
the sum of the demographic, diagnosis, and interaction factors, and
enrollment and prescription drug utilization factors (for the adult
model). We anticipate adjusting these factors in the annual HHS notice
of benefit and payment parameters for the 2020 benefit year as
enrollee-level data from the individual market will be available in
time for proposal in that rulemaking.
We seek comment on this approach.
Table 8--Cost-Sharing Reductions Adjustment
------------------------------------------------------------------------
Induced
Household income Plan AV utilization
factor
------------------------------------------------------------------------
Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL................ Plan Variation 94%..... 1.12
150-200% of FPL................ Plan Variation 87%..... 1.12
200-250% of FPL................ Plan Variation 73%..... 1.00
>250% of FPL................... Standard Plan 70%...... 1.00
------------------------------------------------------------------------
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
>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
statistic 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 ratios are in the range of published estimates for
concurrent risk adjustment models.\12\ Because we are proposing to
blend the coefficients from separately solved models based on
MarketScan[supreg] 2014 and 2015 data in the proposed rule, we are
publishing the R-squared statistic for each model and benefit year
separately to verify their statistical validity. The R-squared
statistic for each model is shown in Table 9.
---------------------------------------------------------------------------
\12\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis
of Claims-Based Tools for Health Risk Assessment.'' Society of
Actuaries. April 2007.
Table 9--R-Squared Statistic for Proposed HHS Risk Adjustment Models
------------------------------------------------------------------------
R-squared statistic
Risk adjustment model -------------------------------
2014 2015
------------------------------------------------------------------------
Platinum Adult.......................... 0.4221 0.4212
Platinum Child.......................... 0.293 0.3314
Platinum Infant......................... 0.3284 0.3329
Gold Adult.............................. 0.4179 0.4164
Gold Child.............................. 0.2883 0.3269
Gold Infant............................. 0.3264 0.3309
Silver Adult............................ 0.4143 0.4123
Silver Child............................ 0.2841 0.3227
Silver Infant........................... 0.325 0.3295
Bronze Adult............................ 0.4117 0.4095
Bronze Child............................ 0.2805 0.3188
[[Page 51072]]
Bronze Infant........................... 0.3247 0.3292
Catastrophic Adult...................... 0.4115 0.4094
Catastrophic Child...................... 0.2803 0.3186
Catastrophic Infant..................... 0.3247 0.3292
------------------------------------------------------------------------
f. Overview of the Payment Transfer Formula (Sec. 153.320)
i. Accounting for High-Cost Risk Pool in the Transfer Formula
We previously 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 (total payments and charges including outlier
pooling) 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. The total payment or charge is thus calculated to balance the
State market risk pool in question. In addition to the total charge
collected and payment made for the State market risk pool, in the 2018
Payment Notice, we added to the risk adjustment methodology additional
transfers that would reflect the payments and charges assessed with
respect to the costs of high-risk enrollees. To account for costs
associated with high-risk enrollees, we added transfer terms (a payment
term and a charge term) that would be calculated separately from the
State transfer formula. Thus, the non-high cost pooling portion of plan
risk would continue to be calculated as the member month weighted
average of individual enrollee risk scores. Beginning for the 2018
benefit year, we added one term that reflects 60 percent of costs above
$1 million, the threshold for our payments for these high-risk
enrollees, and another term that reflects a percentage of PMPM premium
adjustment to the transfer formula for the high-cost enrollee pool to
maintain the balance of payment and charges within the risk adjustment
program. For the 2019 benefit year we propose to maintain this
adjustment to the risk adjustment transfers with the threshold of $1
million and a coinsurance rate of 60 percent, as finalized for the 2018
benefit year.
ii. Administrative Cost Reduction to Statewide Average Premium
Additionally, we propose to continue the policy finalized in the
2018 Payment Notice to reduce the Statewide average premium in the risk
adjustment transfer formula by 14 percent to account for the proportion
of administrative costs that do not vary with claims for the 2019
benefit year and future benefit years until changed in rulemaking. As a
note, we define unadjusted Statewide average premiums as the sum of
average premium per member month of plan (P i) multiplied by plan i's
share of Statewide enrollment in the market in the risk pool (S i). For
the 2019 benefit year, the Statewide average premium, which will be
used for the transfer formula finalized beginning for the 2018 benefit
year, will be calculated based on the formula below:
[GRAPHIC] [TIFF OMITTED] TP02NO17.001
Where:
si = plan i's share of Statewide enrollment in the market
in the risk pool;
P i = average premium per member month of plan i.
iii. State Flexibility
The HHS risk adjustment payment transfer formula generally
transfers amounts from issuers with lower than average actuarial risk
to those with higher than average actuarial risk. Such risk adjustment
transfers are widely used in health insurance markets and recognized as
critical in mitigating the effects of adverse selection, ensuring
financial viability of plans that enroll a higher proportion of high-
risk enrollees, and thus, fostering competitive health insurance
markets. The HHS risk adjustment program transfers are scaled with the
Statewide average premium in the applicable State market. In the 2018
Payment Notice, we noted that compared to other scaling factors, such
as, plans' own premiums, our analyses found Statewide average premium
proves to be a more accurate means of scaling the transfers for
differences in relative actuarial risk, particularly in the context of
a budget-neutral system. We also finalized in the 2018 Payment Notice
an administrative cost adjustment to the statewide average premium to
remove a portion of administrative costs that did not vary based on
claims differences from the Statewide average premium and base the
transfers on the portion of the premiums that vary with claims.\13\
Nevertheless, we acknowledge that, for some States that deviate
significantly from the national dataset used, a further adjustment to
the Statewide average premium may more precisely account for
differences between the plan premium estimate reflecting adverse
selection and the plan premium estimate not reflecting selection in the
respective State market risk pools.
---------------------------------------------------------------------------
\13\ 81 FR 94099, 94100. (December 22, 2016). Available at
https://www.gpo.gov/fdsys/pkg/FR-2016-12-22/pdf/2016-30433.pdf.
---------------------------------------------------------------------------
In the 2016 Interim Final Rule,\14\ HHS recognized some State
regulators' desire to reduce the magnitude of risk adjustment charge
amounts for some issuers. We acknowledged that States are the primary
regulators of their insurance markets, and as such, we encouraged
States to examine whether any local approaches under State legal
authority are warranted to help ease the transition to new health
insurance markets.
---------------------------------------------------------------------------
\14\ 91 FR 29146, 29152. (May 11, 2016). Available at https://www.gpo.gov/fdsys/pkg/FR-2016-05-11/pdf/2016-11017.pdf.
---------------------------------------------------------------------------
In the small group market, employers select the plans offered to
their employees and often pay a significant portion of employees'
premiums to encourage enrollment. Depending on the participation rules
and market dynamics within a particular State, risk selection can be
significantly less in a State's small group market compared to
[[Page 51073]]
its individual market. The HHS methodology calculates relative risk
scores between issuers in a State market, and in the case of the small
group market, the differences between risk scores for issuers within
State markets are generally smaller, leading to a smaller magnitude of
risk adjustment transfers in the small group market as compared to the
individual market. However, certain States have opined that the HHS
risk adjustment methodology, which is calibrated on a national dataset,
may in some circumstances, overcompensate for risk differences in the
small group market for their particular State. In such cases, the
States have the statutory authority to operate their own State risk
adjustment program under a Federally-certified alternate risk
adjustment methodology as they deem fit. We believe that allowing
certain State-by-State adjustments to the HHS risk adjustment program
can account for such State-specific differences in risk without the
necessity for States to undertake operation of their own risk
adjustment program. Therefore, in the case of small group markets,
where States can demonstrate that the actuarial risk differences due to
adverse selection are mitigated by the small group market dynamics
described above, to tailor the risk adjustment methodology to
particularities of reduced risk selection in a State's small group
market, we are proposing to permit States' primary insurance regulators
to request a percentage adjustment in the calculation of the risk
adjustment transfer amounts in the small group market in their State,
beginning for the 2019 benefit year.
Under this proposal, beginning in the 2019 benefit year and beyond,
HHS would require any State that intends to request this flexibility to
submit its proposal for an adjustment to the Statewide average premium
in the small group market within 30 calendar days after publication of
the proposed HHS notice of benefit and payment parameters for the
applicable benefit year in order to permit issuers to incorporate any
such adjustment into their proposed rates. For example, for the 2019
benefit year risk adjustment transfers, which will be calculated in the
2020 calendar year, State proposals would be submitted to HHS no later
than 30 days after publication of this proposed HHS notice of benefit
and payment parameters for the 2019 benefit year, similar to the public
comment deadline for the proposed rule. In order to promote
transparency and solicit feedback from consumers and stakeholders on
the proposed adjustment to the HHS risk adjustment transfer formula,
HHS would publish the requested State adjustments for public comment in
guidance while it begins its initial review of the State proposal. HHS
would then make final determinations of approval of State requests by
March 1 of the benefit year prior to the applicable benefit year, in
time for issuers' initial rate setting deadline. That is, for the 2019
benefit year, HHS would make final determinations of approval by March
1, 2018. The proposed timing of the State adjustment request
submission, publication of HHS guidance, the public notice and comment
period and HHS request approval process will permit plans to
incorporate approved adjustments in their rates for the applicable
benefit year.
HHS would consider requests from State regulators to reduce the
calculation of the Statewide average premium used in the HHS risk
adjustment transfer formula by up to 50 percent for the applicable
benefit year. As noted above, Statewide average premium is defined as
unadjusted Statewide average premium reduced by 14 percent, to account
for a portion of administrative costs, or as 86 percent of unadjusted
Statewide average premium. Transfers in the small group market could be
reduced by up to an additional 43 percent (or 50 percent of the
transfer amounts, after the 14 percent reduction for a portion of
administrative costs to the Statewide average premium). We believe this
adjustment would proportionally reduce the magnitude of risk adjustment
transfers in the small group market. We seek comment on all aspects of
this proposal, including the permissible extent of the adjustment, the
timing of the submission, any evidence the State should be required to
provide, and what procedural requirements should be in place.
We also seek comment on whether we should establish a similar
process through which States could request an adjustment to the
calculation of Statewide average premiums for risk adjustment in the
individual market similarly to the proposed small group market
adjustment. Although adverse selection in the individual market is not
mitigated by group enrollment or minimum participation requirements
that require a minimum percentage of employees to enroll in coverage as
is the selection in the small group market, a State may believe the HHS
risk adjustment methodology, which is calibrated on a national dataset,
disproportionately accounts for relative actuarial risk differences in
its individual market risk pool. We seek comment on whether, if a State
can demonstrate such a difference in calculated relative actuarial
risk, we should reduce States' administrative burden in operating its
own risk adjustment program by allowing some flexibility in the HHS
risk adjustment methodology to the extent permissible under the
statute. Therefore, we seek comment on whether the adjustment described
above for the small group market should also apply to the individual
market, what individual market features would justify such an
adjustment, and what additional submissions a State should provide in
order to justify such a departure for that market. For example, to
accommodate a State with particular State rating practices that serve
to mitigate risk selection, we might require a statistical or actuarial
study demonstrating the extent to which transfer amounts calculated
pursuant to the HHS risk adjustment methodology finalized for the
applicable benefit year would overstate differentials in uncompensated
predicted risk in the individual market.
As noted above, a State that wishes to make an adjustment for the
magnitude of these transfers in the individual and small group markets
may take temporary, reasonable measures under State authority to
mitigate effects under their own authority.
We seek comment on these proposals.
iv. The Payment Transfer Formula
Except as proposed above, the payment transfer formula would be
unchanged from what was finalized in the 2014 Payment Notice (78 FR
15430 through 15434). We believe it 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 51074]]
[GRAPHIC] [TIFF OMITTED] TP02NO17.000
Where:
Ps = Statewide 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 adjustment
charge or receives a risk adjustment 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 (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.
This existing formula would be multiplied by the number of member
months to determine the total payment or charge assessed with respect
to plan average risk scores for a plan's geographic rating area for the
market within the State, and this payment or charge will be added to
the transfer terms described above to account for the costs of high-
risk enrollees.
g. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (Sec. 153.630)
HHS will conduct risk adjustment data validation under Sec.
153.630 in any State where HHS is operating risk adjustment on a
State's behalf.\15\ The purpose of risk adjustment data validation is
to ensure issuers are providing accurate high-quality information to
HHS, which is crucial for the proper functioning of the risk adjustment
program. Risk adjustment data validation consists of an initial
validation audit and a second validation audit. Under Sec. 153.630,
each issuer of a risk adjustment covered plan must engage an
independent initial validation audit entity. The issuer provides
demographic, enrollment, and medical record documentation for a sample
of enrollees selected by HHS to its initial validation auditor for data
validation. Set forth below are proposed amendments and clarifications
to the risk adjustment data validation program in light of experience
and feedback from issuers during the first pilot year.
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\15\ Starting with the 2017 benefit year, no State has elected
to operate a risk adjustment program. Therefore, HHS operates risk
adjustment in all States.
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i. Payment Adjustments for Error Rates
Under Sec. 153.350(c), HHS may adjust risk adjustment payments and
charges to all issuers of risk adjustment covered plans based on
adjustments to the average actuarial risk of a risk adjustment plan due
to errors discovered during risk adjustment data validation. We believe
that some variation and error should be expected in the compilation of
data for risk scores, because providers' documentation of enrollee
health status varies across provider types and groups. Our experiences
with the Medicare Advantage risk adjustment data validation program and
the HHS risk adjustment data validation pilot for the 2015 benefit year
reinforce this belief.
We propose evaluating material statistical deviation in error rates
in applying error rates to risk scores beginning with the 2017 benefit
year risk adjustment data validation. We are considering adjusting an
issuer's risk score only when the issuer's error rate materially
deviates from a statistically meaningful value, such as the central
tendency (a mean or typical value) of errors, nationally. HHS could
also evaluate error rates within each HCC, or groups of HCCs, and then
only apply error rates to outlier issuers' risk scores within each HCC
or group of HCCs. When an error rate materially deviates from the
central tendency, we propose to apply the difference between the mean
error rate or the confidence interval around the population's central
tendency and the calculated error rate instead of the full error rate.
If all error rates in a State risk pool do not materially deviate from
the national central tendency of error rates, we propose to not apply
any adjustments to issuers' risk scores for that benefit year in the
respective State risk pool.
We believe the implementation of any of the alternative evaluations
and subsequent adjustments we propose here would reduce issuer burden,
streamline the risk adjustment data validation process, improve
issuers' ability to predict risk adjustment transfers, and promote
confidence and stability in the budget-neutral payment transfer
methodology while ensuring the integrity and quality of data provided
by issuers.
We seek comment on this proposal and alternatives to evaluating
material deviation in error rates for applying error rates to risk
scores beginning with the 2017 benefit year risk adjustment data
validation.
ii. Payment Adjustments for Issuers That Have Exited the Market
In the 2015 Payment Notice, we established that HHS will use a
prospective approach to adjust risk scores and payment transfers based
on the results of risk adjustment data validation. Specifically, HHS
will apply the error rate calculated through the risk adjustment data
validation process for the applicable benefit year to plan risk scores
in the subsequent benefit year, and then make risk adjustment payment
transfers based on adjusted plan average risk scores in that subsequent
benefit year. However, in some cases, an issuer of a risk adjustment
covered plan may have exited a State market during or at the end of the
benefit year being audited and therefore would not have risk scores or
payment transfers in the subsequent benefit year to which HHS could
make adjustments.
As previously noted, the purpose of data validation for risk
adjustment is to promote confidence in the budget-neutral payment
transfer methodology by ensuring the integrity and quality of data
provided from issuers. HHS believes that the prospect of not receiving
payment adjustments based on the results of risk adjustment data
validation results could undermine these goals by eliminating the
incentive for an exiting issuer to carefully and accurately submit risk
adjustment data for its final benefit year in the market. Not only
could this type of inaccuracy result in overpayments to the exiting
issuer, it could also cause the other issuers in the market to be over
or undercompensated for the actual risk of their enrollee populations.
Therefore, we propose that HHS would use the error rate derived from
the risk adjustment data validation process to adjust the payment
transfer for the issuer's final benefit year in the State market, which
would be concurrent with the benefit year being audited, for issuers
that exit a State market during or
[[Page 51075]]
at the end of the benefit year being audited. Because risk adjustment
transfers for a given benefit year are calculated and paid before the
risk adjustment data validation process for that benefit year is
completed, this approach would require HHS to make a retroactive
adjustment to the issuer's payment transfer for its final benefit year
and reallocate the adjusted transfer amount to the other issuers in the
State market in that year.
HHS believes that the proposed retroactive adjustment to an exited
issuer's payment transfer would help ensure that an issuer with
inaccurate data does not benefit from this error and that other issuers
in the State market are not harmed by it. However, we acknowledge that
this approach could reduce issuers' confidence in the finality of risk
adjustment transfers for any given benefit year because of the
potential for retroactive adjustments for an issuer that has exited the
market. In addition, the calculation of payment transfers could become
increasingly complex for 2018 benefit year risk adjustment transfers
and beyond, because HHS could be adjusting payment transfers based on
the results of data validation, even if transfers were already adjusted
retroactively for an exited issuer's data validation adjustment (for
example, 2018 benefit year risk adjustment transfers would be adjusted
for 2017 benefit year risk adjustment data validation, and would also
be adjusted for 2018 risk adjustment benefit year data validation if an
issuer exits the market at the end of the 2018 benefit year). However,
we believe the payment adjustment proposal for error rates that is
discussed above could result in some exiting issuers not being adjusted
at all, alleviating some of the complexity associated with
retroactively adjusting transfers. We seek comment on this proposal to
make retroactive adjustments to payment transfers for issuers that have
exited the market based on the results of risk adjustment data
validation for the most recent benefit year in which they participated
in risk adjustment.
iii. 500 Billable Member Months
Numerous small issuers have expressed concern regarding the
regulatory burden and cost associated with complying with the risk
adjustment data validation program. HHS has previously considered these
concerns and provided relief where possible. For example, in the 2017
Payment Notice, we included a lower, separate default risk adjustment
charge for small issuers with 500 billable member months or fewer
beginning with the 2016 benefit year in light of the high operational
burden associated with compliance for these issuers.
We propose that, beginning with 2017 benefit year risk adjustment
data validation, issuers with 500 billable member months or fewer that
elect to establish and submit data to an EDGE server would not be
subject to the requirement to hire an initial validation auditor or
submit initial validation audit results. Issuers at or below the 500
billable member months threshold would have their risk score adjusted
by a default error rate equal to the lower of either the national
average negative error rate, or the average negative error rate within
a State, as set forth in the 2018 Payment Notice. We believe exempting
issuers with 500 billable member months or fewer from the requirement
to hire an initial validation auditor is appropriate because issuers of
this size would have a disproportionately high operational burden for
compliance with risk adjustment data validation. We note that,
beginning with 2018 benefit year risk adjustment data validation, these
issuers would not be subject to random sampling under the materiality
threshold discussed below, and would continue to not be subject to the
requirement to hire an initial validation auditor or submit initial
validation audit results, but would have their risk scores adjusted by
a default error rate annually. We note that if the proposal discussed
above to implement a central tendency approach to payment adjustments
is finalized, then it is possible no adjustment would occur for issuers
below this threshold. We seek comment on the proposed exemption from
risk adjustment data validation, including the 500 billable member
months threshold.
iv. Materiality Threshold for Risk Adjustment Data Validation
In the 2018 Payment Notice, HHS implemented a materiality threshold
for risk adjustment data validation to ease the burden of annual audit
requirements for smaller issuers of risk adjustment covered plans.
Specifically, we stated that issuers with total annual premiums at or
below $15 million (calculated based on the premiums of the benefit year
being validated) will not be subject to annual initial validation audit
requirements, beginning with the 2017 benefit year, but will still be
subject to an initial validation audit approximately every 3 years. HHS
based the timeline for enforcement of the materiality threshold on the
expectation that we would begin making payment adjustments based on the
results of 2016 benefit year risk adjustment data validation,
effectively requiring all issuers of risk adjustment covered plans to
participate in the first benefit year for which risk adjustment
payments are adjusted. However, in light of our subsequent decision to
convert the 2016 benefit year to another pilot year,\16\ we propose to
postpone application of the materiality threshold to the 2018 benefit
year. Therefore, all issuers of risk adjustment covered plans would be
required to conduct an initial validation audit for the 2017 benefit
year risk adjustment data validation, other than issuers with 500
billable member months or fewer as discussed above. Beginning with the
2018 benefit year, issuers below the $15 million premium threshold
would not be required to conduct an initial validation audit every
year. Under this proposal, HHS would still conduct random and targeted
sampling under which issuers below the materiality threshold would be
subject to an initial validation audit approximately every 3 years,
beginning with 2018 benefit year risk adjustment data validation. In
addition, issuers below the $15 million threshold that are not selected
for the random and targeted sampling would have their risk adjustment
transfers adjusted by a default error rate equal to the lower of the
average negative error rate nationally, or the average negative error
rate within a State. We note that if the proposal to implement a
central tendency approach to payment adjustments discussed above is
finalized, then it is possible no adjustment would occur for issuers
below this threshold. We seek comment on this proposal.
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\16\ ``HHS-Operated Risk Adjustment Data Validation (HHS-RADV)--
2016 Benefit Year Implementation and Enforcement.'' May 3, 2017.
Available at https://www.regtap.info/uploads/library/HRADV_PilotGuidance_5CR_050317.pdf.
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v. Data Validation Sampling Methodology
Section 153.350(a) requires that a statistically valid sample of
enrollees from each issuer of risk adjustment covered plans be
validated. In the 2015 Payment Notice, HHS finalized its methodology
for selecting the sample of enrollees for the initial validation audit
for each issuer of a risk adjustment covered plan. We established a
sample size per issuer for each State in which the issuer offers risk
adjustment covered plans and clarified that the sample would include
200 enrollees per issuer for each risk pool in which the issuer
participates, not 200 enrollees per plan. However, HHS will not
calculate a risk
[[Page 51076]]
score, or apply risk adjustment payment transfers except for high-cost
risk pool transfers beginning with the 2018 benefit year, on behalf of
a State in a market and risk pool when there is only one issuer in the
market and risk pool. That issuer may participate in another market in
the State where it is not the sole issuer and, as such, would still
participate in risk adjustment and risk adjustment data validation for
the applicable benefit year. In this circumstance, data from the risk
pools in which the issuer was the sole issuer would not be part of a
State market risk pool payment transfer, and would not be subject to
the same quality controls as data used to calculate risk scores and
payment transfers; consequently, the data could not be validated with
the same confidence that data used for payment can be validated.
Therefore, HHS would not require the issuer to validate data for its
plans in a risk pool that was not risk adjusted against another issuer
in the State risk pool in the applicable benefit year. We propose to
change the sampling methodology so that, beginning with the 2017
benefit year data validation, the initial data validation audit sample
will only include enrollees from State risk pools in which there was
more than one issuer and where HHS conducted risk adjustment on behalf
of the State for the benefit year being validated.\17\ We seek comment
on this proposal.
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\17\ For the 2018 and future benefit years, HHS would not
require the sole issuer in the State market to include high-cost
risk pool enrollees in its sample for data validation, as these
payments will be subject to a separate audit process.
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vi. Mental and Behavioral Health Records
Under Sec. 153.630(b)(6), the issuer of a risk adjustment covered
plan must provide the initial validation auditor and second validation
auditor with all relevant source enrollment documentation, all claims
and encounter data, and medical record documentation from providers of
services to each enrollee in the applicable sample without unreasonable
delay and in a manner that reasonably assures confidentiality and
security in transmission. Issuers have advised HHS that certain States'
medical privacy laws may limit providers' ability to furnish mental and
behavioral health records for risk adjustment data validation purposes.
We believe that section 1343 of the PPACA and associated regulations
require issuers of risk adjustment covered plans to furnish any records
needed for purposes of the risk adjustment program, including mental
and behavioral health records. We believe that the HIPAA Privacy Rule
at 45 CFR 164.512(a) generally permits disclosures of protected health
information that are required by law within the meaning of 45 CFR
164.103. Nevertheless, we recognize that some State and Federal privacy
laws impose requirements for mental and behavioral health information
that are different from, and potentially more restrictive than, the
HIPAA regulations. However, without the necessary mental and behavioral
health information, the diagnosis code for an applicable enrollee
cannot be validated and, therefore, it would be rejected during risk
adjustment data validation.
To address these potential issues, we propose to amend Sec.
153.630(b)(6) to provide that, if a provider is prohibited from
furnishing a full mental or behavioral health record by State or
Federal privacy laws, the provider instead may furnish a mental or
behavioral health assessment that providers routinely prepare, for
validation of a mental or behavioral health diagnosis. Although HHS
needs the full content of the mental or behavioral health record to
ensure full validation of the accuracy of diagnosis codes, we believe
that we can still perform some risk adjustment data validation based on
the information contained in mental or behavioral health assessments in
those instances in which State or Federal law prohibits submission of
the full record. For risk adjustment data validation purposes, we would
expect a mental or behavioral health assessment to be signed by a
qualified provider who is licensed by the State to diagnose mental
illness and, to the extent permissible under governing privacy and
confidentiality laws, to contain: (i) The enrollee's name; (ii) gender;
(iii) date of birth; (iv) current status of all mental or behavioral
health diagnoses; and (v) dates of service. We note that
``psychotherapy notes,'' a subset of mental and behavioral health
information that receives special protections under the HIPAA Privacy
Rule, are not required for the purposes of risk adjustment data
validation.\18\ We also note that some State and Federal privacy laws
require that providers obtain patient consent before disclosing mental
or behavioral health records, and that these consent requirements may
apply to mental or behavioral health assessments. We clarify that we do
not view a State or Federal law requiring patient consent as
inconsistent with the risk adjustment data validation requirements to
furnish a mental or behavioral health record or assessment.
Additionally, we note that certain substance use disorder patient
records are subject to the Federal confidentiality law at 42 U.S.C.
290dd-2 and the regulations promulgated thereunder in 42 CFR part 2 and
to similar State laws, and generally require consent prior to
disclosure. We believe that this proposal is consistent with the
foregoing Federal and State confidentiality rules, and that the
substance use disorder confidentiality requirements should govern when
applicable. Therefore, issuers or providers may be required to obtain
written patient consent in order to comply with this proposal.
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\18\ ``Psychotherapy notes'' are notes recorded by a health care
provider who is a mental health professional documenting or
analyzing the contents of conversation during a private counseling
session, or a group, joint, or family counseling session and that
are separated from the rest of the individual's medical record.
Psychotherapy notes do not include medication prescription and
monitoring, counseling session start and stop times, modalities and
frequency of treatment, test results, and summaries of diagnoses,
functional status, treatment plan, symptoms, prognosis, and progress
to date. See 45 CFR 164.501.
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The proposal described above allows issuers an additional avenue to
achieve compliance by permitting abbreviated mental or behavioral
health assessments for risk adjustment data validation in the event
that a provider is subject to State or Federal privacy laws that
prohibit the provider from providing a complete mental or behavioral
health record to HHS. To submit a mental or behavioral health
assessment instead of the full mental or behavioral health record, a
provider would be required to attest that relevant State or Federal
privacy laws prohibit him or her from providing the entire mental or
behavioral health record. HHS also believes that the proposal supports
the integrity of the risk adjustment data validation program by
ensuring that an initial validation auditor obtains data that will
enable proper validation of mental or behavioral health HCCs, which are
susceptible to discretionary coding. Furthermore, we believe the use of
mental or behavioral health assessments would reduce burden on
providers by permitting them to utilize records they routinely prepare
and likely already have, which would avoid the need to prepare special
summaries solely for the purpose of risk adjustment data validation. We
seek comment as to the prevalence and typical contents of mental or
behavioral health assessments under current practice, as well as other
aspects of this proposal.
vii. Inter-Rater Reliability Rates
Under Sec. 153.630(b)(8), the initial validation auditor must
measure and report to the issuer and HHS, in a manner and timeframe
specified by
[[Page 51077]]
HHS, its inter-rater reliability rates among its reviewers. An initial
validation auditor must achieve a consistency measure of at least 95
percent for his or her review outcomes, except for the initial benefit
years of risk adjustment data validation, for which the initial
validation auditor may meet an inter-rater reliability standard of 85
percent. Consistent with our decision to make the 2016 benefit year
another pilot year as referenced above, we propose to amend Sec.
153.630(b)(8) to add the 2016 benefit year as an initial year of risk
adjustment data validation for which the initial validation auditor may
meet the lower inter-rater reliability standard of 85 percent.
viii. Civil Money Penalties
An effective risk adjustment data validation program is essential
to the proper functioning of HHS-operated risk adjustment. In order to
enforce risk adjustment data validation standards when operating risk
adjustment data validation on behalf of a State, we are proposing to
clarify and amend the bases upon which HHS may impose CMPs for
violations of risk adjustment data validation requirements.
To give HHS additional flexibility for ensuring compliance with the
risk adjustment data validation requirements and in light of our
experience in the first pilot year of the risk adjustment data
validation program, HHS is proposing to amend Sec. 153.630(b)(9) to
give HHS the authority to impose a CMP on an issuer of a risk
adjustment covered plan in the event of misconduct or substantial non-
compliance with the risk adjustment data validation standards and
requirements. Specifically, we propose to amend Sec. 153.630(b)(9) to
state that, if an issuer of a risk adjustment covered plan (1) fails to
engage an initial validation auditor; (2) fails to submit the results
of an initial validation audit to HHS; (3) engages in misconduct or
substantial non-compliance with the risk adjustment data validation
standards and requirements applicable to issuers of risk adjustment
covered plans; or (4) intentionally or recklessly misrepresents or
falsifies information that it furnishes to HHS, HHS may impose CMPs in
accordance with the procedures set forth in Sec. 156.805(b) through
(e). We note that Sec. 153.630(b)(9) already addresses the possible
imposition of CMPs for (1) and (2) above, and provides a cross-
reference to Sec. 156.805, which contains the bases and procedures for
imposing CMPs for (3) and (4) above. Section 153.630(b)(9) provides the
authority to assess CMPs on all issuers of risk adjustment covered
plans, not just issuers on an FFE as does Sec. 156.805.\19\ Through
this proposal, we are clarifying that the authority to impose CMPs for
(3) and (4) applies to all issuers of risk adjustment covered plans,
not just those issuers on an FFE. We note that the CMP authority would
be in addition to HHS's ability to adjust an issuer's transfers under
Sec. 153.350(c).
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\19\ Pursuant to Sec. 153.20, risk adjustment covered plan
means, for the purpose of the risk adjustment program, any health
insurance coverage offered in the individual or small group market
with the exception of grandfathered health plans, group health
insurance coverage described in 45 CFR 146.145(c), individual health
insurance coverage described in 45 CFR 148.220, and any plan
determined not to be a risk adjustment covered plan in the
applicable Federally certified risk adjustment methodology.
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As previously noted in the Second 2013 Program Integrity Rule, and
in the 2015 Payment Notice, we propose that HHS's possible application
of CMPs would continue to take into account the totality of the
issuer's circumstances, including such factors as an issuer's previous
record of non-compliance (if any), the frequency and level of the
violation, and any aggravating or mitigating circumstances.
Additionally, we would continue to impose any CMPs so that the level of
the enforcement action is proportional to the level of the violation.
While we reserve the right to impose penalties up to the maximum
amounts set forth in Sec. 156.805(c), as a general principle, we
intend to work collaboratively with issuers to address any problems in
conducting the risk adjustment data validation process.
We believe this additional CMP authority will improve program
integrity and fairness by permitting HHS the authority to assess CMPs
on issuers that engage in misconduct in risk adjustment data
validation. Although Sec. 153.630(e) permits HHS to adjust payments
and charges for issuers that do not comply with audit requirements and
standards, this provision only makes the markets whole in the event of
a violation of the risk adjustment data validation standards or
misconduct. We do not believe this provision provides a sufficient
deterrent effect to ensure program integrity of the risk adjustment
data validation program. Additionally, we believe this additional
authority is necessary in light of the policies finalized in the 2018
Payment Notice, specifically, the concerns HHS highlighted around
gaming and the inclusion of prescription drug data in the risk
adjustment model. We seek comment on this proposal.
ix. Adjustment of Risk Adjustment Transfers Due to Submission of
Incorrect Data
On September 2, 2015, HHS released the Adjustment of Risk
Adjustment Transfers Due to Submission of Incorrect Data guidance,\20\
setting forth the process by which HHS would address instances of
materially incorrect EDGE server data submissions. We propose to
include risk adjustment data validation as a method of discovering
materially incorrect EDGE server data submissions and making
adjustments pursuant to Sec. 153.630(e), as described in our September
2, 2015 guidance. We propose that demographic or enrollment errors
discovered during risk adjustment data validation would be the basis
for an adjustment to the applicable benefit year transfer amount,
rather than the subsequent benefit year risk score. The elements being
validated are related to the transfer formula. As such, we believe they
are substantially similar to a discrepancy in the transfer process,
which is addressed in the current benefit year as part of the process
for handling discrepancies in data under Sec. 153.710, as opposed to a
discrepancy in underlying enrollee diagnoses contributing to risk
scores, which is addressed through subsequent year risk score
adjustments as part of risk adjustment data validation.
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\20\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RA-Adjustment-Guidance-9-2-15.pdf.
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As we noted in the September 2, 2015 guidance, an overstatement or
understatement of premium data may affect issuers differently, because
it will lead to an increase or decrease in the absolute value of the
magnitude of the transfers (and will affect the calculation of the
geographic rating area factors). Therefore, an issuer's submission of
incorrect EDGE server premium data may have the effect of increasing or
decreasing the magnitude of risk adjustment transfers to other issuers
in the market, depending on the direction of the premium error, holding
constant the other elements of the payment transfer formula. In cases
where there is a material impact on risk adjustment transfers for that
particular market as a result of incorrect EDGE server premium data,
HHS would calculate the dollar value of differences in risk adjustment
transfers, and, where the difference is detrimental to one or more
issuers in the market, adjust the other issuers' risk adjustment
transfer amount by that calculation, and increase the risk adjustment
charge (or decrease the risk adjustment payment) to the issuer that
made the data error, in order to balance
[[Page 51078]]
the market.\21\ We believe this approach allows HHS to operate the risk
adjustment program efficiently, while ensuring that issuers do not
profit from their data submission errors or harm their competitors in
the relevant market. We seek comment on this proposal.
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\21\ Calculation of the dollar value will include adjustment to
the statewide premium average and, to the extent possible,
adjustment to the geographic cost factor.
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h. Risk Adjustment User Fee for 2019 Benefit Year (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 its behalf. In 2019, HHS anticipates operating a
risk adjustment program in every State. As described in the 2014
Payment Notice, HHS's operation of risk adjustment on behalf of States
is funded through a risk adjustment user fee. Section 153.610(f)(2)
provides that an issuer of a risk adjustment covered plan must remit a
user fee to HHS equal to the product of its monthly billable member
enrollment in the plan and the per member 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 established Federal policy regarding user
fees, and specified 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 mitigates the financial instability associated with
potential adverse risk selection. The risk adjustment program also
contributes to consumer confidence in the health insurance industry by
helping to stabilize premiums across the individual and small group
markets.
In the 2018 Payment Notice, we calculated the Federal
administrative expenses of operating the risk adjustment program for
the 2018 benefit year to result in a risk adjustment user fee rate of
$1.68 per billable member per year or $0.14 PMPM, based on our
estimated contract costs for risk adjustment operations and estimates
of billable member months for individuals enrolled in a risk adjustment
covered plan. For the 2019 benefit year, we propose to use the same
methodology to estimate our administrative expenses to operate the
program. These contract costs 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 divided HHS's projected total
costs for administering the risk adjustment programs on behalf of
States by the expected number of billable member months in risk
adjustment covered plans in HHS-operated risk adjustment States for the
benefit year.
We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of States for 2019 will be approximately
$38 million, and the risk adjustment user fee would be $1.68 per
billable member per year, or $0.14 PMPM. The risk adjustment user fee
contract costs for the 2019 benefit year are lower than the 2018
benefit year contract costs due to lower risk adjustment data
validation and stakeholder training costs as issuers are becoming more
familiar with our programs. We expect billable member months to decline
slightly compared to the 2016 benefit year, whereas we expected
billable member months to increase over this time period when setting
the risk adjustment user fee rate for the 2018 benefit year. Therefore,
the calculated 2019 benefit year risk adjustment user fee is lower than
the rate for the 2018 benefit year prior to rounding, but after
rounding to the nearest cent, is the same as that for the 2018 benefit
year. We seek comment on the proposed risk adjustment user fee for the
2019 benefit year.
C. Part 154--Health Insurance Issuer Rate Increases: Disclosure and
Review Requirements
1. Applicability (Sec. 154.103)
Since July 18, 2011, issuers have been required to submit rate
filing justifications for rate increases for non-grandfathered plans in
the individual and small group markets.\22\ This requirement was
established, in part, to carry out the Secretary's responsibility, in
conjunction with 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. Student health insurance
coverage is considered by HHS to be a type of individual market
coverage and is generally subject to the PHS Act individual market
requirements including rate review.\23\ However, student health
insurance coverage is not subject to single risk pool requirements.\24\
Because student health insurance coverage is only available through
colleges and universities, it is also exempt from the guaranteed
availability and guaranteed renewability requirements enacted under
HIPAA. For purposes of the guaranteed availability and guaranteed
renewability requirements enacted under the PPACA, a health insurance
issuer that offers student health insurance coverage is not required to
accept individuals who are not students or dependents of students, and
is not required to renew or continue in force coverage for individuals
who are no longer students or dependents of students. Student health
insurance coverage also need not be issued on a calendar year
basis.\25\
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\22\ See Rate Increase Disclosure and Review; Final Rule, 76 FR
29964, 29966 (May 23, 2011).
\23\ See Student Health Insurance Coverage Final Rule 77 FR
16453 (March 21, 2012).
\24\ A health insurance issuer that offers student health
insurance coverage may establish one or more separate risk pools for
an 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 45 CFR 146.121).
However, student health insurance rates must reflect the claims
experience of individuals who comprise the risk pool, and any
adjustments to rates within a risk pool must be actuarially
justified. See 45 CFR 147.145(b)(3).
\25\ 45 CFR 147.145(b)(1).
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We propose to modify Sec. 154.103(b) to exempt from rate review
student health insurance coverage, effective for plan or policy years
beginning on or after January 1, 2019. Grandfathered health plan
coverage as defined in 45 CFR 147.140 and excepted benefits as
described in section 2791(c) of the PHS Act are already exempted from
rate review under the existing regulation at Sec. 154.103(b).
The Federal rate review requirements currently apply to student
health insurance coverage because it is considered individual market
coverage.\26\ Issuers of student health insurance plans are required to
use the Rate Review Justification module of the Health Insurance
Oversight System (HIOS) to submit the required rate filing information.
However, student health insurance coverage is written and sold more
like large group coverage, which was exempted from rate review as part
of the implementing regulations in part 154 because States
traditionally focused their efforts on the review of rates in the small
group and individual markets. Additionally, purchasers in the large
group market were viewed as being more sophisticated, with greater
leverage, and therefore better able to
[[Page 51079]]
avoid the imposition of large rate increases.\27\ Similarly,
institutions of higher education that offer student health insurance
coverage are seen as well informed, with significant purchasing power,
and student health insurance coverage is generally rated and
administered differently from other forms of individual health
insurance coverage.\28\
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\26\ 45 CFR 147.145.
\27\ See preamble discussion in the proposed rule, ``Rate
Increase Disclosure and Review'' 75 FR 81004, 81009 (December 23,
2010).
\28\ See preamble discussion in the final rule, ``Health
Insurance Market Rules; Rate Review'' 78 FR 13406, 13424 (February
27, 2013).
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States have allowed rating practices for student health insurance
coverage to be more in line with large group pricing, in which
experience rating and other factors can be used to determine rates.
Because student health insurance coverage is typically experience
rated, and is typically only available to students and their dependents
with an open enrollment period coinciding with the start of the
academic year, it is exempt from single risk pool rating requirements
and not guaranteed to be available or renewable to individuals who are
not students or dependents of students in an institution of higher
education. In addition, States have generally given student health
insurance coverage more plan design flexibility compared to individual
market plans to better meet student needs and utilization of on-campus
providers. Because of these factors, some States have requested student
health insurance coverage be exempt from the rate review requirements
in part 154 of title 45. The proposed change would reduce the
regulatory burden on States and issuers of student health insurance
plans. This proposal is consistent with our general approach of
providing tailored flexibility with respect to the PHS Act individual
market reforms for student health insurance coverage. Eliminating the
burdens associated with the Federal rate review requirements may
incentivize issuers to offer more student health insurance plans,
increasing competition among issuers to the benefit of institutions of
higher education and their students.
We note that States would continue to have the flexibility to
review rate increases or other aspects of student health insurance
coverage. Under this proposal, in States that do not have an Effective
Rate Review Program, we would monitor the compliance of student health
insurance coverage with applicable market rating reforms based on
complaints and as part of targeted market conduct examinations. In
States where we are enforcing market reforms, we would continue to
review form filings for student health insurance coverage for
compliance with applicable PHS Act individual market requirements, but
would not review rate increases for reasonableness under part 154 of
title 45.
We solicit comment on this proposal.
2. Rate Increases Subject to Review (Sec. 154.200)
Section 2794(a)(1) of the PHS Act requires the Secretary, in
conjunction with States, to establish a process for the annual review
of unreasonable premium increases for health insurance coverage.
Section 2794(a)(2) of the PHS Act requires health insurance issuers to
submit to the Secretary and relevant State a justification for an
unreasonable premium increase prior to implementation. States may
establish a more robust review process, and many have chosen to do so.
Section 154.200(a)(1) currently provides that a rate increase for
single risk pool coverage beginning on or after January 1, 2017 is
subject to a reasonableness review if: (1) The average increase,
including premium rating factors described in 45 CFR 147.102, for all
enrollees, weighted by premium volume for any plan within the product,
meets or exceeds 10 percent; or (2) the increase exceeds a State-
specific threshold approved by the Secretary. We propose to amend this
provision to establish a 15 percent default threshold for
reasonableness review, in recognition of significant rate increases in
the past number of years, rather than the current 10 percent default
threshold, and seek comment on the appropriate default threshold.\29\
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\29\ The 10 percent threshold was established in the ``Rate
Increase Disclosure and Review'' Final rule (76 FR 29963, May 23,
2011) based upon three indices. These indices are: (1) The medical
component of the Consumer Price Index (CPI); (2) the National Health
Expenditure data (NHE); and (3) the Standard and Poor's Healthcare
Economic Commercial Index. The threshold was finalized at 10 percent
based on the analysis of the trend in health care costs and rate
increases provided in the preamble to the proposed rule.
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A reasonableness review looks at the assumptions used in
determining the rate increase to make sure those assumptions are
supported by evidence. The reasonableness review also checks that the
increase will not result in a projected Federal MLR below the minimum
standard in the applicable market and will not unfairly discriminate
between insureds with similar risk categories.
Regardless of the threshold set for reasonableness review, all
issuers must submit a Uniform Rate Review Template (URRT) (Part I of
the Rate Filing Justification) for all single risk pool plan
submissions. Issuers offering a QHP or any single risk pool submission
containing a rate increase of any size must also submit an actuarial
memorandum (Part III of the Rate Filing Justification). Issuers with
rate filings that do not meet the threshold for a reasonableness review
are exempt from the requirement to submit Part II of the Rate Filing
Justification (Consumer Justification Narrative) for those rate
filings. No changes are being proposed to these requirements.
We note that the threshold set by CMS constitutes a minimum
standard. Some States currently employ stricter rate review standards
and may continue to do so. Section 154.200(a)(2) currently requires
States to submit a proposal to the Secretary for approval of any State-
specific threshold. We propose to amend Sec. 154.200(a)(2) to require
submission of a proposal only if the State-specific threshold is higher
than the Federal default threshold. We are proposing this change to
reduce burdens and promote State flexibility. We also propose to amend
this provision to clarify that a State seeking approval for a higher
threshold than the Federal default must base its request on factors
impacting rate increases in the State to the extent that the data
relating to such factors are available by August of the preceding year.
CMS released guidance entitled, ``State-Specific Threshold
Proposals, Guidance for States'' on March 27, 2012,\30\ and outlined
the process to be followed by States wishing to propose a State-
specific threshold to be effective from September 1, 2012 through
August 31, 2013. We will issue future guidance on the process for
submission and review of State requests to propose a State-specific
threshold above what is set by CMS, to be effective for rate filings
submitted on or after January 1, 2019.
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\30\ https://www.cms.gov/CCIIO/Resources/Files/Downloads/dwnlds/rrjssptguidance.pdf.
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We also propose to delete paragraph (b) in its entirety. That
paragraph currently requires that the Secretary publish a notice each
year indicating which threshold applies to each State. CMS currently
posts information regarding State-specific threshold requests on its
Web site \31\ and would continue to do so for States that request a
State-specific threshold above what is set by CMS, beginning with rate
filings submitted on or after January 1, 2019. If this proposal is
finalized, CMS would
[[Page 51080]]
not post information on States where the Federal default or a stricter
State-specific threshold applies. Under the proposed approach, we would
rely on States to communicate information about stricter thresholds, as
well as any other State-specific requirements.
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\31\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/sst.html.
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We propose to redesignate paragraph (c) as paragraph (b) and revise
that paragraph to delete the language related to rates filed for
coverage beginning before January 1, 2017, currently captured in
paragraph (c)(1) as this provision is no longer necessary.\32\ We
propose to redesignate paragraph (d) as paragraph (c). Finally, we
propose conforming changes to change the cross references in Sec.
154.200 to align with the changes described above.
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\32\ This standard (that is, the average increase for all
enrollees weighted by premium volume meets or exceeds the applicable
threshold), however, continues to apply to rates filed for coverage
beginning before January 1, 2017, including with respect to
compliance reviews and enforcement actions.
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We seek comment on these proposals.
3. Submission of Rate Filing Justification (Sec. 154.215)
Section 154.215(h)(2) includes a reference to 45 CFR 5.65, which
defined trade secret, confidential commercial or financial information
under HHS regulations implementing the Freedom of Information Act, 5
U.S.C. 552. HHS revised 45 CFR part 5 in a final rule issued on October
28, 2016, effective on November 28, 2016 (81 FR 74930). We propose to
make a technical correction to Sec. 154.215(h)(2) to refer to 45 CFR
5.31(d) because 45 CFR 5.65 no longer exists and Sec. 5.31(d) now
lists the reasons a record may be withheld.
4. Timing of Providing the Rate Filing Justification (Sec. 154.220)
Section 154.220(b) provides that 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 by
the earlier of (1) the date by which the State requires submission of a
rate filing; or (2) the date specified in guidance by the Secretary. As
discussed in the 2016 Payment Notice,\33\ we have interpreted that
section to require submission of all rate filings, for both QHPs and
non-QHPs, at a uniform time. We have issued rate filing timeline
guidance on an annual basis establishing the respective dates for each
benefit year and reiterating that requirement.\34\
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\33\ 80 FR 10782.
\34\ See, for example, Bulletin: Revised Timing of Submission
and Posting of Rate Filing Justifications for the 2017 Filing Year
for Single Risk Pool Coverage; Revised Timing of Submission for
Qualified Health Plan Certification Application (April 13, 2017),
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-Revised-2017-filing-timeline-bulletin-4-13-17.pdf.
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Several State regulators have indicated that requiring all
submissions at one time poses an undue regulatory burden. They have
stated that they prefer to set a later date for submission of rate
filings from issuers that only offer non-QHPs to enable regulators to
complete the review of QHP rate filings first and review non-QHP rate
filings later. Therefore, starting with plan year 2019, we propose to
interpret Sec. 154.220(b) to allow a State with an Effective Rate
Review Program to set different submission deadlines for rate filings
from issuers that only offer non-QHPs. This change would reduce burden
while empowering States to pick the timeframe that works best for their
markets, and also accounts for market differences between States. This
is also in line with a comment we received in response to the Request
for Information requesting that States be allowed to set rate filing
dates. Under this proposal, an issuer that offers both QHPs and non-
QHPs in a market in a given State would be required to submit its rate
filing in accordance with the deadlines established for QHPs pursuant
to Sec. 154.220(b) to support regulatory review of compliance with the
single risk pool requirement.
CMS would need to coordinate with all States in order to continue
collecting preliminary rate filing information and final rate
determinations in order to comply with the statutory requirement under
section 2794(b)(2)(A) of the PHS Act to monitor premium increases of
health insurance coverage offered inside and outside of the Exchanges.
This coordination will also be important to support compliance under
section 1311(e)(2) of the PPACA for the FFEs to take into consideration
State recommendations provided under section 2794(b)(1) of the PHS Act
when certifying QHPs, as well as information on any excess premium
growth outside of Exchanges as compared to inside the Exchanges. We
solicit comment on this proposal.
5. Determinations of Effective Rate Review Programs (Sec. 154.301)
a. State Posting of Rate Increases
We propose to modify Sec. 154.301(b)(2), which requires a State
with an Effective Rate Review Program to notify us in writing, no later
than 30 days prior to the date it intends to make any proposed or final
rate filing information public if the State will be posting prior to
the date specified by the Secretary. We propose to reduce the advance
notification required from 30 days to 5 business days. The 30-day
notification period was intended to give us sufficient notice in
advance of State rate increase announcements. However, in many
instances a State does not know the posting date 30 days in advance, so
it was difficult to meet this requirement. Shortening the advance
notice period to 5 business days would better reflect existing State
practices. Under this proposal, if a State opts to post submissions on
a rolling basis, as specified in the proposed change below, then the
State would need to provide this notification to us only for the first
submission for a given plan year that is publicly posted.
b. Posting of Rate Increases
Section 154.301(b)(3) currently provides that a State with an
Effective Rate Review Program must ensure that information regarding
rate increases is made available to the public at a uniform time for
all proposed and final rate increases, as applicable, in the relevant
market segment and without regard to whether coverage is offered on or
off of an Exchange. That provision was codified in order to set a level
playing field, to prevent issuers that submit rate filings later from
having an advantage over their competitors that submitted rate filings
earlier.
Upon further analysis and input from stakeholders, including a
comment we received in response to the Request for Information, we
propose to eliminate the requirement for uniform posting by deleting
paragraph (b)(3). This would permit States that have an Effective Rate
Review Program to post proposed and final rate filing information on a
rolling basis. We believe that providing this flexibility better
accords with State laws and historical practices. Prior to the
introduction of the Federal rate review program, many States received
and posted rate filing information on a rolling basis. Some State laws
conflict with the Federal uniform posting requirement and require
posting of rate filing information upon receipt. In addition, several
States faced challenges due to information systems that were unable to
suppress rate filing information until a later date.
Under this proposal, States with Effective Rate Review Programs
would continue to be required to provide access from their respective
Web sites to at least the same information from the rate filing that we
make available on our Web site (or provide our web address for such
information). Further, such States must have a mechanism for receiving
[[Page 51081]]
public comments on proposed rate increases subject to review and must
post the required rate filing information by the applicable deadlines
established under Sec. 154.301(b)(1).
We would need to coordinate with States to continue collecting
preliminary rate filing information and final rate determinations to
comply with the statutory requirement under section 2794(b)(2)(A) of
the PHS Act to monitor premium increases of health insurance coverage
offered inside and outside of the Exchanges. This coordination would
also be important to support compliance under section 1311(e)(2) of the
PPACA for the FFEs to take into consideration State recommendations
provided under section 2794(b)(1) of the PHS Act when certifying QHPs,
as well as information on any excess premium growth outside of
Exchanges as compared to inside the Exchanges. We would continue to
post proposed and final rate changes at https://ratereview.HealthCare.gov at a uniform time, consistent with current
practices and Sec. 154.215(h).
We solicit comment on these proposals for posting of rate
increases.
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Standardized Options (Sec. 155.20)
In the 2017 Payment Notice, HHS introduced standardized options
(also now referred to as Simple Choice plans). A standardized option is
a QHP offered for sale through an individual market Exchange that
either has a standardized cost-sharing structure specified by HHS in
rulemaking or has a standardized cost-sharing structure specified by
HHS in rulemaking that is modified only to the extent necessary to
align with the high deductible health plan (HDHP) requirements under
section 223 of the Code or the applicable annual limitation on cost
sharing and HHS actuarial value requirements. For the 2017 and 2018
benefit years, HHS specified standardized options in rulemaking,
encouraged issuers to offer such plans and provided differential
display of these plans on HealthCare.gov.
We seek to encourage free market principles in the individual
market, and to maximize innovation by issuers in designing and offering
a wide range of plans to consumers. We have heard concerns that
providing differential display for these plans may limit enrollment in
coverage with plan designs that do not match the standardized options,
removing incentives for issuers to offer coverage with innovative plan
designs. We believe that encouraging innovation is especially important
now, given the stresses faced by the individual market. Therefore, we
are proposing not to specify any standardized options for the 2019
benefit year, and not to provide differential display for standardized
options on HealthCare.gov. If this proposal is finalized, agents,
brokers and issuers that assist consumers with QHP selection and
enrollment as described in Sec. 155.220(c)(3) and Sec. 156.265(b),
respectively, would also not be required to provide differential
display for standardized options on those third-party Web sites.
We seek comment on this proposal.
2. General Standards Related to the Establishment of an Exchange
a. Flexibility for State-Based Exchanges and State-Based Exchanges on
the Federal Platform (Sec. 155.106 and Sec. 155.200)
While the PPACA allowed each State to operate its own SBE,
currently, 11 States and the District of Columbia operate their own
Exchanges, five States utilize the SBE-FP model, and FFEs operate in
the remaining 34 States. We seek to support innovation by States
operating SBEs by providing opportunities for increased program
flexibilities to help support the retention and financial self-
sustainability of States participating in the SBE model. In particular,
we seek comment on how HHS can best support SBE efforts to utilize
commercial platform services, including what type of technical support
would be useful and what, if any, specific regulatory changes would
facilitate the use of these services.
We also propose to explore strategies to make the SBE-FP model more
appealing and viable to States with FFEs, as well as to support
retention of existing SBE-FPs. As codified in the 2017 Payment Notice,
the SBE-FP model allows States to establish the legal status of their
Exchanges as SBEs while leveraging the economies of scale available
through the Federal eligibility and enrollment platform and information
technology infrastructure. The SBE-FP model offers States opportunities
to retain more control over their Exchanges than if an FFE operated in
the State, as it allows them to control plan management and consumer
assistance activities, without the additional responsibility of
building the infrastructure required to operate an IT eligibility and
enrollment platform. Accordingly, we seek to explore options for
streamlining current requirements and leveraging private sector and
Federal platform technologies and advances to increase opportunities
for those States interested in remaining or becoming SBE-FPs.
As discussed in prior rulemaking, due to operational limitations,
HHS is unable at this time to offer a ``menu'' of Federal services from
which an SBE-FP may select some, but not other, services on the Federal
platform. However, we have stated in previous rules that we would
explore the availability of new capabilities of the Federal platform to
customize particular functionalities. We intend to continue to explore
additional areas where current authority, technology, and operational
capacities would permit HHS to provide additional options in
operational functions to SBE-FPs and provide SBE-FPs with a greater
role in decision-making. Those areas include allowing SBE-FPs greater
access to enrollment data and operational statistics to enable States
to more effectively design their local outreach and education
strategies, providing SBE-FPs access to personally identifiable
consumer data to assist the FFE with conducting resource-intensive
consumer assistance activities such as data matching issues or special
enrollment period verifications, and exploring branding opportunities
for SBE-FPs to make their role more visible, including potential State-
specific landing pages on HealthCare.gov. We seek comment on these
options, as well as other activities that SBE-FPs could undertake that
would strengthen and enhance the SBE-FP model.
b. Election To Operate an Exchange After 2014 (Sec. 155.106)
Section 155.106 describes the process for a State electing to
operate an SBE, for a State terminating its SBE and transitioning to an
FFE, and for a State seeking to operate an SBE-FP. This section applies
to both individual market and SHOP Exchanges. Currently, under Sec.
155.106(c), as finalized in the 2017 Payment Notice, States can elect
to operate an individual market SBE-FP, an SBE-FP for SHOP, or both. If
a State operates an SBE-FP for SHOP, the SBE-FP utilizes the Federal
platform for enrollment, eligibility, and premium aggregation services.
As discussed more fully in section III.D.7 of this proposed rule,
we are proposing changes to required SHOP functionality, effective on
the effective date of the final rule, if finalized as proposed, for
plan years beginning on or after January 1, 2018, under which qualified
employers and employees could enroll in SHOP plans by working with a
QHP issuer or SHOP-registered agent or broker. If these proposals are
[[Page 51082]]
finalized as proposed, many Federal platform services currently
available to a State operating an SBE-FP would no longer exist,
including employee eligibility, enrollment, and premium aggregation
services. Therefore, States operating an SBE-FP for SHOP would no
longer be able to utilize the Federal platform for those functions.
If the proposed changes reducing SHOP requirements for SHOP
functionality are finalized as proposed, we propose to amend Sec.
155.106(c) to remove the option for States to seek approval to operate
an SBE-FP for SHOP after the effective date of the final rule.
Nonetheless, States that are currently operating an SBE-FP for SHOP,
which include Kentucky and Nevada, could maintain their existing SBE-
FPs for SHOP, using the Federal platform functionality that would
remain if the proposals regarding SHOP functionality are finalized as
proposed and subject to the applicable requirements in Sec.
155.200(f)(4), which we also have proposed to amend to align with the
proposed changes to SHOP functionality requirements. Issuers in these
SBE-FPs for SHOP would continue to be subject to Sec. 156.350, which
we have also proposed to amend to align with the proposed changes to
SHOP functionality requirements. For those issuers that offer SHOP QHPs
in SBE-FPs for SHOP beginning on or after January 1, 2018, the expected
burden (as well as expected reduction in burden) should be similar to
that of issuers in the FF-SHOPs.
We seek comment on all aspects of this proposal.
c. Additional Required Benefits (Sec. 155.170)
Section 1311(d)(3)(B) of the PPACA permits a State, at its option,
to require QHPs to cover benefits in addition to the EHB, 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 previous rulemaking, we directed
States to identify additional State-required benefits that are subject
to defrayal and provided direction on how States must calculate the
cost of those benefits.\35\
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\35\ See the EHB Rule, available at https://www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/2013-04084.pdf. Also see the 2016 Payment
Notice Final Rule, available at https://www.gpo.gov/fdsys/pkg/FR-2015-02-27/pdf/2015-03751.pdf. and the 2017 Payment Notice Final
Rule, available at https://www.gpo.gov/fdsys/pkg/FR-2016-03-08/pdf/2016-04439.pdf.
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At Sec. 156.111 of this proposed rule, we make a number of
proposals related to State changes to EHB-benchmark plans beginning for
the 2019 plan year. In light of those proposals, we are affirming that
we are not proposing any changes to the policies governing State-
required benefits at Sec. 155.170. Under any of the proposed methods
for a State to select a new EHB-benchmark plan, benefits mandated by
State action prior to or on December 31, 2011 could be considered EHB
according to the continuing policy described above and would not
require State defrayal. However, State-required benefits mandated by
State action taking place after December 31, 2011, other than for
purposes of compliance with Federal requirements, would continue to be
considered in addition to EHB under this continuing policy even if
embedded in the State's newly selected EHB-benchmark plan under the
proposals at Sec. 156.111, and their costs would accordingly be
required to be defrayed by the State. Therefore, whether a State
mandate could be considered EHB is dependent on when the State enacted
the mandate.
As discussed more in the preamble for Sec. 156.111, we propose
that Sec. 155.170 would continue to apply in the same manner as it
currently applies to Sec. 156.110 and that the proposed Sec. 156.111,
which offers States the flexibility to select a new EHB-benchmark plan,
would not remove the obligations required under the proposed Sec.
156.111(a)(3) with regard to maximum allowed generosity for a State's
EHB-benchmark plan. For further discussion of how the State mandate
policy at Sec. 155.170 would apply to EHB under the proposals at Sec.
156.111 supplying States with options to select a new EHB-benchmark
plan for plan years beginning in 2019 and later, see the preamble to
Sec. 156.111.
We solicit comments regarding State mandates and our proposal to
apply Sec. 155.170 in the same manner as it currently applies to Sec.
156.110 to the options proposed at Sec. 156.111, which would allow
States to select new EHB-benchmark plans. Specifically, we are
interested in comments on different applications of the State mandate
policy to the proposed policy for EHB-benchmark plan selections at
Sec. 156.111 that would increase State flexibility, while also being
cost effective for States, consumers, and the Federal government, such
as allowing States the flexibility to update benefits mandated by State
action prior to or on December 31, 2011, that are considered EHB if the
State can prove that the update to the State mandate is budget neutral.
3. General Functions of an Exchange
a. Functions of an Exchange (Sec. 155.200)
The 2017 Payment Notice finalized requirements at Sec.
155.200(f)(2) for SBE-FPs to establish and oversee certain requirements
for their QHPs and QHP issuers that are no less strict than the
requirements that apply to QHPs and QHP issuers on an FFE. Due to the
operational complexities in implementing these requirements from both
the State and Federal perspective, and to promote the goal of returning
regulatory authority over the insurance markets to States, we propose
to eliminate requirements for SBE-FPs to enforce FFE standards for
network adequacy at Sec. 155.200(f)(2)(ii) and essential community
providers at Sec. 155.200(f)(2)(iii). Instead, we propose that the
SBE-FPs, like other SBEs, would have the flexibility to determine how
to implement the network adequacy and essential community provider
standards with which issuers offering QHPs through the SBE-FP must
comply. We believe SBE-FPs are best positioned to determine these
standards for the QHP certification process in their States, and that
the removal of the requirement that SBE-FPs establish and oversee
requirements for their issuers that are no less strict that the manner
in which these regulatory requirements are applied to FFE issuers would
streamline certain aspects of the QHP certification process, and return
traditional insurance market regulatory authority to the States.
Additionally, HHS is proposing elsewhere in this proposed rule that,
for 2019 plan years and later, the FFEs would rely on State reviews of
network adequacy standards where the States have been determined to
have an adequate review process. Accordingly, we believe similar
deference should be granted to States with SBE-FPs. We believe these
changes would further empower SBE-FPs to use their QHP certification
authority to encourage issuers to stay in the Exchange, enter the
Exchange for the first time, or expand into additional service areas.
We also are proposing to remove the requirement at Sec.
155.200(f)(2)(iv) that QHP issuers in SBE-FPs comply with the Federal
meaningful difference standard to reflect the proposal to remove Sec.
156.298 described elsewhere in this rule.
Section 155.200(f)(4) describes requirements for States that
operate an SBE-FP for SHOP. As discussed above, although we are
proposing that States can no longer elect to operate SBE-FPs for SHOP
after the effective date of the final rule, if finalized as proposed,
Kentucky and Nevada are already
[[Page 51083]]
approved to operate SBE-FPs for SHOP, and thus the requirements in
Sec. 155.200(f)(4) could remain relevant for those SBE-FPs for SHOP.
We therefore propose to amend Sec. 155.200(f)(4) to reflect the
proposed amendments (described in section III.D.7 of this proposed
rule) under which the functionality of the FF-SHOPs' platform would be
reduced for plan years beginning on or after January 1, 2018.
Specifically, we propose to amend the introductory text to Sec.
155.200(f)(4) to describe the requirement applicable, effective on the
effective date of the final rule, if finalized as proposed, for plan
years beginning on January 1, 2018 and beyond, and to make the
requirements in paragraphs (f)(4)(i) through (vii), effective on the
effective date of the final rule, if finalized as proposed, applicable
for only plan years beginning prior to January 1, 2018.
Specifically we propose that the requirements in (f)(4)(i) and
(iv), which require SBE-FPs for SHOP to align their premium payment and
employer contribution calculation methodologies with those used by the
Federal platform, would not apply for plan years beginning on or after
January 1, 2018, effective on the effective date of the final rule, if
finalized as proposed. Because under our proposed amendments to Sec.
155.705 and proposed introduction of Sec. 155.706, for plan years
beginning on or after January 1, 2018, the Federal platform for SHOP
would no longer calculate premium rates or employer contributions, and
would no longer aggregate premium payments (as of the effective date of
the final rule, if finalized as proposed), there would be no further
need for such alignment for plan years beginning on or after January 1,
2018.
Because under our proposed approach the Federal platform would
continue to include plan display with premium amounts, we do not
propose changes to the requirement that States operating an SBE-FP must
require its QHP issuers to make any changes to rates in accordance with
the timeline applicable in a Federally-facilitated SHOP under current
Sec. 155.705(b)(6)(i)(A), which regulation is mirrored in our proposed
introduction of Sec. 155.706(b)(6)(i)(A). However, we propose to
specify that this requirement applies in the introductory text to
(f)(4), to reflect the proposed change to make the requirements in
(f)(4)(i) through (vii) applicable for only plan years beginning prior
to January 1, 2018, effective on the effective date of the final rule,
if finalized as proposed.
Additionally, because under our proposed approach, for plan years
beginning on or after January 1, 2018, the Federal platform would,
effective on the effective date of the final rule, if finalized as
proposed, no longer calculate whether a qualified employer has met the
applicable minimum participation rate, there would no longer be any
need for States operating an SBE-FP for SHOP to align their minimum
participation rate requirements and calculation methodologies with
those applicable in the FF-SHOPs for plan years beginning on or after
January 1, 2018. We therefore propose that this requirement would only
apply for plan years beginning prior to January 1, 2018, effective on
the effective date of the final rule, if finalized as proposed.
To align with our proposed amendments at Sec. 155.725 and proposed
new section Sec. 155.726, under which the FF-SHOPs, effective on the
effective date of the final rule, if finalized as proposed, for plan
years beginning on or after January 1, 2018, would no longer establish
annual employee open enrollment periods, or establish effective dates
of coverage for an initial group enrollment or group renewal, we also
propose that the requirements in Sec. 155.200(f)(4)(v) and (vi) would
only apply for plan years beginning prior to January 1, 2018, effective
on the effective date of the final rule, if finalized as proposed.
Finally, to align with our proposed amendments at Sec. 155.735, under
which the FF-SHOP, effective on the effective date of the final rule,
if finalized as proposed, for plan years beginning on or after January
1, 2018, would no longer determine the timing, form, and manner in
which coverage or enrollment in a SHOP QHP may be terminated, we
propose that the requirement in Sec. 155.200(f)(4)(vii) would only
apply for plan years beginning prior to January 1, 2018, effective on
the effective date of the final rule, if finalized as proposed.
We seek comment on these proposals.
b. Navigator Program Standards (Sec. 155.210)
Each Exchange is required under section 1311(d)(4)(K) and 1311(i)
of the PPACA to establish a Navigator program under which it awards
grants to entities that, among other things: Conduct public education
activities to raise awareness of the availability of QHPs, distribute
fair and impartial information concerning enrollment in QHPs and the
availability of premium tax credits and CSRs, and facilitate enrollment
in QHPs. Under section 1311(i)(2)(B) of the PPACA, these entities may
include trade, industry, and professional associations; commercial
fishing industry organizations; ranching and farming organizations;
community and consumer-focused nonprofit groups; chambers of commerce;
unions; resource partners of the Small Business Administration; other
licensed insurance agents and brokers; and other entities that meet the
statutory requirements at section 1311(i)(3), (4), and (5) of the
PPACA.
Currently, Sec. 155.210(c)(2) specifies that each Exchange must
include among its Navigator grantees both a community and consumer-
focused nonprofit group and at least one other entity that is from one
of the other categories listed at Sec. 155.210(c)(2), including other
public or private entities or individuals that meet the requirements of
Sec. 155.210. Section 155.210(c)(2)(viii) specifies that these other
entities may include Indian tribes, tribal organizations, urban Indian
organizations, and State or local human service agencies.
To maximize the flexibility and efficiency of the Navigator
program, we propose to amend Sec. 155.210(c)(2) to remove the
requirements that each Exchange must have at least two Navigator
entities and that one of these entities must be a community and
consumer-focused nonprofit group. We believe removing these
requirements would provide Exchanges with improved flexibility to award
funding to the number and type of entities that would be most effective
for the specific Exchanges. Eliminating the requirement to have at
least two Navigator entities would allow each Exchange to optimally use
the funding amounts available, which may include selecting a single,
high performing grantee in an Exchange.
The requirement that one Navigator grantee in each Exchange must be
a community and consumer-focused nonprofit group may unnecessarily
limit an Exchange's ability to award grants to the strongest
applicants. Additionally, if we finalize our proposal to permit an
Exchange to have only one Navigator grantee but retain the requirement
regarding community and consumer-focused nonprofit groups, this
requirement could effectively exclude any other type of statutorily
eligible entities from becoming Navigators. Eliminating this
requirement would provide Exchanges with the flexibility to target
grants to the highest scoring and performing entities, regardless of
organization type.
Removing these requirements at Sec. 155.210(c)(2) would also
promote Exchange flexibility and autonomy to structure Navigator
programs tailored to each Exchange. An Exchange could award a grant to
a single Navigator
[[Page 51084]]
entity from any of the permitted types. Alternatively, Exchanges could
elect to continue awarding two or more grants, as they have been doing
thus far, and include a community and consumer-focused nonprofit group
among those grantees.
Section 155.210(e)(7) requires each Navigator entity to maintain a
physical presence in the Exchange service area, so that face-to-face
assistance can be provided to applicants and enrollees. We propose to
remove this requirement to provide more flexibility to each Exchange to
structure its Navigator program to best serve the Exchange service
area. Under section 1311(i)(2)(A) of the PPACA and Sec.
155.210(c)(1)(ii), entities seeking to become Navigator grantees must
demonstrate to the Exchange that they have existing relationships, or
could readily establish relationships, with employers and employees,
consumers (including uninsured and underinsured consumers), or self-
employed individuals likely to be eligible for enrollment in a QHP.
Consistent with those provisions, Navigator grant applicants in the
FFEs are scored on their ability to make this demonstration. Based on
HHS's experience with Navigator programs in FFEs and other public
programs, we believe entities with a physical presence and strong
relationships in their FFE service areas tend to deliver the most
effective outreach and enrollment results. However, we believe that
each Exchange is best suited to determining the weight to give a
physical presence in the Exchange service area when selecting Navigator
entities, as long as the Exchange's Navigator grantee selection process
is consistent with section 1311(i)(2)(A) of PPACA and Sec.
155.210(c)(1)(ii).
These proposals are intended to maximize flexibility for each
Exchange in awarding Navigator grants. We seek comment on statutorily
acceptable alternative types of entities that could serve as Navigators
and possible new ways in which Navigators could carry out their duties.
For reasons similar to those motivating our proposed changes to
Sec. 155.210(e)(7), as well as to promote consistency across programs,
we propose to remove the corresponding requirement at Sec. 155.215(h)
that requires maintenance of a physical presence in the Exchange
service area by all non-Navigator entities subject to Sec. 155.215.
In addition to the requirement to maintain a physical presence in
the Exchange service area, Sec. Sec. 155.210(e)(7) and 155.215(h)
currently provide that, in an FFE, no individual or entity is
ineligible to operate as a Navigator or non-Navigator assistance
personnel solely because its principal place of business is outside of
the Exchange service area. We note that there is also a corresponding
provision applicable to certified application counselors and certified
application counselor organizations at Sec. 155.225(b)(3). We are not
proposing changes to these provisions. We codified these provisions due
to concerns about non-Federal requirements that these types of
assisters maintain their principal place of business in the State (79
FR 30273-30274), and we continue to have these concerns.
We solicit comments on all aspects of these proposals.
c. 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 (Sec. 155.215)
For a discussion of the provisions of this proposed rule related to
standards applicable to non-Navigator Assistance Personnel subject to
Sec. 155.215, please see the preamble to Sec. 155.210.
d. Standards for Third-Party Entities To Perform Audits of Agents,
Brokers, and Issuers Participating in Direct Enrollment (Sec. 155.221)
In the 2018 Payment Notice, we implemented an approach for an HHS-
approved third party to conduct onboarding operational readiness
reviews and audits authorized by Sec. 155.220(c)(5), specific to use
of the direct enrollment pathway by agents and brokers registered with
the FFEs. HHS proposes new standards in this rule to replace the
standards set forth in the 2018 Payment Notice for Sec. 155.221. HHS
also proposes to expand the applicability of this section to require
issuers, in addition to agents and brokers, participating in direct
enrollment to engage third-party entities to conduct the required
operational readiness reviews. We propose a conforming edit to Sec.
156.1230(b)(2) to reflect this proposal.
HHS is proposing to implement an approach wherein agents, brokers,
and issuers that participate in direct enrollment and use their own
Internet Web site for QHP selection or to complete the Exchange
eligibility application would select their own third-party entities for
conducting audits, rather than requiring HHS to initially review and
approve these entities. HHS anticipates this approach would reduce the
regulatory burden on agents, brokers, and issuers by allowing the
opportunity to choose an auditor or use an existing auditor. In
addition, HHS anticipates that agents, brokers, and issuers already
conduct audits for compliance with HHS requirements, and implementing
this program would reduce duplicative HHS oversight. This approach
would also reduce the burden on third-party entity reviewers, as the
entities would no longer need to apply for HHS-approval to perform
operational readiness reviews. HHS believes this approach would expand
the available number of qualified third-party entities to perform the
audits, thereby enabling more agents, brokers and issuers to
demonstrate operational readiness to participate in direct enrollment.
We believe this would expand consumer access to direct enrollment
pathways for enrolling in Exchange coverage. The proposed approach
would also reduce the burdens on HHS by no longer requiring the
establishment of a Federal application, approval and appeals process
for these entities to conduct operational readiness reviews. HHS
anticipates this approach would allow more flexibility for private
entities to respond to potential changes and HHS requirements as HHS
considers future enhancements to the direct enrollment pathway. Under
this proposal, agents, brokers and issuers must select an auditor who
meets the requirements described in the proposed amendments to Sec.
155.221(b), such as privacy and security experience, to perform a
review to demonstrate operational readiness as required under Sec.
155.220(c)(3)(i)(K) and Sec. 156.1230(b)(2).
We propose to replace Sec. 155.221(a) with a new paragraph to
require agents, brokers, and issuers to select a third-party entity
that meets the proposed standard outlined in the new Sec. 155.221(b),
described below, to perform these operational readiness reviews,
instead of restricting the availability to third-party entities that
have been pre-approved by HHS. Specifically, Sec. 155.221(a) would
require that the agent, broker, or issuer engage a third-party entity
that meets the standards outlined in the new Sec. 155.221(b) to
conduct an annual operational readiness review prior to participating
in direct enrollment. Consistent with Sec. 155.220(c)(3)(i)(K) and
Sec. 156.1230(b)(2), the operational readiness review would be
performed using the third parties' own audit processes and methods
subject to HHS-defined specifications and
[[Page 51085]]
requirements. The third-party entity's review would verify compliance
by the agent, broker, or issuer with the applicable requirements in
Sec. Sec. 155.220, 155.260, 156.265, and 156.1230, and would need to
be completed prior to the use of the agent, broker or issuer Internet
Web site for submission of an Exchange application or completion of QHP
selection. HHS would publish technical guidance outlining the review
standards and other operational details, as well as provide other
resources to assist the third-party entities in conducting the reviews
at a later date. The new proposed paragraph (a) also provides that the
third-party entity would be a downstream or delegated entity of the
agent, broker or issuer that participates or wishes to participate in
direct enrollment. Therefore, these third-party entities would be
subject to HHS oversight as delegated or downstream entities of an
agent, broker, or issuer, and the agent, broker, or issuer would remain
responsible for compliance with all applicable direct enrollment
requirements.
HHS proposes revising Sec. 155.221(b) to modify the standards that
third-party entities must satisfy to perform the reviews to demonstrate
operational readiness under Sec. 155.220(c)(3)(i)(K) and Sec.
156.1230(b)(2). HHS proposes replacing the introductory language at
Sec. 155.221(b) with new language to align with the new proposed
approach where the agent, broker, or issuer selects the third-party
entity to perform the audit under paragraph (a) and remove the
requirement for approval of these entities by HHS. New Sec.
155.221(b)(1) would remove the requirement that an entity must submit
its application to HHS; instead we propose to require the entity to
have experience conducting audits or similar services, including
specific experience with relevant privacy and security standards due to
the operational requirements of the current direct enrollment processes
and any potential future enhancements. This would include demonstrated
experience with current National Institute of Standards and Technology
(NIST) SP 800-53 or the HIPAA Security Rule standards, and the review
of compliance with those standards. Auditors must also be capable of
performing penetration testing on all interfaces that collect
personally identified information or connect with HHS. We propose
modifying Sec. 155.221(b)(2) to include issuers participating in
direct enrollment and to expand the scope of the audit to also include
review of compliance with other applicable program requirements (for
example, Web site design, or consumer disclosures). We propose to
modify Sec. 155.221(b)(3) to require the auditor to collect, store,
and share with HHS all data related to its audits of agents, brokers,
and issuers under paragraph (a) in a manner, format, and frequency
specified by HHS until 10 years from the date of creation. The proposed
amendments to paragraph (b)(3) also require the auditor to comply with
the privacy and security standards HHS adopts for agents, brokers, and
issuers as required in accordance with Sec. 155.260.
Further, HHS proposes adding new paragraph (b)(4) to implement a
conflict of interest standard that requires disclosure of financial
relationships between a third-party entity conducting a direct
enrollment operational readiness review and the agent, broker, or
issuer. We also propose to add Sec. 155.221(b)(5) to require
compliance by the third-party entity with all applicable Federal and
State requirements, and to add Sec. 155.221(b)(6) to require the
third-party entity to ensure, on an annual basis, that appropriate
staff successfully complete operational readiness review training as
established by HHS prior to conducting audits under paragraph (a) of
this section. The training would provide information about compliance,
direct enrollment technical requirements, applicable privacy and
security standards, and reporting requirements.
Under proposed Sec. 155.221(b)(7), a third-party entity would be
required to permit access by the Secretary and the Office of the
Inspector General (OIG), or their designees, in connection with their
right to evaluate through audit, inspection, or other means, to the
third-party entity's books, contracts, computers, or other electronic
systems, relating to the third-party entity's audits of agents,
broker's, or issuer's obligations in accordance with Federal standards
under paragraph (a) of this section until 10 years from the date of
creation. This is intended to align with the existing obligation on QHP
issuer downstream and delegated entity requirements under Sec.
156.340(b) to cooperate with HHS and OIG audits, investigations, or
other reviews. Proposed new paragraph (b)(8) would require compliance
with other minimum business criteria specified in guidance by HHS.
To provide agents, brokers, and issuers with flexibility, HHS
proposes replacing Sec. 155.221(c) with a new paragraph to permit an
agent, broker, or issuer participating in direct enrollment to engage
multiple third-party entities to perform the audits under paragraph (a)
and to clarify that each such third-party entity will need to
separately comply with the standards proposed under paragraph (b).
HHS proposes deleting paragraphs Sec. 155.221(d) (regarding a list
of HHS-approved entities) and (e) (regarding an appeals process for
entities that were not approved) to conform to the other proposed
changes in this section.
We solicit comments on these proposals, and general feedback on the
direct enrollment process to inform the development of future direct
enrollment operational and oversight standards, including improvements
to the pathway to further expand access to coverage.
4. Exchange Functions in the Individual Market: Eligibility
Determinations for Exchange Participation and Insurance Affordability
Programs
a. Eligibility Standards (Sec. 155.305)
Section Sec. 155.305(f)(4)(i) prohibits an Exchange from
determining a consumer is eligible for APTC if APTC payments were made
on behalf of the tax filer for the consumer's household (or either
spouse, if the tax filer is married) for a previous year for which tax
data would be utilized for verification of household income and family
size, and the tax filer or his or her spouse did not comply with the
requirement to file an income tax return and reconcile APTC received
for that year. Under the current regulation at paragraph (f)(4)(ii),
Exchanges cannot discontinue APTC due to the failure to file and
reconcile associated APTC unless direct notification is first sent to
the tax filer that his or her eligibility will be discontinued as a
result of the tax filer's failure to comply with the requirement
specified under paragraph (f)(4)(i) of Sec. 155.305.
We propose to amend Sec. 155.305(f)(4) by removing the direct
notification requirement in paragraph (f)(4)(ii) and revising the
remaining paragraph (f)(4) to move the content in paragraph (f)(4)(i)
into paragraph (f)(4).
Upon further examination, we have determined that notification
practices in place prior to adoption of the direct notification
requirement provide sufficient clarity for consumers prior to action
being taken to discontinue APTC. Specifically, these practices were to
discontinue APTC by notifying the household contact that his or her
eligibility will be discontinued as a result of the tax filer's failure
to comply with the filing and reconciliation requirement.
In past years, the FFEs have sent notifications to the household
contact based on notification preference--electronically or at the
address specified
[[Page 51086]]
when he or she submitted the application. Because of the restrictions
on disclosing Federal tax information (FTI), these notices cited three
possible reasons why a consumer may be at risk for losing APTC, one of
which is failure to file and reconcile. In our experience operating the
FFEs and the Federal eligibility and enrollment platform, the household
contact may often be the same person as the tax filer on whose behalf
APTC is paid; accordingly, since FFE notices have been sent to the
household contact, we believe the notifications have been addressed, in
many cases, to the person who is the tax filer for the household. In
cases where the household contact has not been the tax filer, because
the notification has been clear that it concerns eligibility for APTC,
we expect that the household contact likely has shared the notice with
the tax filer on whose behalf APTC was paid. As evidence that tax
filers generally have received notification directly regarding their
receipt of APTC and information that they have not satisfied the
requirement to file and reconcile, this notification method has
successfully resulted in tax filers for approximately 60 percent of
households receiving the notification taking appropriate action to file
a tax return and reconcile associated APTC. However, because tax filers
for approximately 40 percent of households receiving the notification
did not take appropriate action, HHS believes it is important for
program integrity purposes that Exchanges discontinue APTC for tax
filers who failed to file a tax return and reconcile after the notice
was provided. If the Exchange discontinues APTC in connection with the
requirement under paragraph Sec. 155.305(f)(4), the enrollee would
have the right to appeal the discontinuation of APTC and maintain APTC
during the appeal. Therefore, we propose to remove the direct
notification requirement in Sec. 155.305(f)(4)(ii).
We also believe this change could reduce burden on Exchanges.
Absent this proposed change, in order to discontinue APTC for consumers
who failed to file a tax return and reconcile their income taxes,
Exchanges would be required to establish a mechanism through which to
notify tax filers without making an unauthorized disclosure of
protected FTI. Doing so could be financially and operationally
burdensome and out of proportion to the limited need for FTI handling
in Exchange notice generation functionality.
As discussed above, we believe that removing the direct
notification requirement will reduce the burden on Exchanges, while tax
filers and households that have been identified as not meeting the
requirement to file and reconcile will continue to receive adequate
notice under the approach that Exchanges using the federal eligibility
and enrollment platform have taken in past years. However, improving
the clarity and overall effectiveness of this notification process is a
priority, and we continue to explore ways to make the process even more
robust and consumer-friendly, without unduly burdening the Exchanges.
We may issue additional information about our notification process in
the future as an aid to SBEs seeking to implement a more robust
process.
We seek comment on this proposal.
b. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
i. Income Inconsistencies
Section Sec. 155.320(c)(3)(iii) sets forth the verification
process for increases in household income. Generally, if income data
from our electronic data sources indicate a tax filer's attested
projected annual income is more than the income amount represented by
income data returned by the IRS and the SSA and current income data
sources, Sec. 155.320(c)(3)(iii) requires the Exchange to accept the
attestation without further verification. Currently, Exchanges
generally are not permitted to create inconsistencies for consumers
when the consumer's attested income is greater than the amount
represented by income data returned by IRS and the SSA and current
income data sources.
We propose to revise Sec. 155.320(c)(3)(iii) to specify that the
Exchange will also generate annual income inconsistencies in certain
circumstances when a tax filer's attested projected annual income is
greater than the income amount represented by income data returned by
IRS and the SSA and current income data sources. Current regulations
generally require the Exchange to accept a consumer's attestation to
projected annual household income when the attestation reflects a
higher income than what is indicated in data from the IRS and Social
Security Administration. This approach continues to make sense from a
program integrity perspective when both the attestation and data from
trusted data sources are over 100 percent Federal poverty level (FPL),
since an attestation that is higher than data from trusted data sources
in that situation would reflect a lower APTC than would be provided if
the information from trusted data were used instead.
However, where electronic data sources reflect income under 100
percent FPL and a consumer attests to income between 100 percent FPL
and 400 percent FPL, where the attested income exceeds the income
reflected in trusted data sources by more than some reasonable
threshold, we believe it would be reasonable to request additional
documentation, since the consumer's attested income could make him or
her eligible for APTC that would not be available using income data
from electronic data sources. This proposal also would help limit tax
filers' potential liability at tax reconciliation to repay excess APTC.
Accordingly, we propose to add new paragraphs (c)(3)(iii)(D) and (E),
and to modify paragraphs (c)(3)(vi)(C), (D), (F), and (G), to specify
that the Exchange will follow the procedures in Sec. 155.315(f)(1)
through (4) to create an annual income data matching issue for
consumers if: (1) The consumer attested to projected annual income
between 100 percent and 400 percent of the FPL; (2) the Exchange has
data from IRS and SSA that indicates income is below 100 percent FPL;
(3) the Exchange has not assessed or determined the consumer to have
income within the Medicaid or CHIP eligibility standard; and (4) the
consumer's attested projected annual income exceeds the income
reflected in the data available from electronic data sources by a
reasonable threshold established by the Exchange and approved by HHS.
We propose that a reasonable threshold must not be less than 10
percent, and can also include a threshold dollar amount. In accordance
with the existing process in Sec. 155.315(f)(1) through (4), if the
applicant fails to provide documentation verifying their income
attestation, the Exchange would redetermine the applicant's eligibility
for APTC and CSRs based on available IRS and SSA data, which under this
proposal would typically result in discontinuing APTC and CSR as
required in paragraph (c)(3)(vi)(G). The adjustment and notification
process would work like other inconsistency adjustments laid out in
paragraph (c)(3)(vi)(F).
We propose to allow the Exchange to set the threshold for setting a
data matching issue similar to Sec. 155.320(c)(3)(vi). We propose that
a reasonable threshold should take into account that consumers with
incomes near 100 percent FPL have a smaller margin for error in dollar
terms. Therefore, a reasonable threshold might also include a fixed
dollar amount in
[[Page 51087]]
addition to a percentage threshold. We seek comment on this proposal.
In paragraph (c)(3)(vi)(D) we propose to make changes to provide
consistency with changes finalized in the 2017 Payment Notice regarding
the threshold for the generation of annual income data matching issues
for decreases in annual household income. This proposed change would
specify that the 10 percent threshold standard no longer applies to
cases when a tax filer's attested projected income is less than all
data sources, or when no electronic data sources are available.
Instead, an Exchange would use the reasonable threshold established in
accordance with Sec. 155.320(c)(3)(vi).
We note, however, our interest in providing further guidance on the
appropriate thresholds for the generation of data matching issues
generally. It is our intent to reconsider and provide further guidance
on these thresholds in the near future, and in anticipation of that
effort we seek comment on the appropriate thresholds to use at various
income levels and in various circumstances. In particular, we welcome
data and evidence on this issue.
We intend to address this issue as part of broader rulemaking and
guidance on a number of related program integrity issues, including
further examination of our processes for denying eligibility for
subsidies for individuals who have failed to reconcile APTC on their
Federal income tax return, Exchange processes for matching enrollment
data with Medicare and Medicaid in order to remove duplicate
enrollments, and our rules around recalculation of eligibility for APTC
following a midyear change in eligibility. In anticipation of these
actions, we seek comment generally on these and other program integrity
topics.
ii. Verification of Eligibility for Employer Sponsored Coverage
An employee, or a member of the employee's family, who is eligible
to enroll in qualifying coverage in an eligible employer-sponsored plan
is not eligible for a premium tax credit unless the plan's coverage for
the employee is either unaffordable, as defined in section
36B(c)(2)(C)(i)(II) of the Code, or does not provide minimum value, as
defined in section 36B(c)(2)(C)(ii) of the Code. An employee (or member
of the employee's family) also is not eligible if he or she actually
enrolls in the employer-sponsored plan, even if the plan is not
affordable or fails to provide minimum value.
When an individual submits a request for an eligibility
determination for insurance affordability programs, including as part
of the eligibility verification process for APTC and CSRs, Sec.
155.320(d) requires the Exchange to verify whether the applicant
reasonably expects to be 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.
Paragraph (d)(2) of Sec. 155.320 describes the data sources an
Exchange must use to perform verification. Paragraph (d)(2)(i) requires
an Exchange to obtain data from any electronic data sources that are
available to the Exchange and which have been approved by HHS based on
evidence showing that such data sources are sufficiently current,
accurate, and minimize administrative burden. Paragraph (d)(2)(ii)
requires that the Exchange also obtain available data based on Federal
employment through HHS, and paragraph (d)(2)(iii) requires the Exchange
to obtain available data from the SHOP that corresponds to the State in
which the Exchange is operating. Under Sec. 155.320(d)(4), if an
Exchange is unable to fulfill the requirement to connect to the data
sources set forth in (d)(2), the Exchange is required to conduct
sampling as described under paragraph (d)(4)(i), or--for benefit years
2016 and 2017--it may conduct an HHS-approved alternative process
instead of sampling, as provided under paragraph (d)(4)(ii).
We propose to amend Sec. 155.320(d)(4) to allow an Exchange to
conduct an HHS-approved alternative process instead of sampling, as
provided under paragraph (d)(4)(ii), for benefit years through 2019.
When we introduced this option for benefit years 2016 and 2017, we
received comments that encouraged us to make this option permanent.
However, at the time we stated that we believed the alternative process
should be used as an interim measure to gather information about the
verification process as Exchanges improve their long-term verification
programs.\36\ We also stated that we believed the temporary option
would provide Exchanges with needed flexibility as verification
processes are refined and employer databases compiled, to improve long-
term verification programs. While Exchanges have since gained greater
access to data and explored approaches to sampling, challenges remain.
To reduce regulatory burdens on Exchanges while they address remaining
hurdles to developing a long-term approach to verification, we believe
the option to use an alternative process instead of sampling should be
extended through plan year 2019.
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\36\ 81 FR 12203, 12269 (March 8, 2016).
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After the option to use an alternate process for benefit years 2016
or 2017 was finalized, HHS investigated the feasibility of connecting
to a comprehensive database of information on employer-sponsored
coverage that could be used by all Exchanges to fulfill verification
requirements under Sec. 155.320(d)(2)(i). Such a database would be
most useful and cost-effective if it contained information on employer-
sponsored coverage from as many non-Federal and non-SHOP employers as
possible. We found that a comprehensive database does not currently
exist and building such a database would be a resource-intensive
endeavor. In addition, employers are not required to provide
information to Exchanges or HHS regarding the coverage they offer,
potentially limiting the completeness of such a database.
Because of the current challenges associated with building an HHS-
approved database that is sufficiently complete and accurate to satisfy
requirements under paragraph (d)(2)(i), we anticipate many Exchanges
will fulfill verification requirements using an alternate process, as
described under paragraph (d)(4). And, in recognition of the challenges
that Exchanges may encounter with conducting sampling, as explained
below, we propose to extend the option for Exchanges to conduct an
alternative process to sampling through benefit year 2019. Our hope is
that Exchanges can continue to compile databases sufficient to meet
verification requirements under paragraph (d)(2) and to continue to
refine their approaches to sampling to meet verification requirements
under paragraph (d)(4)(i).
In accordance with the requirement at paragraph (d)(4) to pursue an
alternate process, the FFE conducted a pilot study that incorporated
many components of sampling. The pilot was intended to assess
sampling's value protecting the integrity of the attestation process
regarding applicant access to and enrollment in employer-sponsored
coverage. As part of this sampling pilot, employers for a small sample
of enrollees receiving APTC through the FFE were contacted by
telephone, based on the employer contact information applicants
provided on their Exchange applications, and asked whether specified
employees were also enrolled in a qualifying employer-sponsored plan or
were offered qualifying coverage in an employer-sponsored plan. The FFE
collected information by contacting employers' human resources
personnel.
[[Page 51088]]
Sampling may be a lower cost option for SBEs compared to FFEs. For
example, the FFE operates Exchanges for 38 States, and the volume of
employers that the FFE encompasses may inherently present challenges in
relying on sampling results that States may not face. Some states may
collect and have access to data from employers that makes verifying
consumers' attestations more efficient and reliable, or may have
existing channels through which they can communicate with in-State
employers. Therefore, we are maintaining the option to use sampling as
an alternate method of verification under paragraph (d)(4) to allow
SBEs maximum flexibility. We expect that the proposed change to
paragraph (d)(4) to allow Exchanges to continue to use an HHS-approved
alternative process to sampling through plan year 2019 will provide
Exchanges with important flexibility to conduct the most efficient,
reliable alternate method of verification as Exchanges refine their
approaches to conducting sampling over time, and until data sources
exist that provide an effective way to verify consumers' enrollment in
or access to qualifying employer-sponsored coverage. If SBEs use an
alternative process to sampling to conduct verification under paragraph
(d)(4)(ii), the process must be approved by HHS. To be approved by HHS,
we expect an Exchange to develop an alternate process that provides
insight into whether employees provide accurate information or the
Exchange effectively verifies information about enrollment in and
eligibility for qualifying coverage in an eligible employer-sponsored
plan.\37\ This requires Exchanges to conduct reliable and sufficient
verification, while giving them the flexibility to find the most
efficient ways of doing so for their Exchange.
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\37\ 81 FR 94058, 94125 (December 22, 2016).
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We note that to the extent an Exchange believes an alternate
process to verification through data sources other than those described
under paragraph (d)(2) may result in a more efficient or comprehensive
verification procedure, the Exchange may also, in accordance with
Sec. Sec. 155.315(h) and 155.320(a)(2), request HHS approval for use
of an alternate process for verifying enrollment in and access to
employer sponsored coverage. We note that HHS received support for
providing flexibility for the use of alternate data sources by
Exchanges in comments to the Request for Information. For example, we
received comments indicating that, for some Exchanges, due to the
limited number of Federal employees in their State, connecting to the
database containing data on Federal employment provides little utility
in Exchange verification of applicants' eligibility for employer-
sponsored coverage. One commenter encouraged HHS to consider removing
the regulatory requirement to connect to this database for purposes of
employer-sponsored coverage verification. We have also received
feedback from some Exchanges noting challenges and limitations
connecting to a SHOP database. These Exchanges noted that, given the
limited enrollment in SHOP in many States and that many States do not
have a SHOP database to which to connect, requiring verification
through SHOP imposes a technical and financial challenge for States
that may not be the most efficient and cost-effective way to perform
verification.
We seek comment on these proposals. Additionally, we seek
information and suggestions from State-based Exchanges and other
stakeholders on ways to improve verification of whether an applicant
reasonably expects to be 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.
c. Eligibility Redetermination During a Benefit Year (Sec. 155.330)
We seek comment on ways to better encourage enrollees to report
changes in circumstance during the benefit year that may have an impact
on their eligibility for Exchange coverage or for advance payment of
the premium tax credit or cost sharing reductions. The FFEs currently
conduct proactive outreach to enrollees through a variety of means,
including emails, phone calls, and paper mail to encourage them to
return to the Exchange to update their information throughout the
benefit year and during key Exchange operational efforts, such as open
enrollment. The FFEs also periodically provide general information and
reminders to enrollees. However, many individual changes in
circumstance, such as an individual's changes in household income or
size, remain unknown by the Exchanges until reported by the enrollee
and, such changes may have a significant impact on the enrollee's
eligibility for QHP coverage through the Exchange and for financial
assistance.
Therefore, we are interested in hearing from stakeholders about
ways to increase enrollee reporting of individual changes in
circumstance within 30 days of the change in order to ensure compliance
with Sec. 155.330(b). Increasing such reporting would benefit
enrollees by ensuring that they continue to be enrolled given their
current eligibility for financial assistance and would improve program
integrity.
d. Annual Eligibility Redetermination (Sec. 155.335)
We are considering the possibility of amending the length of time
that individuals may authorize the Exchanges to obtain the updated tax
return information for enrollees as described in Sec. 155.335(k)(2).
Currently, the Exchanges may obtain updated tax return information for
a period of no more than five years based on a single authorization.
We seek comment on whether five years is an appropriate amount of
time for this type of an authorization to last or whether a shorter
time period should be considered. In particular, we are contemplating
whether shortening this authorization period would improve Exchange
program integrity by helping to ensure that the enrollee's application
at the time of re-enrollment accurately reflects his or her data
collection preferences, that all sources of income that may impact his
or her eligibility for APTC and cost sharing reductions are listed on
the application, and that individuals update their applications on a
more regular basis to reflect other changes in circumstances that
affect eligibility (such as changes in employment or marital status).
5. Exchange Functions in the Individual Market: Enrollment in Qualified
Health Plans
a. Special Enrollment Periods (Sec. 155.420)
i. Plan Options Under Select Special Enrollment Periods
For many special enrollment periods, a dependent of an Exchange
enrollee may newly enroll in Exchange coverage or switch Exchange plans
when the dependent or another qualified individual on the Exchange
application qualifies for a special enrollment period. Even though
dependents may access special enrollment periods based on different
qualifying events, when they qualify for a special enrollment period to
newly enroll in Exchange coverage, regardless of whether it is a
special enrollment period due to gaining or becoming a dependent or due
to a loss of minimum essential coverage, we believe they should be
treated alike. Section 155.420(a)(4) defines the coverage changes
Exchange enrollees may make when they or their dependents qualify for
special enrollment periods. We are proposing to modify how paragraph
(a)(4)(iii) treats
[[Page 51089]]
dependents to align more closely with paragraph (a)(4)(i) which
addresses when an existing enrollee gains a new dependent. To do this,
we propose to modify paragraph (a)(4)(iii) to establish a distinction
between how the rule treats existing enrollees who qualify for one of
the relevant special enrollment periods themselves or when existing
Exchange enrollees themselves and their dependent(s) qualify for one of
the relevant special enrollment periods; and when only new dependents
qualify for one of the relevant special enrollment periods and are
enrolling in coverage with an existing Exchange enrollee. We propose to
establish this distinction by separating these situations into new
paragraphs (a)(4)(iii)(A) and (a)(4)(iii)(B). We believe the latter
situation is akin to when an enrollee adds a new dependent to their
coverage, even though in this situation the dependent is qualifying for
a different special enrollment period.
Proposed new paragraph (a)(4)(iii)(A) would address the coverage
options available to current enrollees and dependents who qualify for a
special enrollment period. As is current policy under paragraph
(a)(4)(iii), paragraph (a)(4)(iii)(A) would continue to allow enrollees
and their dependents who qualify for the special enrollment periods
specified in paragraphs (d), other than those described in paragraphs
(d)(2)(i), (d)(4), (d)(6)(i) or (ii) for becoming newly eligible for
CSRs, (d)(8), (d)(9), and (d)(10) of this section, to use their special
enrollment period to change to another QHP within the same level of
coverage or one metal level higher or lower, if no such QHP is
available, as outlined in Sec. 156.140(b) of this subchapter.
Proposed new paragraph (a)(4)(iii)(B) would address the coverage
options available when only a dependent who is not currently enrolled
in Exchange coverage qualifies for a special enrollment period. We are
proposing to revise the policy for these qualified individuals to align
with paragraph (a)(4)(i) of this section. We propose that, if a new
dependent qualifies for one of the special enrollment periods specified
in paragraphs (d)(1), (d)(3), (d)(6)(iii), (d)(6)(iv), (d)(7), (d)(11),
and (d)(13) of this section and an enrollee would like to add the
dependent to his or her QHP at that time, the Exchange must allow the
enrollee to add the dependent to his or her current QHP; or, if the
plan's business rules do not allow the dependent to enroll, the
Exchange must allow the enrollee and dependent to change to another QHP
within the same level of coverage; or, if no such QHP is available,
allow them to switch to a QHP one metal level lower or higher, as
outlined in Sec. 156.140(b) of this subchapter. Alternatively, the
enrollee may enroll the dependent in a separate QHP at any metal level.
We believe that these modifications are needed in order to align
the flexibilities available to enrollees and dependents when a
dependent is newly enrolling in Exchange coverage during the benefit
year due to qualifying for a special enrollment period. With this
proposed change, regardless of the special enrollment period for which
a dependent qualifies, an enrollee may either add the dependent to his
or her existing QHP, as long as they continue to qualify for it, or
enroll the new dependent in a separate QHP at any metal level.
In the event that both the enrollee and the new dependent qualify
for special enrollment periods referenced in proposed paragraphs
(a)(4)(iii)(A) and (a)(4)(iii)(B), respectively, and the enrollee wants
to add this new dependent to his or her QHP, the Exchange would allow
both the enrollee and dependent to switch to a new QHP at the same
metal level, if available, as described in proposed paragraph
(a)(4)(iii)(A).
In addition, we propose to exclude the special enrollment period in
paragraph (d)(12) for material plan or benefit display errors from
paragraph (a)(4)(iii). This is because we understand that certain
material plan or benefit display errors may impact an enrollees'
decision to enroll in a level of coverage, in addition to his or her
decision to enroll in a specific QHP. Therefore, we believe that, if an
enrollee qualifies for the special enrollment period because of a
material plan or benefit display error, he or she should be allowed to
switch to a different QHP at any metal level that better meets his or
her needs.
We seek comment on these proposals.
ii. Exception to Prior Coverage Requirement for Qualified Individuals
Who Have Lived in Service Areas Where No QHP Is Offered Through an
Exchange
In response to concerns from stakeholders that certain special
enrollment periods intended to help qualified individuals maintain
continuous coverage for themselves and their families were being used
to newly enroll in coverage mid-year, HHS recently added a prior
coverage requirement to the special enrollment period for gaining
access to new QHPs as a result of a permanent move, described in Sec.
155.420(d)(7), and the special enrollment period for gaining or
becoming a dependent through marriage, described in Sec.
155.420(d)(2)(i). Section 155.420(a)(5) specifies how a qualified
individual can satisfy the prior coverage requirement. Qualified
individuals can either demonstrate that they had minimum essential
coverage as described in 26 CFR 1.5000A-1(b) for 1 or more days during
the 60 days preceding the date of the qualifying event; lived in a
foreign country or in a United States territory for 1 or more days
during the 60 days preceding the date of the qualifying event; or are
an Indian, as defined by section 4 of the Indian Health Care
Improvement Act. This prior coverage requirement encourages individuals
to maintain coverage throughout the year.
However, we recognize that individuals living in a service area, as
defined by Sec. 155.1055, where no Exchange QHPs are offered, may not
be able to obtain affordable coverage. We believe that individuals in
this situation should not later be prevented from enrolling in coverage
through a special enrollment period that requires prior coverage, when
they were previously unable to enroll in Exchange coverage because it
was unavailable or inaccessible. Therefore, we propose to amend
paragraph (a)(5) to exempt qualified individuals from the prior
coverage requirement if, for at least 1 of the 60 days prior to the
date of their qualifying event, they lived in a service area where
there were no QHPs offered through an Exchange. Absent this change,
qualified individuals who have lived for part of the benefit year in a
location where no QHPs were offered through an Exchange, and therefore
may have been unable to enroll in minimum essential coverage, would be
prevented from subsequently qualifying for a special enrollment period
due to a permanent move or marriage.
Additionally, we note that the proposed amendment to paragraph
(a)(5) would apply, along with the rest of the paragraph, to the
individual market outside of the Exchange through the cross-reference
to Sec. 155.420(d) in Sec. 147.104(b)(2). In this context, health
insurance issuers offering coverage outside an Exchange would not be
able to require qualified individuals to demonstrate prior coverage if
they lived for at least 1 of the 60 days prior to their qualifying
event in a service area where there were no QHPs offered through an
Exchange.
We invite comment on this proposal.
[[Page 51090]]
iii. Effective Date Options for Special Enrollment Periods Relating to
Gaining or Becoming a Dependent
Paragraph (b)(2)(i) of Sec. 155.420 requires Exchanges to provide
qualified individuals who qualify for a special enrollment period due
to gaining or becoming a dependent through birth, adoption, placement
for adoption, or placement in foster care with a retroactive coverage
effective date back to the date of the qualifying event, and provides
Exchanges with the option to allow these consumers to elect an
effective date of the first of the month following the date of the
event or following regular coverage effective dates, in accordance with
paragraph (b)(1) of this section. Paragraph (b)(2)(v) addresses
coverage effective date options for special enrollment periods related
to gaining or becoming a dependent due to a child support or other
court order as described in paragraph (d)(2)(i); it requires Exchanges
to ensure that coverage takes effect on the date of the court order and
permits the Exchange to allow qualified individuals to elect an
effective date based on paragraph (b)(1), but it does not provide
qualified individuals with an option to begin their coverage the first
of the month following the date of the event.
We propose to remove paragraph (b)(2)(v) of this section and to
revise paragraph (b)(2)(i) to include the special enrollment period for
a court order to align the coverage effective dates for all special
enrollment periods based on gaining or becoming a dependent, with the
exception of gaining or becoming a dependent through marriage. Aligning
coverage effective date options ensures that Exchanges provide
qualified individuals in similar situations with the same flexibility
with regard to coverage effective dates. We then propose to redesignate
current paragraph (b)(2)(vi) as paragraph (b)(2)(v).
In addition, we propose to modify paragraph (b)(2)(i) so that, in
addition to requiring an Exchange to ensure that coverage is effective
retroactive to the date of the qualifying event, it may permit the
qualified individual or enrollee to elect a coverage effective date of
the first of the month following plan selection, rather than the first
of the month following the qualifying event, as currently written, or
following regular coverage effective dates, in accordance with
paragraph (b)(1) of this section.
This amendment would streamline Exchange operations and align this
coverage effective date option with the accelerated prospective
coverage effective date rule as it applies to other special enrollment
periods, including the special enrollment period for gaining or
becoming a dependent through marriage, as described in (b)(2)(ii) of
this section. Thus, at the Exchange's option, qualified individuals who
qualify for a special enrollment period due to gaining or becoming a
dependent through birth, adoption, placement for adoption, placement in
foster care, or through a child support or other court order, would be
able to elect from the same coverage effective date options, including:
the date of qualifying event, the first day of the month following plan
selection, or regular coverage effective dates in accordance with
paragraph (b)(1). These amendments would standardize the coverage
effective date options for qualified individuals who have experienced
similar qualifying events.
We request comments on this proposal.
iv. Loss of Coverage Special Enrollment Period (Sec.
155.420(d)(1)(iii))
Section Sec. 155.420(d)(1) establishes a special enrollment period
for qualified individuals who lose certain types of coverage, including
minimum essential coverage. As described in paragraph (d)(1)(iii),
qualified individuals who lose certain types of Medicaid pregnancy-
related coverage not considered minimum essential coverage may also
qualify for this special enrollment period. This is to ensure that
women losing eligibility for coverage of pregnancy-related services
that often meet their primary and specialty healthcare needs are not
left without the option to enroll in a QHP through an Exchange after
they lose access to those services.
We propose to revise paragraph (d)(1)(iii) to include women who
lose access to healthcare services that they were receiving through
CHIP coverage for their unborn child. While CHIP coverage for unborn
children, provided based on the definition of a child described in 42
CFR 457.10, is considered minimum essential coverage for the unborn
child, it is not considered minimum essential coverage for the pregnant
woman. Nonetheless, these pregnant women may receive a set of health
services comparable to those available to women enrolled in Medicaid
pregnancy-related coverage. For this reason, pregnant women who have
received prenatal care as part of CHIP coverage for their unborn child
may apply and be determined eligible for a hardship exemption from the
FFEs so that they are not required to also maintain minimum essential
coverage during that time.
The proposed revision to paragraph (d)(1)(iii) would provide a
pathway to coverage for new mothers who lose access to healthcare
services provided through unborn child CHIP coverage following the
birth of their child, and who are otherwise eligible to enroll in a QHP
through the Exchange. Under paragraph (c)(2) of this section, these
qualified individuals would have up to 60 days before or after the loss
of access to CHIP unborn child coverage to qualify for the loss of
coverage special enrollment period and enroll in a QHP. If they select
a plan prior to their loss of CHIP unborn child coverage, their
Exchange coverage would begin as soon as the first day of the month
following the loss of coverage. If they select a plan after the loss of
CHIP unborn child coverage, their Exchange coverage would begin either
the first of the following month or following regular, prospective
coverage effective dates at the option of the Exchange, as provided
under paragraph (b)(2)(iv). We believe that this revision is needed to
ensure a pathway to coverage for women in the 17 states that offer
unborn child CHIP coverage, so that they may maintain access to
continuous coverage after the birth of their child.
We request comments on this proposal.
iv. Technical Amendment (Sec. 155.420(d)(10)(i))
We propose to make a technical amendment to update the cross
reference to 26 CFR 1.36B-2T in Sec. 155.420(d)(10)(i), regarding the
special enrollment period for victims of domestic abuse or spousal
abandonment. The temporary regulation under section 36B of the Code
originally cited has now been finalized without change to the
definition cited in this special enrollment period. Therefore, this
technical correction would not in any way alter the parameters of this
special enrollment period.
b. Effective Dates for Terminations (Sec. 155.430)
Section 155.430 specifies the termination dates for Exchange
enrollees. Paragraph (d)(1)(i) of Sec. 155.430 defines ``reasonable
notice'' as at least 14 days before the requested effective date of
termination. Paragraph (d)(2) sets forth three possible effective dates
for enrollee-initiated terminations made in accordance with paragraph
(b)(1): (1) The termination date specified by the enrollee, if the
enrollee provides reasonable notice; (2) 14 days after the termination
is requested by the enrollee,
[[Page 51091]]
if the enrollee does not provide reasonable notice; or (3) on a date on
or after the date on which the termination is requested by the
enrollee, if the enrollee's QHP issuer agrees to effectuate termination
in fewer than 14 days, and the enrollee requests an earlier termination
effective date. Further, current paragraph (d)(2)(iv) sets the QHP
termination effective date for enrollees newly eligible for Medicaid,
CHIP, or the basic health program as the day before the individual is
determined eligible for Medicaid, CHIP, or the basic health program.
While the 14-day ``reasonable notice'' rule was created to provide
issuers ample termination transaction processing time, we believe that
most Exchanges and issuers have the operational capability to make
enrollee-initiated terminations effective in fewer than 14 days--and
often do so on the same day of enrollee request. When asked, issuers
have not informed HHS of any challenges in processing these same-day
transactions. Therefore, we propose to remove paragraphs (d)(2)(i)
through (d)(2)(iii) and align the effective dates for all enrollee-
initiated terminations on the date on which the termination is
requested by the enrollee or on another prospective date selected by
the enrollee.
To further align termination effective dates, we also propose
removing existing paragraph (d)(2)(iv), which states that the QHP
termination date for an enrollee newly determined eligible for
Medicaid, CHIP or a basic health program is the date before the
Medicaid, CHIP, or basic health program eligibility determination. We
do not provide QHP termination dates according to eligibility for other
forms of coverage, such as Medicare or employer-sponsored coverage.
This rule singles out the Medicaid/CHIP/basic health program enrollee
population for an earlier termination date than other Exchange
consumers, causing unnecessary confusion for consumers and issuers.
Consumers may also be determined eligible through the State Medicaid
agency, instead of the Exchange, resulting in challenges in
coordinating effective dates through the State and the Exchange and its
issuers. The removal of paragraph (d)(2)(iv) may limit enrollees'
ability to retroactively terminate QHP coverage when it overlaps with
Medicaid or CHIP, which could result in consumers being unable to
recoup premiums paid for periods when the enrollee was enrolled in QHP
coverage through the Exchange and gains retroactive eligibility for
Medicaid or CHIP. However, these types of retroactive terminations can
lead to major challenges for consumers as Medicaid/CHIP providers may
not cover claims reversed by the QHP--leading to unexpected out-of-
pocket costs for consumers.
Consolidating these termination effective date scenarios--based on
reasonable notice or the reason for termination--into one option for
consumers would help streamline operations for Exchanges and issuers.
Allowing enrollees to terminate their coverage immediately or on a
future date of their choosing also would provide consumers with greater
control over ending their QHP coverage and would help minimize or
eliminate overlaps in coverage. Such flexibility would also allow
Exchanges to send termination transactions to issuers that do not need
subsequent adjustment, reducing the need for casework or direct
consumer contact with issuers to request earlier termination dates as
permitted under paragraph (d)(2)(iii).
We believe that streamlining these termination dates would not
negatively affect issuer or Exchange operations, but we invite comment
from Exchanges, issuers, and other stakeholders on any burdens these
rule changes may impose, as well as whether we should make the changes
at the option of the Exchange or the issuer.
6. Definitions (Sec. 155.500)
This section defines terms that are relevant to this subpart. We
propose to amend the definitions of ``Appeal request'' and ``Appeals
entity'' by adding a cross reference to proposed section Sec.
155.716(e)'' to align with the other proposals discussed throughout
this proposed rule.
7. Eligibility Standards for Exemptions (Sec. 155.605)
a. Hardship Exemptions (Sec. 155.605(d))
Section 1311(d)(4)(H) of the PPACA and section 5000A(e)(5) of the
Code allow individuals to seek an exemption from the individual shared
responsibility provision due to a lack of affordable coverage based on
an individual's projected income. Section 155.605(d)(2) establishes the
circumstances under which an Exchange must determine an applicant
eligible for an exemption due to lack of affordable coverage based on
projected income. For determining whether affordable coverage is
available, paragraph (d)(2) states that the Exchange should use the
standards specified in section 5000A(e)(1) of the Code which, among
other things, specifies that the Exchange should use, for individuals
not eligible for employer-sponsored coverage, the annual premium for
the lowest-cost bronze plan available in the individual market through
the Exchange in the State in the rating area in which the individual
resides.
However, market instability has resulted in limited offerings of
plans on the Exchanges in many regions, and there may be individuals
who live in a rating area without a bronze plan. Under the current
regulation, the Exchange would not be able to make a determination as
to whether an individual not eligible for employer-sponsored coverage
who lives in a rating area without a bronze plan is eligible for the
exemption due to lack of affordable coverage based on projected income.
We propose to amend paragraph Sec. 155.605(d)(2)(iv), to allow an
Exchange to make a determination of lack of affordable coverage based
on projected income for individuals not eligible for employer-sponsored
coverage using the annual premium for the lowest cost Exchange metal
level plan available in the individual market through the Exchange in
the State in the rating area in which the individual resides if there
is no bronze level plan sold through the Exchange in that rating area.
Absent this proposed change, individuals may lack access to affordable
coverage, but be unable to qualify for an exemption determination from
the Exchange due to the Exchange's inability to calculate whether
coverage is unaffordable due to the absence of a bronze plan in that
rating area. Under the proposed amendment to Sec. 155.605(d)(2),
Exchanges would use the amount of the lowest cost Exchange metal level
plan available to the individual when no bronze level plan is
available.
We invite comment on this proposal.
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 an
individual shared responsibility payment. 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(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(d)(2)(iv), certain
[[Page 51092]]
employed individuals are exempt if, on an individual basis, the cost of
self-only 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
of HHS 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.
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 in the 2015 Market Standards Rule (79 FR 30302), and we stated
that 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.\38\
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\38\ 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.
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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.\39\ (As
discussed elsewhere in this preamble, we are proposing the 2019 premium
adjustment percentage to be 1.2516634051, (or an increase of about 25
percent over the period from 2013 to 2018). This reflects an increase
of about 7.7 percent over the 2018 premium adjustment percentage
(1.2516634051/1.1617303196).
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\39\ 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 preceding
year exceeds the most recent NHEA estimate of per enrollee employer-
sponsored insurance premiums for 2013.
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As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice that we would use per capita personal income
(PI). Under the approach finalized in the 2017 Payment Notice, and
using the NHEA data, the rate of income growth for 2019 is the
percentage (if any) by which the most recent projection of per capita
PI for the preceding calendar year ($53,729 for 2018) exceeds per
capita PI for 2013 ($44,555), carried out to ten significant digits.
The ratio of per capita PI for 2018 over the per capita PI for 2013 is
estimated to be 1.2059028167 (that is, per capita income growth of
about 20.6 percent). This reflects an increase of about 4.5 percent
relative to the increase for 2013 to 2017 (1.2059028167/1.1540603665)
used in last year's rule.
Thus, using the 2019 premium adjustment percentage proposed in this
rule, the excess of the rate of premium growth over the rate of income
growth for 2013 to 2018 is 1.2516634051/1.2059028167, or 1.0379471610.
This results in a proposed required contribution percentage for 2019 of
8.00*1.0379471610 or 8.30 percent, when rounded to the nearest one-
hundredth of one percent, an increase of 0.25 percentage point from
2018 (8.30358-8.05317). The excess of the rate of premium growth over
the rate of income growth also is used for determining the applicable
percentage in section 36B(b)(3)(A) of the Code and the required
contribution percentage in section 36B(c)(2)(C) of the Code.
We seek comment on whether there are other measures of premium
growth or income growth that we could use to calculate the required
contribution percentage.
8. Eligibility Process for Exemptions
Paragraph 155.610(h)(2) describes the timeframe during which the
Exchange will accept an individual's application for a hardship
exemption. We are proposing to make a technical correction to paragraph
155.610(h)(2) to reflect the prior redesignation of paragraph
155.605(g)(1), which describes the criteria for a hardship exemption,
to paragraph 155.605(d)(1) in the 2017 Payment Notice.\40\
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\40\ 81 FR 12346, March 8, 2016.
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We seek comment on this proposal.
9. Exchange Functions: Small Business Health Options Program
We previously interpreted the PPACA's provisions regarding the
SHOPs to require that all SHOPs provide for employer eligibility,
employee eligibility, and certain enrollment functions, including
premium aggregation services.
We recognize that SHOPs, including SBE-FP for SHOP and FF-SHOPs,
continue to face challenges and, to accommodate those challenges and to
provide SHOPs with more flexibility in operating their programs, we
propose to allow SHOPs to operate in a leaner fashion beginning for
plan years beginning on or after January 1, 2018. If the proposals of
this rule are finalized, the changes would become effective as of the
effective date of the final rule. In the 2018 Payment Notice, HHS
finalized the removal of a participation provision that had required
certain QHP issuers to participate in an FF-SHOP in order to
participate in an FFE. As a result, HHS expects that there will be a
significant decrease in the number of issuers in the FF-SHOPs in the
2018 plan year and therefore, also expects fewer enrollments in the FF-
SHOPs and SBE-FPs utilizing the Federal platform for SHOP. With the
anticipated significant decreases in QHP issuer participation and
enrollment beginning in 2018, it is not cost effective for the Federal
government to continue to maintain certain FF-SHOP functionalities,
collect significantly reduced user fees on a monthly basis, maintain
the technologies required to maintain an FF-SHOP Web site and payment
platform, generate enrollment and payment transaction files, and
perform enrollment reconciliation. Specifically, as previously
signaled,\41\ we are proposing to remove regulatory burden on SHOPs by
removing several of the existing requirements imposed upon the SHOPs,
focusing on removing requirements to provide certain functionality that
is not expressly required by the PPACA, while still ensuring
appropriate implementation of statutorily required functions of the
SHOP. Under this proposal, employer groups that are currently enrolled,
or will enroll in a SHOP QHP for plan years that begin prior to January
1, 2018, would enroll in a SHOP QHP consistent with the current SHOP
regulations. If this rule is finalized as proposed, the
[[Page 51093]]
changes would take effect for plan years beginning on or after January
1, 2018 as of the effective date of the final rule.
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\41\ Centers for Medicare & Medicaid Services Offers New Health
Coverage Enrollment Option for Small Business (May 15, 2017),
available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-05-15.html.
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Under the proposed approach, SHOPs would no longer be required to
provide employee eligibility, premium aggregation, and online
enrollment functionality for plan years beginning on or after January
1, 2018, effective on the effective date of the final rule, if
finalized as proposed. If these proposals are finalized as proposed,
the FF-SHOPs and the SBE-FP for SHOPs would take advantage of this
flexibility, and SBEs would continue to have the flexibility to operate
a SHOP in the way that they choose in accordance with applicable
Federal and State law. Notably, we received comments to the Request for
Information that provided support for this proposed enrollment
approach. Moreover, few SBEs currently utilize a similar enrollment
approach as is being proposed as a transitional measure that was
expected to extend through plan years beginning in 2018. These SBEs
have already inquired about the possibility to continue permitting
enrollment of their SHOP consumers through a participating QHP SHOP
issuer, or a SHOP-registered agent or broker, for plan years beginning
in 2019 and beyond.\42\ Additionally, these SBEs have each indicated
that this enrollment method has contributed to reduced SHOP Exchange
programmatic expenses, which is critical for SBEs to maintain financial
sustainability as required by section 1311(d)(5)(A) of the PPACA.
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\42\ Extension of state-based SHOP Direct Enrollment Transition
(April 18, 2016), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/1332-and-SHOP-Guidance-508-FINAL.pdf.
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To reflect the proposed changes for plan years beginning on or
after January 1, 2018, effective on the effective date of the final
rule, if finalized as proposed, we are proposing modifications
throughout the requirements applicable in the SHOPs. However, because
some groups' plan years that begin prior to the effective date of the
rule finalizing this proposal will continue beyond the effective date
of the rule finalizing this proposal, both the existing requirements
and the proposed requirements would need to be in place simultaneously.
For this reason, we propose to make many of the existing regulatory
sections regarding SHOP applicable for plan years beginning prior to
January 1, 2018 only, and propose new regulatory sections applicable
for plan years beginning on or after January 1, 2018. After the
effective date of this rule, the new regulatory sections will be
effective for all 2018 plans, regardless of whether they started prior
to the effective date of the rule. Except as described in this rule, we
propose that these new regulatory sections would mirror the existing
regulatory sections.
Specifically, we propose to amend Sec. Sec. 155.705, 155.715,
155.720, 155.725, 155.730, 155.735, 155.740, 156.285 and 157.205 to
make each section applicable only to plan years beginning prior to
January 1, 2018. Additionally, we propose to introduce mirroring new
sections, applicable for plan years beginning on or after January 1,
2018, at Sec. Sec. 155.706, 155.716, 155.721, 155.726, 155.731,
155.741, 156.286 and 157.206. We do not propose a new section mirroring
current Sec. 155.735, as further explained later in this preamble. We
also propose minor changes to Sec. 155.700. These are described in the
sections that follow. We also propose additional changes related to the
proposed new approach to SHOP in Sec. Sec. 155.106, 155.200, and
156.350, to define the streamlined enrollment approach that groups
enrolling in a SHOP QHP in a SBE-FP would take, if the proposals in
this rule were to become finalized. In light of the substantial changes
proposed throughout this document, we intend to make conforming
amendments and to update all applicable cross references in these and
other regulations, including Sec. Sec. 147.102, 147.104, 155.500,
156.200, and 156.340. We solicit comment on any additional cross-
references that should be amended.
If this proposal is finalized, SHOPs that opt to operate in a
leaner fashion, such as the FF-SHOPs, would still assist qualified
employers who are small employers in facilitating the enrollment of
their employees in QHPs offered in the small group market in the State,
consistent with section 1311(b)(1)(B) of the PPACA, because the basic
functionalities of an Exchange would still be provided. Under the
proposed approach, SHOPs would continue to be required to certify plans
for sale through the SHOP, and the following features would still be
available: An Internet Web site that displays and provides QHP
information, a premium calculator that generates estimated prices of
the available QHPs, and a call center to answer questions related to
the SHOP. Further, small employers would continue to obtain an
eligibility determination from the SHOP Web site but would enroll in a
SHOP QHP by working with a SHOP-registered agent or broker, or with a
QHP issuer participating in a SHOP to complete the enrollment process.
An enrollment completed by working with a SHOP-registered agent or
broker, or with a QHP issuer participating in a SHOP under the proposed
flexibilities, would be considered to be an enrollment through the
SHOP, and an employer would be considered to have offered its employees
coverage through a SHOP for purposes of section 45R of the Code (the
Small Business Health Care Tax Credit), if the employer: (1) Obtains
from the SHOP a favorable determination of eligibility to participate
in the SHOP; (2) enrolls in a SHOP QHP offered by an issuer; and (3)
chooses to have the enrollment identified as being through the SHOP. If
an enrollment meets this definition, the QHP issuer would be required
to conduct enrollment with all applicable SHOP rules and policies.
Because the SHOP would be required to determine employer
eligibility to participate in the SHOP only, and not be required to
determine employer group members' eligibility to enroll, it would only
be responsible for handling appeals as they relate to an employer's
eligibility in the SHOP, as currently described in Sec. 155.740. If,
under the flexibilities described here, employer group members enrolled
in a SHOP QHP needed to file an appeal related to their SHOP coverage,
they generally would file the appeal directly with the insurance
company, or could take advantage of other appeals mechanisms under
applicable State and Federal law. If an employer group member, under
the approach proposed throughout this document, believed that he or she
were entitled to a SHOP special enrollment period, but was denied that
special enrollment period, the employer group member could file a
complaint with the SHOP and the SHOP would investigate. SHOP special
enrollment periods would continue to be available to enrollees who
experience specified qualifying events. If the proposed changes are
finalized, SHOPs that use the new flexibilities, such as the FF-SHOPs,
would no longer have the information required to determine employer
group members' eligibility for special enrollment periods. Therefore,
issuers wishing to participate in such a SHOP would be required to
administer special enrollment periods.
SHOPs opting to operate in a leaner fashion, like the FF-SHOPs,
would continue to provide employers with the option to offer a choice
of plans, consistent with section 1312(a)(2) of the PPACA, by
continuing to allow employers to offer their employees a choice of
plans, either by coverage level, or, in some States, by participating
QHP issuer. Employers would be able to see the SHOP plans available, by
coverage level and issuers, in their area using the
[[Page 51094]]
plan comparison tool available on a SHOP Web site. To streamline
enrollment through a SHOP, the employer would maintain the ability to
offer their employees a choice of plans across issuers. Employers who
choose to offer a choice of plans to employees would contact the
participating QHP issuers, whose plans they would like to offer to
their employees, to obtain the application information necessary in
order to enroll in coverage.
Once the necessary information required to enroll is obtained from
the QHP issuer or issuers or from the SHOP-registered agent or broker,
the employer could disseminate the application information to its
employees. The employer could later collect the information from its
employees and send it to the applicable QHP issuer or issuers or the
SHOP-registered agent or broker. Employers generally would also be
responsible for collecting monthly premium payments from employees and
sending them to the appropriate issuers. While initially offered to
support employers' option to offer a choice of plans across issuers,
premium aggregation services are not a service mandated by the PPACA
and therefore may be altered or removed, as proposed in this proposed
rule. SHOP-registered agents and brokers would be able to assist
employers perform these tasks, if the employer chooses to work with a
SHOP-registered agent or broker.
Additionally, to further support employers' option to offer a
choice of plans across issuers, under the proposed approach, an
employer's minimum participation rate would continue to be calculated
at the employer level, though the SHOPs would not be involved in
calculating it, and the FF-SHOPs would no longer calculate it.
Participating QHP issuers would not be permitted to deny enrollment on
the basis of failure to meet minimum participation requirements to
employers who have been determined eligible to participate in the SHOP,
and who have met the applicable minimum participation rate, as
specified by the SHOP, even if only one employee in a group wishes to
enroll with a particular issuer.
Under the proposed approach, SHOPs would also still be able to
administer the provision at section 1304(b)(4)(D) of the PPACA that
guarantees continuing eligibility for growing small employers by
limiting the validity of an employer's eligibility determination such
that it terminates when the employer makes a change that could end its
eligibility under Sec. 155.710(b), by requiring the employer to submit
a new single employer application to the SHOP if the employer makes a
change that could end its eligibility under Sec. 155.710, and by
requiring issuers to be able to distinguish SHOP enrollments from non-
SHOP enrollments. Under the proposed flexibilities, issuers would be
expected to rely on the determination of eligibility to reflect the
employer's ongoing eligibility to participate in the SHOP and the IRS
would have the option to follow up with an employer for additional
information if necessary.
HHS understands that the changes outlined in this proposed rule, if
finalized, would allow SHOPs to adopt changes (and we propose that the
FF-SHOPs would adopt such changes) that result in a substantial
departure from current operations for participating SHOP QHP issuers,
employers, and enrollees. We recognize that if this proposed rule is
finalized, it would be effective on the effective date of the final
rule, and thus could take effect after the first date that employers
can complete an enrollment that takes effect on or after January 1,
2018. It is important to note that employer groups currently enrolled
in a SHOP plan that began in 2017 in a SHOP that would opt to operate
in a leaner fashion would not be affected until their plan year ends,
as the current regulations will be in effect for the entirety of a plan
that began in 2017. The current regulations will also be in place for
the beginning of plan year 2018 for those plans that start before the
effective date of the rule. But, after the effective date of the rule,
any finalized regulations pertaining to plan year 2018 will be
effective for all plans that begin or began in 2018, regardless of
whether they started prior to the effective date. HHS acknowledges that
this transition will create challenges and is concerned about employers
enrolling between when rates become available for plan years beginning
in 2018 and when the proposed flexibilities in this rule would go into
effect. We seek comment on how to best ease this transition.
HHS also recognizes that if the proposals are finalized and take
effect after rates become available for plan years beginning in 2018,
employers participating in an FF-SHOP that complete the enrollment
process for a plan that would take effect on or after January 1, 2018,
but prior to the effective date of the final rule could begin the
enrollment process on the existing SHOP Web site, and might receive
billing and premium aggregation services through the SHOP Web site for
only a short time period in 2018 before any final version of these
proposals could take effect. If SHOP enrollment processes that would no
longer be required to be provided by the SHOP were discontinued when
the rule took effect, issuers and small employers could experience a
disruption in the processing of payments or subsequent enrollments,
which could result in loss of coverage due to non-payment of premiums
that might affect an employer's ability to claim the Small Business
Health Care Tax Credit. This approach would also result in complex data
transfers between a SHOP and issuers. Nonetheless, not allowing SHOPs
to operate in a leaner fashion as soon as possible would cause SHOPs to
continue to incur substantial financial and operational burdens, and
would undermine the goal of achieving financial sustainability, as
referenced above. This is why the proposals in this proposed rule would
apply as of the effective date of the final rule, and any finalized
regulations pertaining to plan year 2018 will be effective for all
plans that begin or began in 2018, regardless of whether they started
prior to the effective date. Issuers that intend to use the FF-SHOP and
SBE-FP for SHOP systems that will no longer be required under the new
regulations are encouraged to inform HHS of their intention to do so as
soon as possible, so that HHS may work through the necessary
operational, technology, and transition issues to establish manual
procedures to accommodate them. Manual procedures could include premium
aggregation services and processing of enrollments in SHOP QHPs.
We seek comment on these proposals, including on any other
regulatory provisions that should be changed to reflect the changes
described here.
a. Standards for the Establishment of a SHOP (Sec. 155.700)
Section 155.700 outlines the general requirements to establish a
SHOP and defines certain terms specific to SHOPs. We propose to amend
Sec. 155.700(a) by adding paragraph (a)(1) to make the current
requirements applicable for only plan years beginning prior to January
1, 2018. We propose to add paragraph (a)(2) to describe the general
requirements applicable for plan years beginning on or after January 1,
2018. Proposed paragraph (a)(2) more closely aligns with the statutory
language in section 1311(b)(1)(B) of the PPACA than existing paragraph
(a), and would specify that SHOPs must assist qualified employers in
facilitating the enrollment of their employees in small group market
QHPs. We believe that the PPACA does not have to be interpreted to
require SHOPs to facilitate the enrollment of qualified employees into
QHPs, as is specified by the current
[[Page 51095]]
regulation. Instead, we believe it can also be interpreted in a less
burdensome way, to require SHOPs to assist qualified employers in
facilitating employees' enrollment into QHPs, which would still be
provided for under our proposals. If finalized, these changes would
become effective as of the effective date of the final rule. We seek
comment on this proposal.
b. Functions of a SHOP (Sec. 155.705) for Plan Years Beginning Prior
to January 1, 2018. (Sec. 155.705)
As discussed in the following section, we propose to modify the
regulatory requirements regarding functions of a SHOP for plan years
beginning on or after January 1, 2018 and to introduce those
requirements in a new Sec. 155.706. To reflect the proposal that the
requirements currently in Sec. 155.705 would apply only for plan years
beginning before January 1, 2018, we propose to amend the heading of
Sec. 155.705 and add paragraph (f), to state that the section would
apply only for plan years that begin prior to January 1, 2018. We
discuss the proposed new Sec. 155.706 below.
c. Functions of a SHOP for Plan Years Beginning on or After January 1,
2018 (Sec. 155.706)
Section 155.705 describes required Exchange functions that are
specific to SHOPs. To permit SHOPs to operate in a leaner fashion for
plan years beginning on or after January 1, 2018, we are proposing
several changes to the required functions of a SHOP. If finalized,
these changes would become effective as of the effective date of the
final rule. Under these proposals, which we propose to introduce in new
Sec. 155.706, certain functions that are currently required would
become optional for SHOPs for plan years beginning on or after January
1, 2018, and the FF-SHOPs would not provide them. With the exception of
the proposed changes to the functions described here, the functions
would remain the same as in Sec. 155.705. The proposals described in
this section would become effective on the effective date of the final
rule, if finalized as proposed.
We propose only to include the paragraphs in current paragraph
(b)(3) of Sec. 155.705, that would be applicable to plan years
beginning on or after January 1, 2018, maintaining the currently
applicable policy requiring SHOPs to allow employers to select a level
of coverage and to offer a choice of QHPs across that level of
coverage, and permitting SHOPs to allow employers to offer a choice of
all QHPs from a single issuer, or another method of providing employer
choice. To provide additional flexibility, we also propose to codify
that State SHOPs may, as the FF-SHOPs have, offer employers a choice of
SADPs. To reflect the proposals described in Sec. 156.150(b) of this
document, we propose that SHOPs could and FF-SHOPs would allow
employers to offer a choice of SADPs across a selected level of
coverage, if such levels of coverage are available. In the event that
no SADP coverage levels are available, employers would be able to offer
a choice of all SADPs offered in an area. We also propose conforming
amendments to the structure of this paragraph.
Because, as discussed earlier in this preamble, premium aggregation
services are not mandated by the PPACA and to maximize the
flexibilities associated with operating a SHOP, we propose to remove
required functions related to premium aggregation. Specifically, we
propose that the only premium aggregation function from Sec.
155.705(b)(4) that would be applicable in plan years beginning on or
after January 1, 2018, would be an amended version of the function in
Sec. 155.705(b)(4)(ii)(A), relating to the continuation of coverage.
State-based Exchanges would be permitted to continue providing
remaining premium aggregation services in their SHOPs currently
described at Sec. 155.705(b)(4) if they choose to do so. SHOPs
electing not to provide premium aggregation services, like the FF-
SHOPs, would still be required to provide an opportunity for employers
to offer employees a choice of plans. In SHOPs not offering premium
aggregation services, we expect that employers generally would receive
premium bills from each of the plans or issuers with which an employee
enrolls and would pay premiums to each such plan or issuer. Section
155.705(b)(4)(ii)(A) (which we propose to include in a revised form in
Sec. 155.706) describes the process through which the SHOP may enter
into an agreement with a qualified employer related to the
administration of continuation coverage. Under the proposed approach
for enrollment in a SHOP QHP for plan years beginning on or after
January 1, 2018, the FF-SHOPs would no longer facilitate the collection
of premiums. Therefore, we propose that Sec. 155.706(b)(4) would
mirror Sec. 155.705(b)(4)(ii)(A) but would not include the provision
that permits the FF-SHOPs to limit the service to the collection of
premiums related to the requirements under 29 U.S.C. 1161, et seq.
Paragraph (b)(7) of Sec. 155.705 describes the SHOP function
related to QHP availability in merged markets and paragraph (b)(8)
describes the function related to QHP availability in unmerged markets.
We propose to include these functions in Sec. 155.706(b)(7) and
(b)(8).
However, under the proposal to streamline SHOP enrollment for plan
years beginning on or after January 1, 2018, we propose to change the
references to a ``qualified employee'' to an ``employer group'' in both
paragraphs, as the SHOP would no longer be required to process employee
enrollments under the proposed approach.
Paragraph (b)(10) of Sec. 155.705 establishes requirements related
to minimum participation rates and SHOP coverage; we propose to include
these requirements in Sec. 155.706(b)(10), with certain modifications.
In order to facilitate employers' ability to offer employees a choice
of plans through a SHOP, as is required under section 1312(a)(2) of the
PPACA, Sec. 155.705(b)(10) requires that any minimum participation
rate applicable in a SHOP be calculated based on the rate of employee
participation in the SHOP, rather than on the rate of participation in
any particular QHP or QHPs of any particular issuer. In the FF-SHOPs,
this requirement has been implemented through the requirements
currently outlined at Sec. 155.705(b)(10)(i)-(iii). Currently, the
Federally-facilitated SHOPs calculate a group's minimum participation
rate based on the information provided by the employer and the
employees during the online enrollment process. Under the proposed
approach, the SHOP would not be required to collect the enrollment
information needed to calculate a group's minimum participation rate.
Under this proposal, issuers would be permitted to use their
established practices allowed under State law for groups enrolling in
their certified SHOP plans for plan years beginning on or after January
1, 2018, so long as they comply with Sec. 147.104, and so long as the
minimum participation rate is calculated based on the level of
participation in the SHOP instead of on the level of participation in
any one QHP or with any one issuer (that is, so long as SHOP
participation is measured at the employer group level). Issuers
participating in the FF-SHOPs would be required to adhere to the level
of participation as would continue to be specified in Sec.
155.706(b)(10) and issuers in State SHOPs would be subject to any
minimum participation rate established by the SHOP, consistent with
this provision. We also propose that
[[Page 51096]]
Sec. 155.706(b)(10) would not include the language in Sec.
155.705(b)(10)(i) because it applies to plan years beginning before
January 1, 2016, and would therefore not be applicable for the period
covered in Sec. 155.706. We also propose to clarify that, under the
proposed approach, the reference in proposed Sec. 155.706(b)(10) to
the time the employer submits the SHOP group enrollment would be
interpreted to mean the time when the employer submits a complete group
enrollment or renewal to the QHP issuer or SHOP-registered agent or
broker, applicable.
Section 155.705(b)(11) specifies the requirements related to an
online premium calculator. For plan years beginning on or after January
1, 2018, we propose to modify these requirements and include the
modified requirements in Sec. 155.706(b)(11). Specifically, Sec.
155.706 (b)(11) would specify that the premium calculator described in
Sec. 155.205(b)(6) must facilitate the comparison of available QHPs.
This would reflect that SHOPs would no longer be required to maintain
enrollment and premium payment information or administer premium
billing, and therefore, would no longer necessarily have employer
contribution information. If this proposal is finalized, the SHOPs
would be required to maintain a calculator that facilitates the
comparison of available QHPs and would generate premium estimates, but
would no longer be required to reflect any employer contribution.
Therefore, we propose to not include the requirements in Sec.
155.705(b)(11)(i) or (ii) in Sec. 155.706(b)(11), since these reflect
methods SHOPs would use for determining employer contributions. In the
FF-SHOPs and SBE-FPs for SHOP, this premium calculator would be where
an employer or SHOP-registered agent or broker could go to see a
complete listing of all the QHPs available in a given area. The tool
has served and would continue to serve as a resource for employers and
SHOP-registered agents and brokers. Because we believe the premium
calculator requirement at section 1311(d)(4)(G) of the PPACA could be
interpreted to apply to only individual market Exchanges based on its
reference to APTCs and CSRs, which are not available through SHOPs, we
believe that this proposal is consistent with the statute.
Section 155.705(c) generally requires a SHOP to provide data
related to eligibility and enrollment of a qualified employee to the
applicable individual market Exchange. For plan years beginning on or
after January 1, 2018, we propose that this requirement would apply
only in SHOPs that collect employee enrollment data related to
eligibility and enrollment of a qualified employee, unless the SHOP is
operated pursuant to Sec. 155.100(a)(2).
Finally, we propose in paragraph (e) that the provisions of the
section would be applicable for plan years beginning on or after
January 1, 2018, effective on the effective date of the final rule, if
finalized as proposed.
d. Eligibility Determination Process for SHOP for Plan Years Beginning
Prior to January 1, 2018 (Sec. 155.715)
As discussed in the following section, we propose to modify the
regulatory requirements regarding the eligibility determination process
for SHOP for plan years beginning on or after January 1, 2018,
effective on the effective date of the final rule, if finalized as
proposed, and to introduce those requirements in a new Sec. 155.716.
To reflect the proposal that the requirements currently in Sec.
155.715 would apply only for plan years beginning before January 1,
2018, we propose to amend the heading of Sec. 155.715 and add
paragraph (h), to state that the section would apply only for plan
years that begin prior to January 1, 2018.
e. Eligibility Determination Process for SHOP for Plan Years Beginning
on or After January 1, 2018 (Sec. 155.716)
Section 155.715 describes the SHOP eligibility determination
process for employers and employees. We propose to add new Sec.
155.716 to describe the eligibility determination process for SHOPs for
plan years beginning on or after January 1, 2018. With the exception of
the proposed changes to the process described here, the process would
remain the same as in Sec. 155.715. However, this new section would
modify and remove some of the requirements in Sec. 155.715. The
proposals described in this section would be effective on the effective
date of the final rule, if finalized as proposed.
Section 155.715(a) requires that before permitting the purchase of
coverage in a QHP, the SHOP must determine that the employer or
individual who requests coverage is eligible. Under current
regulations, this requirement means that employers and employees must
complete an application to participate in the SHOP. Accordingly, the
FF-SHOPs have established certain operational requirements related to
submitting an application through the FF-SHOP Web site, including
creating an account on the FF-SHOP Web site, (for employers) providing
information on the business (including location, Employer
Identification Number, and number of employees), and identity
verification.
To reduce the barriers on employers to obtain SHOP coverage, we
propose in Sec. 155.716 that SHOPs must determine that the employer
who requests coverage is eligible, but that SHOPs generally would not
always need to do so before the issuer permits the purchase of coverage
in a QHP through a SHOP, for plan years beginning on or after January
1, 2018. This would generally permit an employer to purchase a QHP
before obtaining a determination of SHOP eligibility and confirming
with the issuer the status of the enrollment as being through the SHOP.
As further explained in the preamble to Sec. 156.286, issuers would be
expected to establish processes to ensure that they can accurately
identify which enrollments are considered SHOP enrollments and which
are not considered SHOP enrollments. We would encourage employers to
obtain an eligibility determination from the SHOP as close to the date
in which they purchase a SHOP QHP. We also are considering establishing
a limit on how long an employer can wait between purchasing the QHP and
obtaining the determination of eligibility for that QHP to be
considered purchased through the SHOP. We solicit comments on whether
to establish such a limit, and how long it should be.
As a condition of claiming the Small Business Health Care Tax
Credit, small employers must be prepared to provide sufficient proof
that they meet applicable criteria. Part of the employer's
responsibility in providing evidence that it is a small employer
eligible for the Small Business Health Care Tax Credit includes the
ability to verify not only the purchase of a SHOP QHP, but the ability
to produce a favorable eligibility determination from a SHOP.
Therefore, employers applying for the Small Business Health Care Tax
Credit are also encouraged to obtain an eligibility determination from
the SHOP in the taxable year in which they intend to apply for the
credit.
Section 155.715(b) requires the SHOP to accept SHOP applications
from both employers and employees, and Sec. 155.715(c) provides for
the verification of both employer and employee eligibility. For plan
years beginning on or after January 1, 2018, we propose to provide
SHOPs flexibility to forgo providing for employee eligibility
determinations and related functionality and obligations (and the FF-
SHOPs would pursue this flexibility). If finalized, these changes would
become effective as of the effective date of the
[[Page 51097]]
final rule. We propose that SHOPs would not be required to accept
applications by employees or determine eligibility of employees
because, under the proposed approach to enrollment in a SHOP, SHOPs
would not be required to interact with employees. Proposed paragraphs
(b) and (c) of Sec. 155.716 would still require SHOPs to accept a SHOP
single employer application form from employers, and to verify employer
eligibility subject to provisions like those currently in Sec.
155.715(c)(2) through (4). We intend to update the single employer
applications that employers applying to participate in SHOPs would use
to reflect our proposed changes to Sec. 155.730 described elsewhere in
this preamble. Employee information is primarily collected for purposes
of enrollment, and therefore would not be necessary to the operation of
a leaner SHOP under our proposed approach. State-based SHOPs that
intend to maintain more robust SHOP functionalities, in lieu of the
flexibilities in this proposal, would be permitted to continue to
determine employee eligibility. We believe this proposal is consistent
with the statute because, as noted above, the PPACA does not have to be
interpreted to require SHOPs to provide for employee enrollment
functionality, and does not define qualified employees.
Paragraph (d) of Sec. 155.715 describes the eligibility adjustment
period. We propose to include in Sec. 155.716(d) these requirements as
they relate to eligibility for employers. However, because SHOPs would
not be required to accept applications from employees, we propose not
to include the requirements in Sec. 155.715(d)(2), relating to
eligibility for employees, in new Sec. 155.716. We also propose to add
language to reflect that SHOPs also must address inconsistencies in
employer eligibility information received from sources other than those
used in the employer eligibility process described in Sec. 155.715(c).
To reflect our proposed changes to the employer eligibility
verification process, as further described in this section and in the
preamble to Sec. 157.205, and our proposal not to include a section
mirroring Sec. 155.735 regarding terminations, we are adding a
requirement in the paragraphs mirroring paragraphs (d)(3)(i) and (e) of
Sec. 155.715 to require the SHOP to notify employers not only of a
denial of the employer's eligibility to participate in the SHOP, but
also of a termination of the employer's eligibility to participate in
the SHOP.
Paragraph (f) of Sec. 155.715 specifies the requirement that the
SHOP notify an employee of his or her eligibility to enroll in a SHOP.
Because we would not be requiring SHOPs to determine employee
eligibility for plan years beginning on or after January 1, 2018, we
propose not to include this requirement in Sec. 155.716. SHOPs that
continue to provide employee eligibility functionality should continue
notifying employees of their eligibility. Under the proposed approach
for SHOP flexibilities for plan years beginning on or after January 1,
2018, we anticipate that the participating QHP issuer or employer would
determine the method of employee enrollment and notification,
consistent with otherwise applicable Federal or State law.
Paragraph (g) of Sec. 155.715 describes the requirements
surrounding communication between the SHOP and QHP issuers in the event
of an employer withdrawing from the SHOP and the notification of
qualified employees of an employer's withdrawal from SHOP. Under the
proposed approach for SHOPs beginning for plan years that begin on or
after January 1, 2018, the enrollment and disenrollment processes would
be addressed between the employer and the issuer or the agent or
broker. Therefore, we are not proposing to include these requirements
in Sec. 155.716.
We further propose in paragraph (f) of Sec. 155.716 that an
employer's determination of eligibility to participate in the SHOP
obtained under paragraph (a) remains valid until the employer makes a
change that could end its eligibility under Sec. 155.710(b). This
could include terminating offers of coverage to employees maintaining
full-time status, growing to be a large employer without having
maintained continuous SHOP coverage, or moving its principal business
address or eligible employee worksites out of the SHOP service area.
The employer would be required under new regulations proposed in part
157 to take further action upon termination of the validity of the
determination of eligibility to participate in a SHOP to submit a new
application for determination of eligibility or to withdraw from
participation in the SHOP. We are considering requiring SHOPs to
acknowledge an employer's withdrawal from participation in the SHOP
within a reasonable time. Alternatively, we are considering requiring
that employers reapply to determine their SHOP eligibility on an annual
basis. We seek comment on these proposals. Under the proposals
described herein, a SHOP would no longer be required to operate an
enrollment system, where information such as an employee roster or
employee worksite would generally be collected and stored. Because
employers would no longer use a SHOP's systems to report and document
these changes, employers must inform the SHOP if their business status
changes.
We propose to specify in paragraph (g) that the provisions in Sec.
155.716 would be applicable for plan years beginning on or after
January 1, 2018. If finalized as proposed, these changes would become
effective as of the effective date of the final rule.
We seek comment on these proposals.
f. Enrollment of Employees Into QHPs Under SHOP for Plan Years
Beginning Prior to January 1, 2018 (Sec. 155.720)
Section 155.720 contains requirements related to the enrollment of
employees into QHPs under SHOP. To reflect that our proposed approach
would no longer require SHOPs to provide functionality related to
enrollment of employees for plan years beginning on or after January 1,
2018, effective on the effective date of the final rule, if finalized
as proposed, we propose to amend the heading of Sec. 155.720 and add
paragraph (j), to state that the section would apply only for plan
years that begin prior to January 1, 2018.
Specifically, we propose that the requirement in paragraph (b) of
Sec. 155.720 that SHOPs establish a timeline and process for QHP
issuers and employers to follow regarding purchasing coverage and
processing of enrollment would not be applicable for plan years that
begin on or after January 1, 2018. SBEs that choose to maintain their
current operations may continue establishing enrollment timelines, as
State law and SHOP technology permit. We also propose that the
requirements to transmit enrollment information on behalf of qualified
employers and employees to QHP issuers as described in current
paragraph (c), and to process payments as described in current
paragraph (d) would not apply after plan year 2017, since SHOPs may not
have enrollment or payment information to transmit. We propose that the
requirement in paragraph (e) that SHOPs ensure a QHP issuer notifies a
qualified employee enrolled in a QHP of the effective date of his or
her coverage would not apply for plan years beginning on or after
January 1, 2018 because SHOPs may not have the enrollment information
necessary to enforce this requirement, if the proposed approach became
final. We anticipate QHP issuers would notify employees in accordance
with applicable State law. Additionally, after
[[Page 51098]]
plan year 2017 plans have ended, we propose not to require SHOPs to
reconcile enrollment information as described in paragraph (g), as
SHOPs would not have enrollment files to reconcile with issuers. We
also propose that the requirements described in current paragraph (h),
which requires a SHOP to notify a qualified employee's employer in the
event the qualified employee terminates his or her SHOP coverage, would
no longer apply for plan years beginning on or after January 1, 2018.
If finalized, these changes would become effective as of the effective
date of the final rule. Under the proposed approach, SHOPs may not have
that information to communicate to the qualified employee's employer.
g. Record Retention and IRS Reporting for Plan Years Beginning on or
After January 1, 2018 (Sec. 155.721)
Our proposed approach would not require SHOPs to provide
functionality related to enrollment of employees for plan years
beginning on or after January 1, 2018, and we are therefore proposing
that Sec. 155.720 would be inapplicable for those plan years,
effective on the effective date of the final rule, if finalized as
proposed. However, there are requirements in that section related to
record retention and IRS reporting that would continue to be applicable
with some modifications. We propose to include modified versions of
these requirements in a new Sec. 155.721, titled ``Record retention
and IRS Reporting for plan years beginning on or after January 1,
2018.''
We propose that all SHOPs would still be required to maintain
records of employer eligibility for 10 years, as described in paragraph
(f). Because SHOPs utilizing the proposed flexibilities, like the FF-
SHOPs, would not have information on employees, we do not propose to
continue requiring that SHOPs maintain information on employees.
Section 155.720(i) describes the information the SHOP is currently
required to communicate to the IRS for purposes of the Small Business
Health Care Tax Credit. We propose to modify the reporting for plan
years beginning on or after the effective date of the rule finalizing
this proposal to require SHOPs to send the IRS information about the
employers determined eligible to purchase a SHOP QHP only upon the
request of the IRS. We believe providing the IRS with a list of
employers determined eligible to participate in a SHOP, at the IRS's
request, fulfills HHS's reporting responsibility. SBEs that currently
report all the information required by existing Sec. 155.720(i) and
will continue to collect such information related to an employer's
eligibility and enrollment in a SHOP are encouraged to continue
reporting this information to assist the IRS in administering the Small
Business Health Care Tax Credit. As mentioned earlier in this document,
employers in all States must be able to provide sufficient evidence
that they meet all the necessary eligibility requirements for the Small
Business Health Care Tax Credit, if they intend to apply for it. The
IRS may ask employers to produce the aforementioned evidence and
employers have a responsibility to produce it. Further, employers may
work with their issuer to verify their contribution information,
employee enrollment information and any other applicable information
required to apply for the Small Business Health Care Tax Credit through
their tax filings.
h. Enrollment Periods Under SHOP for Plan Years Beginning Prior to
January 1, 2018 (Sec. 155.725)
As discussed in the following section, we propose to modify the
regulatory requirements regarding enrollment periods under a SHOP for
plan years beginning on or after January 1, 2018, and to introduce
those requirements in a new Sec. 155.726. To reflect the proposal that
the requirements currently in Sec. 155.725 would apply only for plan
years beginning before January 1, 2018, we propose to amend the heading
of Sec. 155.725 and add paragraph (l), to state that the section would
only apply for plan years that begin prior to January 1, 2018. If
finalized, these changes would become effective as of the effective
date of the final rule. We discuss the proposed new Sec. 155.726
below.
i. Enrollment Periods Under SHOP for Plan Years Beginning on or After
January 1, 2018 (Sec. 155.726)
Section 155.725 describes enrollment periods under SHOP, including
the timeline under which employer groups must enroll in SHOP coverage,
and the notices the SHOP is required to send related to enrollment
periods. We propose to introduce a new Sec. 155.726, which would
retain the rolling enrollment and minimum participation rate provisions
of Sec. 155.725(b) and (k), but would remove the requirements
applicable to enrollment periods under SHOP other than those related to
special enrollment periods for plan years beginning on or after January
1, 2018, to reflect the increased flexibility we are proposing. The
proposals described in this section would be effective on the effective
date of the final rule, if finalized as proposed.
Section Sec. 155.725(a) requires that SHOPs ensure that enrollment
transactions are sent to QHP issuers and that such issuers adhere to
coverage effective dates in accordance with this section. We propose
that many previously required enrollment and election periods would no
longer apply for plan years beginning on or after January 1, 2018.
State-based SHOPs that continue to provide online enrollment
functionality would be able to continue to adhere to these
requirements. However, under the proposed approach, some SHOPs
(including the FF-SHOPs) may not have enrollment information to
communicate to the issuers and may not want to continue setting and
enforcing coverage effective dates under the previously specified
requirements. In SHOPs, like the FF-SHOPs, that pursue the proposed
approach, we anticipate that most enrollment timelines, deadlines, and
coverage effective dates in SHOPs would be set by employers and issuers
consistent with applicable State law and otherwise applicable Federal
law. We do, however, believe that, under the proposed approach, the
SHOP should be responsible for ensuring that QHP issuers adhere to the
remaining required enrollment periods and their corresponding coverage
effective dates. Therefore, we propose to include this requirement in
Sec. 155.726(a).
Paragraph (c) of Sec. 155.725 states that the SHOP must provide
qualified employers with an annual election period prior to completion
of the employer's plan year and paragraph (d) of Sec. 155.725 requires
the SHOP to provide notice of that period in advance of that period.
Given that, under the proposed approach for SHOPs for plan years
beginning on or after January 1, 2018, SHOPs would not be required to
process enrollments, we propose that these requirements would not apply
for plan years beginning on or after January 1, 2018. We anticipate
that participating QHP issuers in SHOPs pursuing the proposed approach,
like in the FF-SHOPs, would be responsible for setting any requirements
around renewals, annual employer election periods, and annual employee
open enrollment periods, based on their current practices, and subject
to applicable State law and otherwise applicable Federal law, including
Sec. Sec. 147.104 and 147.106. For similar reasons, we propose that
the requirements in Sec. 155.725(e), which requires the SHOP to set a
standard open enrollment period for qualified employees, and Sec.
155.725(f), which requires the SHOP to send a notice to the employee
about the open enrollment
[[Page 51099]]
period, would not apply for plan years beginning on or after January 1,
2018.
Section 155.725(g) requires SHOPs to establish and maintain
enrollment and coverage effective dates, including waiting periods, for
newly qualified employees. However, our proposed amendments at
paragraphs (b), (c)(1), and (d)(2) of Sec. 155.715 would remove the
requirement for SHOPs to perform employee eligibility determinations,
accept and process single employee SHOP application forms, as well as
verify employee eligibility for plan years beginning on or after
January 1, 2018. Furthermore, our proposed amendments to remove
paragraphs (c) and (d) of Sec. 155.725 would remove the requirement
for SHOPs to maintain enrollment records for plan years beginning on or
after January 1, 2018. SHOPs that utilize these proposed flexibilities,
like the FF-SHOPs, may be unable to satisfy the requirements in Sec.
155.725(g). To align with these proposed amendments, we propose that
the requirements in Sec. 155.725(g) would not apply for plan years
beginning on or after January 1, 2018. Instead, we anticipate that
enrollment timelines, deadlines, and coverage effective dates for newly
qualified employees in SHOPs that pursue the proposed approach would be
set by employers and issuers consistent with applicable State law and
otherwise applicable Federal law, including Sec. 147.116. Further, as
noted above, issuers offering plans in SHOPs would still be required to
adhere to the guaranteed availability requirements set in Sec.
147.104(b)(1)(i) and the special enrollment period requirements in
proposed Sec. 155.726(c).
We also propose that the requirement in Sec. 155.725(h)(1) that a
SHOP establish the effective dates of coverage for initial and annual
group enrollments would not apply for plan years beginning on or after
January 1, 2018. Because SHOPs utilizing the proposed flexibilities,
like the FF-SHOPs, would no longer be involved in processing group
enrollments, and would therefore not be able to hold issuers
accountable to these enrollment deadlines, we believe it is more
appropriate to permit QHP issuers in SHOPs to set their own enrollment
timelines. However, SBEs would be permitted to continue establishing
these effective dates. We are also proposing to remove paragraph (h)(2)
for plan years beginning on or after January 1, 2018, which establishes
the effective dates for initial and annual group enrollments in FF-
SHOPs, because the FF-SHOPs intends to utilize the proposed
flexibilities. We anticipate that issuers in SHOPs that pursue this
approach, like in FF-SHOPs, would set enrollment timelines for employer
groups participating in these SHOPs, based on their current practices,
and consistent with the market rules set forth in Sec. Sec. 147.104
and 147.106, and otherwise applicable State law.
We propose that the special enrollment periods specified in Sec.
155.725(j) would continue to be applicable in the SHOPs for plan years
beginning on or after January 1, 2018, and propose to include these in
Sec. 155.726(c). We also propose that the requirements regarding
special enrollment periods in Sec. 155.725(j)(3) would apply for plan
years beginning on or after January 1, 2018. However, we propose to
modify the SHOPs' responsibilities with respect to special enrollment
periods. As stated earlier in this preamble, under our proposed
approach for SHOPs beginning in plan years starting on or after January
1, 2018, SHOPs would no longer be required to provide functionality
related to enrollment of employees. For SHOPs that pursue the proposed
approach, like the FF-SHOPs, issuers would preliminarily be responsible
for completing enrollments, and so we expect issuers would implement
enrollment periods. We are therefore proposing to modify the
requirements to reflect that the SHOP's proposed role is not to provide
special enrollment periods, but to ensure that QHP issuers offering
coverage through the SHOP provides the special enrollment periods set
forth in regulation.
We seek comment on these proposals.
j. Application Standards for SHOP for Plan Years Beginning Prior to
January 1, 2018 (Sec. 155.730)
As discussed in the following section, we propose to modify the
regulatory requirements regarding application standards of a SHOP for
plan years beginning on or after January 1, 2018 and to introduce those
requirements in a new Sec. 155.731. To reflect the proposal that the
requirements currently in Sec. 155.730 would apply only for plan years
beginning before January 1, 2018, we propose to amend the heading of
Sec. 155.730 and add paragraph (h), to state that the section would
apply for only plan years that begin prior to January 1, 2018,
effective on the effective date of the final rule, if finalized as
proposed.
k. Application Standards for SHOP for Plan Years Beginning on or After
January 1, 2018 (Sec. 155.731)
Section 155.730 describes the requirements for employer and
employee applications in the SHOPs. We propose to modify these
requirements for plan years beginning on or after January 1, 2018, and
to introduce these modified requirements in Sec. 155.731. With the
exception of the proposed changes to the requirements described here,
the requirements would remain the same as in Sec. 155.730. The
proposals in this section would be effective on the effective date of
the final rule, if finalized as proposed.
Because under the proposed approach to SHOP enrollment for plan
years beginning on or after January 1, 2018, QHP issuers would complete
the process of enrolling qualified employees into coverage in SHOPs, it
would not be necessary for a SHOP to collect information necessary for
purchasing coverage. Therefore, we propose to modify the information
collection requirements related to the single employer application to
require SHOPs to collect only information that would be necessary for
SHOPs to determine employer eligibility to participate in the SHOP
under Sec. 155.710(b). To more closely align the description of the
data elements collected with those standards for eligibility to
participate, we propose to require the SHOP to collect the employer
name and address of the employer's locations; information sufficient to
confirm that the employer is a small employer; the Employer
Identification Number; and information sufficient to confirm that the
employer is offering, at a minimum, all full-time employees' coverage
in a QHP through a SHOP. SHOPs could collect other information, at
their option subject to the limitations in Sec. 155.716(c)(2) and
Sec. 155.731(f).
Paragraph (c) of 155.730 requires the use of a single employee
application. We propose that this requirement would not apply for SHOP
beginning for plan years starting on or after January 1, 2018, as the
information collected in this application would no longer be necessary,
since the SHOP would no longer process employees' enrollment.
Section 155.730(d) permits a SHOP to use a model single employer
application and model single employee application provided by HHS and
Sec. 155.730(e) permits the use of HHS-approved alternatives to these
model applications. We also propose to maintain these options, but for
consistency with the proposal described throughout this preamble, we
propose not to reference a model single employee application. We expect
to update the model single employer application for consistency with
the elements described in proposed Sec. 155.731(b).
Paragraph (g) of Sec. 155.730 describes additional application
safeguards for SHOP employer and employee applications, which we
propose to
[[Page 51100]]
maintain in Sec. 155.731(f) with minor amendments to reflect the
proposal to eliminate the requirement to collect a single employee
application. We also propose in new paragraph (g) to state that Sec.
155.731 is only applicable for plan years beginning on or after January
1, 2018. If finalized, these changes would become effective as of the
effective date of the final rule.
We seek comment on these proposals.
l. Termination of SHOP Enrollment or Coverage (Sec. 155.735)
Section 155.735 outlines requirements related to terminations of
SHOP coverage or enrollment. Under our proposed approach, described in
detail in the preamble to earlier sections of this proposed rule, the
process of completing enrollments, as well as terminating coverage,
could be completed by issuers, and would not be required to be
completed by the SHOPs. Issuers would be expected to comply with
otherwise applicable State and Federal law regarding terminating
coverage, the timelines and effective dates for termination, and any
notice requirements, including those at Sec. Sec. 147.106 and 156.285.
Accordingly, we propose that this section would be applicable for only
plan years beginning prior to January 1, 2018, as described in the
proposed amendment to the heading and new paragraph (h), effective on
the effective date of the final rule, if finalized as proposed. SHOPs
maintaining current enrollment functions would be encouraged to set
termination guidelines and distribute notices for terminations based on
nonpayment of premiums or loss of employee eligibility, unless State
law requires QHP issuers to send the notices. Because SHOPs, such as
the FF-SHOPs, would no longer be required to enroll groups into a SHOP
QHP, they would no longer be required to maintain the ability to
terminate coverage. We believe proposed new Sec. Sec. 155.716 and
157.206 sufficiently address terminations of eligibility for
participation in a SHOP. We seek comments on this proposal.
m. SHOP Employer and Employee Eligibility Appeals Requirements for Plan
Years Beginning Prior to January 1, 2018 (Sec. 155.740)
As discussed in the following section, we propose to modify the
regulatory requirements regarding employer and employee eligibility
appeals in SHOP for plan years beginning on or after January 1, 2018,
and to introduce those modified requirements in a new Sec. 155.741. To
reflect the proposal that the requirements currently in Sec. 155.740
would apply only for plan years beginning before January 1, 2018,
effective on the effective date of the final rule, if finalized as
proposed, we propose to amend the heading of Sec. 155.740 and add
paragraph (p), to state that the section would apply only for plan
years that begin prior to January 1, 2018.
n. SHOP Employer and Employee Eligibility Appeals Requirements for Plan
Years Beginning on or After January 1, 2018 (Sec. 155.741)
Section 155.740 describes the SHOP eligibility appeals process for
employers and employees. These provisions describe the applicable
definitions, the general requirements to provide for appeals, and
employers' and employee's rights to appeal an eligibility determination
from the SHOP.
To continue to provide for employer eligibility appeals, we propose
to add new Sec. 155.741, mirroring Sec. 155.740, with the following
exceptions. Because we propose elsewhere that the requirement to
provide employees with eligibility determinations and the requirement
in Sec. 155.715(f) regarding notification of employee eligibility
would no longer apply in plan years beginning on or after January 1,
2018, we propose not to include a paragraph mirroring Sec. 155.740(d),
which describes employees' rights to appeal. We also propose to omit
other references to employee appeal rights, to add references to
provide for appeals of terminations of eligibility to participate in a
SHOP, and to update cross-references as applicable.
We propose in paragraph (o) that the provisions of Sec. 155.741
would only be applicable to plan years beginning on or after January 1,
2018, effective on the effective date of the final rule, if finalized
as proposed.
We seek comments on these proposals.
E. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. FFE and SBE-FP User Fee Rates for the 2019 Benefit Year (Sec.
156.50)
Section 1311(d)(5)(A) of the PPACA 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 PPACA directs HHS to operate an Exchange within the State.
Accordingly, in Sec. 156.50(c), we specified that a participating
issuer offering a plan through an FFE or SBE-FP 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 and SBE-FPs 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 or SBE-FP.
OMB Circular No. A-25R establishes Federal policy regarding user
fees; it specifies that a user fee 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 through 2018, issuers seeking to participate in an FFE in
the 2019 benefit year 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 for the 2019 benefit year 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; and
Certification processes for QHPs (including ongoing
compliance verification, recertification and decertification).
OMB Circular No. A-25R further states that user fee charges should
generally be set at a level that is 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). Activities performed by the Federal government that
do not provide issuers participating in an FFE with a special benefit
are not covered by this user fee.
Based on estimated contract costs, enrollment and premiums for the
2019 benefit year, we propose to maintain the 2019 benefit year user
fee rate for all participating FFE issuers at 3.5 percent of total
monthly premiums. We seek comment on this proposal.
State-based Exchanges on the Federal platform enter into a Federal
platform
[[Page 51101]]
agreement with HHS to leverage the systems established for the FFEs to
perform certain Exchange functions, and to enhance efficiency and
coordination between State and Federal programs. Accordingly, in Sec.
156.50(c)(2), we specified that an issuer offering a plan through an
SBE-FP must remit a user fee to HHS, in the timeframe 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 SBE-FPs for the applicable benefit year, unless the SBE-FP and HHS
agree on an alternative mechanism to collect the funds from the SBE-FP
or State instead of direct collection from the SBE-FP issuers. The
benefits provided to issuers in SBE-FPs by the Federal government will
include use of 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 PPACA, and
enrollment in QHPs under Sec. 155.400. As previously discussed, OMB
Circular No. A-25R established Federal policy regarding user fees, and
specified 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 user fee rate for SBE-FPs is
calculated based on the proportion of FFE costs that are associated
with the FFE information technology infrastructure, the consumer call
center infrastructure, 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
eligibility determinations for enrollment in QHPs and other applicable
State health subsidy programs as defined at section 1413(e) of the
PPACA, and personnel who perform the functions set forth in Sec.
155.400 to facilitate enrollment in QHPs. Based on this methodology, 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 plans offered through an SBE-FP. This fee would
support FFE operations associated with providing the services described
above. We seek comment on this proposal.
We will continue to examine contract cost estimates for the special
benefits provided to issuers offering QHPs on the FFEs and SBE-FPs for
the 2019 benefit year as we finalize the FFE and SBE-FP user fee rates,
which will be reflected in the final rule. Additionally, outreach and
education efforts will be evaluated annually and funded at the
appropriate level. We seek comment on the proposed FFE and SBE-FP user
fee rates.
As we describe elsewhere in this proposed rule, for plan years
beginning on or after January 1, 2018, effective on the effective date
of the final rule, if finalized as proposed, we are proposing to remove
employee eligibility, premium aggregation, and online enrollment
functionality through the FF-SHOPs for FFE and SBE-FP SHOP issuers.
Given the changes to the functionality for the FF-SHOPs, HHS would not
provide these special benefits through the FF-SHOPs after the effective
date of the rule finalizing this proposal. Therefore, HHS would not
assess a user fee on issuers offering QHPs through FF-SHOPs for FFE or
SBE-FP SHOP issuers because these user fees are currently only charged
to issuers who receive special benefits from enrolling individuals
through the FF-SHOPs' platform. In instances where enrollment did occur
through the Federal platform, for example, for plan years beginning
prior to the effective date of the final rule, HHS will continue
charging SHOP issuers monthly FFE or SBE-FP user fees, as applicable.
2. Essential Health Benefits Package
Section 2707(a) of the PHS Act, as added by the PPACA, directs
health insurance issuers that offer non-grandfathered health insurance
coverage in the individual or small group market to ensure that such
coverage includes the EHB package, which is defined under section
1302(a) of the PPACA to include coverage that provides for the EHB
defined by the Secretary under section 1302(b) of the PPACA; limits
cost sharing in accordance with section 1302(c) of the PPACA; and
provides either the bronze, silver, gold, or platinum level of
coverage, or is a catastrophic plan under sections 1302(d) and (e) of
the PPACA. Section 1302(b) of the PPACA states that the Secretary is to
define EHB, except that EHB must include at least the following general
categories and the items and services covered within the categories:
(1) Ambulatory patient services; (2) emergency services; (3)
hospitalization; (4) maternity and newborn care; (5) mental health and
substance use disorder services including behavioral health treatment;
(6) prescription drugs; (7) rehabilitative and habilitative services
and devices; (8) laboratory services; (9) preventive and wellness
services and chronic disease management; and (10) pediatric services,
including oral and vision care. Additionally, section 1302(b)(2) of the
PPACA states that the Secretary must ensure that the scope of EHB for
the 10 EHB categories be equal to the scope of benefits provided under
a typical employer plan, as determined by the Secretary. Furthermore,
section 1302(b)(2) of the PPACA states, in defining and revising EHB,
that the Secretary is to submit a report to the appropriate committees
of Congress containing a certification from the CMS Chief Actuary that
such EHB are equal in scope to the benefits provided under a typical
employer plan. In defining and revising the 10 EHB categories, the
Secretary must also provide notice and an opportunity for public
comment. Additionally, section 1302(b)(4)(G) and (H) of the PPACA
require the Secretary to periodically review and update the definition
of EHB and provide a report to Congress that contains assessments
related to the need to update the definition of EHB.
Section 1302(b)(4) of the PPACA requires the Secretary, in defining
the EHB, to: (1) Ensure that such EHB reflect an appropriate balance
among the categories so that benefits are not unduly weighted toward
any category; (2) not make coverage decisions, determine reimbursement
rates, establish incentive programs, or design benefits in ways that
discriminate against individuals because of their age, disability, or
expected length of life; (3) take into account the healthcare needs of
diverse segments of the population, including women, children, persons
with disabilities, and other groups; (4) ensure the health benefits
established as essential not be subject to denial to individuals
against their wishes on the basis of the individuals' age or expected
length of life or of the individuals' present or predicted disability,
degree of medical dependency, or quality of life; and (5) provide that
a QHP shall not be treated as providing coverage for EHB unless it
meets certain requirements for coverage of emergency services.
To implement section 1302(b) of the PPACA, HHS defined EHB based on
a benchmark plan approach, which provided at Sec. 156.100 for the
States' selection from one of 10 base-benchmark plans, including the
largest health plan by enrollment in any of the three largest small
group insurance products by enrollment, any of the largest three
employee health benefit plan options by enrollment offered and
generally available to State employees in the State, any of the largest
three
[[Page 51102]]
national Federal Employees Health Benefits Program (FEHBP) plan options
by aggregate enrollment that is offered to all health-benefits-eligible
Federal employees under 5 U.S.C. 8903, or the coverage plan with the
largest insured commercial non-Medicaid enrollment offered by a health
maintenance organization operating in the State. States were required
at Sec. 156.110 to supplement their base-benchmark plan from Sec.
156.100 to ensure the 10 EHB categories were being covered to establish
the State's EHB-benchmark plan. Section 156.110 also ensures that the
EHB-benchmark plan meets the standards of nondiscrimination and balance
of benefits, and allows habilitative services to be determined by the
State.
We believe that States should have additional choices with respect
to benefits and affordable coverage. As such, we are proposing to
provide States with additional flexibility in their selection of an
EHB-benchmark plan for plan year 2019 and later plan years. In addition
to granting States more flexibility regulating their markets, we
believe these changes would permit States to modify EHB to increase
affordability of health insurance in the individual and small group
markets beginning in 2019. We propose that the current EHB-benchmark
plan selection would continue to apply for any year for which a State
does not select a new EHB-benchmark plan under this proposal. We seek
comment on all aspects of this proposal. We also seek comment on the
timing of this proposed policy, and specifically whether this policy
should start with the 2019 plan year, as proposed, or with the 2020
plan year.
For plan years further in the future, we are considering
establishing a Federal default definition of EHB that would better
align medical risk in insurance products by balancing costs to the
scope of benefits. The benefits of a Federal default could outweigh the
potential impact on flexibility afforded to States, but we are also
considering allowing States continued flexibility to adopt their own
EHB-benchmark plans, provided they defray costs that exceed the Federal
default. The National Academy of Medicine previously recommended a
similar approach to HHS in their report on Essential Health Benefits:
Balancing Costs and Coverage.\43\ We understand that in developing this
type of default definition there are trade-offs in adjusting benefits
and services. For instance, as part of this approach, we could
establish a national benchmark plan standard for prescription drugs
that could balance these tradeoffs and provide a consistent
prescription drug default standard across States. We anticipate
publishing further details on such an approach and gathering
stakeholder input as we explore this longer-term approach. For now, we
solicit initial comments on this longer-term approach, particularly
with regards to setting a national prescription drug benefit standard
under a Federal default EHB definition and the trade-offs in adjusting
benefits from the current EHBs.
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\43\ Institute of Medicine, ``Essential Health Benefits:
Balancing Coverage and Cost.'' October 6, 2011. Available at https://www.nationalacademies.org/hmd/Reports/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost.aspx.
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a. State Selection of Benchmark Plan for Plan Years Beginning Prior to
January 1, 2019 (Sec. 156.100)
To reflect the proposed options in Sec. 156.111 for States to
adopt new EHB-benchmark plans for plan years 2019 and later, we propose
to make conforming changes to Sec. 156.100 to explicitly state that
this selection applies only through plan years beginning in 2018, and
Sec. 156.111 applies for plan years beginning after 2018.
b. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
After January 1, 2019 (Sec. 156.111)
i. States' EHB-Benchmark Plan Options (Sec. 156.111(a))
We propose adding new Sec. 156.111, which would provide States
with the flexibility to update their EHB-benchmark plans more
frequently and to select among more options. Specifically, we propose
that a State may change its EHB-benchmark plan by: (1) Selecting the
EHB-benchmark plan that another State used for the 2017 plan year \44\
under Sec. 156.100 and Sec. 156.110; (2) replacing one or more EHB
categories of benefits under Sec. 156.110(a) in its EHB-benchmark plan
used for the 2017 plan year with the same categories of benefits from
another State's EHB-benchmark plan used for the 2017 plan year under
Sec. 156.100 and Sec. 156.110; or (3) otherwise selecting a set of
benefits that would become the State's EHB-benchmark plan, provided
that the EHB-benchmark plan does not exceed the generosity of the most
generous of among a set of comparison plans. Under this third option,
the comparison plans would be the State's EHB-benchmark plan used for
the 2017 plan year and the plans described in Sec. 156.100(a)(1) for
the 2017 plan year, supplemented as necessary under Sec. 156.110.
These plans would include the largest health plan by enrollment in each
of the three largest small group insurance products by enrollment from
the State's 2017 EHB-benchmark plan options.\45\ The intention of this
proposal is to provide flexibility and the option for stability.
Specifically, the proposal would allow States the flexibility to change
their EHB-benchmark plans annually. At the same time, this proposed
policy would also allow States that prefer to maintain their current
EHB-benchmark plans to do so without action.
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\44\ The State's EHB-benchmark plans used for the 2017 plan year
are based on plans from a previous plan year, but we occasionally
refer to them as 2017 plans because these plans are applicable as
the State's EHB-benchmark plans in 2017.
\45\ The Essential Health Benefits: List of the Largest Three
Small Group Products by State for 2017 is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Top3ListFinal-5-19-2015.pdf. States' EHB-benchmark plans used for
the 2017 plan year are able at https://www.cms.gov/;CCIIO/Resources/
Data-Resources/Downloads/Final-List-of-BMPs_4816.pdf.
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Option 1: Select Another State's EHB-Benchmark Plan
The first option proposed in paragraph (a)(1) would permit a State
to select one of the EHB-benchmark plans used for the 2017 plan year by
another State. This option would increase the number of selection
options for each State without necessarily requiring extensive analysis
on the part of a State because all States' current benchmark plan
documents are publicly available.\46\ We are not proposing to change
the State mandate policy at Sec. 155.170 under this option. Under this
proposed policy, we propose that benefits mandated by State action
prior to or on December 31, 2011, could continue to be considered EHB
under Sec. 155.170, and would not require the State to defray the
costs. However, if a State selects an EHB-benchmark plan
[[Page 51103]]
from another State using this option, the selecting State would still
be required to defray the cost of any benefits included in that State's
EHB-benchmark plan that are benefits mandated by the selecting State
after December 31, 2011, and that are subject to defrayal under the
current regulations.\47\ For example, if State A selects the EHB-
benchmark plan of State B, State A would be required to defray the cost
of any benefits included in State B's EHB-benchmark plan that are
required to be provided by State A's action after December 31, 2011,
and that are subject to defrayal under current regulations. We solicit
comments on this proposal, including on the application of the State
mandate policy under this proposal and on whether other flexibilities
are needed by States under this proposed option, such as allowing a
State to select its EHB-benchmark plan from any of the 10 previous
base-benchmark plan options available to the State or other States
under Sec. 156.100, supplemented as necessary under Sec. 156.110.
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\46\ Benefits and limits described in the available benchmark
plan documents on CMS's Web site may not be fully applicable due to
other laws and regulations. For instance, under section 2711 of the
PHS Act, as added by the PPACA, issuers may not impose dollar limits
on EHBs. When dollar limits are specified in available benchmark
plan documents, States would have removed the dollar limits or
converted them to non-dollar limits when interpreting and applying
EHB policy. CMS recognizes States as the primary enforcers of EHB
policy. Thus, when a State would use a benchmark plan that
originated in another State under any proposals under Sec. 156.111,
we would defer to the selecting State's implementation of the
benefits and limits consistent with otherwise applicable law, even
when such interpretation differs from the originating State's
interpretation. This applies throughout the proposals under Sec.
156.111. All States' current benchmark plan documents are posted on
CCIIO's Web site at https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html.
\47\ Pursuant to 45 CFR 155.170, the State must make payments to
defray the cost of additional required benefits either to an
enrollee, as defined in 45 CFR 155.20, or directly to the QHP issuer
on behalf of the enrollee.
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Option 2: Replace Category or Categories From Another State's EHB-
Benchmark Plan
Paragraph (a)(2) would allow a State to partially replace its
current EHB-benchmark plan, using EHB-benchmark plans used by other
States for the 2017 plan year. Under this option, we propose that a
State may replace any EHB category or categories of benefits in its
EHB-benchmark plan from the 10 required EHB categories with the same
category or categories of benefits from another State's EHB-benchmark
plan used for the 2017 plan year. For example, a State may select the
prescription drug coverage from another State's EHB-benchmark plan
(which might include a different formulary drug count) and a third
State's EHB-benchmark plan hospitalization category. This option would
allow States to make precise changes to their EHB-benchmark plans by
adjusting specific categories of benefits.
Similar to the option proposed in paragraph (a)(1), we also propose
that benefits mandated by State action prior to or on December 31,
2011, could continue to be considered EHB under this proposal in
accordance with Sec. 155.170, and would not require the State to
defray their costs. However, if a State uses this option to replace one
or more categories of its EHB-benchmark plan used for the 2017 plan
year with a category or categories of benefits from another State's
EHB-benchmark plan used for the 2017 plan year, the selecting State
would be required to defray the cost of any benefits included in the
categories of benefits from the other State's EHB-benchmark plan that
are mandated by the selecting State's action after December 31, 2011
and that are subject to defrayal under current regulations. For
example, if State A replaces a category of benefits in its EHB-
benchmark plan with a category of benefits from State B's EHB-benchmark
plan, State A must defray the cost of any benefits in that category
mandated by State A after December 31, 2011 that are included in the
replacement category of benefits and that are subject to defrayal under
current regulations. We solicit comments on this proposed option,
including on the application of the State mandate policy under this
proposal and on whether other flexibilities are needed by States under
this proposed option, such as allowing States to select their
categories of benefits from any of the 10 previous base-benchmark plan
options available to the State or other States under Sec. 156.100,
supplemented as necessary under Sec. 156.110.
Option 3: Select a Set of Benefits To Become the State's EHB-Benchmark
Plan
Lastly, under paragraph (a)(3), we propose that the State could
select a set of benefits that would become its EHB-benchmark plan using
a different process, so long as the new EHB-benchmark plan does not
exceed the generosity of the most generous among a set of comparison
plans. Under this option, the set of comparison plans would be the
State's EHB-benchmark plan used for the 2017 plan year and the plans
described in Sec. 156.100(a)(1) that were available as base-benchmark
plan options for the 2017 plan year, supplemented as necessary under
Sec. 156.110. These plans would include the largest health plan by
enrollment in each of the three largest small group insurance products
by enrollment from the State's base-benchmark options for the 2017 plan
year. We believe this proposed limit on the generosity of the plan
benefits would help to ensure that States select EHB in a manner that
is equal to the scope of benefits provided under a typical employer
plan, while minimizing the opportunity for a State to select EHB in a
manner that would significantly decrease affordability for patients.
While this proposed option would allow more flexibility to States in
establishing an EHB-benchmark plan than other proposed options, this
option would be the most resource intensive for the State. For example,
a State selecting this option would need to have a formulary drug list
that would be used to establish the State's EHB-benchmark plan drug
count for the purposes of Sec. 156.122(a)(1), which could be more
labor intensive for the State than selecting another State's EHB-
benchmark plan prescription drug category of benefits that already
exists and is publicly available for review.
Furthermore, this option requires that the State determine an EHB-
benchmark plan's generosity, and we propose that the State would
determine if its proposed EHB-benchmark plan does not exceed the
generosity of the most generous of a set of comparison plans using an
actuarial certification, developed by an actuary who is a member of
American Academy of Actuaries, in accordance with generally accepted
actuarial principles and methodologies. For this actuarial
certification, we propose that the State could determine generosity in
the same manner as we would use to measure whether the plan is equal in
scope of benefits provided under a typical employer plan, described
later in this section. We solicit comments on this proposed standard
and approach to calculating the generosity of plans' benefits.
We also recognize that the increased flexibility offered to States
under this proposed option to define an EHB-benchmark plan for 2019 and
later years could allow a State to embed any desired benefit mandate
into the EHB-benchmark plan, without any requirement to defray the
obligation. For this reason, we propose to apply the benefit mandate
defrayal policy under Sec. 155.170 to this option. Specifically, we
propose that benefits mandated by State action prior to or on December
31, 2011 could continue to be considered EHB under this proposal
according to Sec. 155.170, and would not require State defrayal.
However, if a State selects its EHB-benchmark plan using this option,
the State must continue to defray the cost of any benefits mandated by
State action after December 31, 2011 that are subject to defrayal under
current regulations. For example, if the State selects a set of
benefits to become its EHB-benchmark plan under paragraph (a)(3), any
benefits mandated by that State after December 31, 2011 that are
subject to defrayal under current regulations would not be considered
EHB, and the State would be required to defray the cost of any such
benefits included in the State's EHB-benchmark plan under this proposed
option.
[[Page 51104]]
We solicit comments on this proposal and all of the proposed
options in this section, including whether a different approach is
needed to defray the cost of any benefits mandated by State action, on
our proposed approach to limit a State's new EHB-benchmark plan such
that it does not exceed the generosity of the comparison plans and on
whether other options should be provided to States to select their EHB-
benchmark plans beyond the three proposed options.
ii. The Requirements for States' EHB-Benchmark Plans (Sec. 156.111(b)-
(d))
For all of the proposed options for States to select a new EHB-
benchmark plan, we also propose that a State's EHB-benchmark plan must
meet certain requirements established under the PPACA with regard to
EHB coverage, scope of benefits, and notice and opportunity for public
comment. In paragraph (b)(1), we propose to require that the State's
EHB-benchmark plan provide an appropriate balance of coverage for the
10 EHB categories of benefits as established at Sec. 156.110(a) and
under section 1302(b)(1) of the PPACA. The intention of this proposed
requirement is to ensure that the State's EHB-benchmark plan selection
meets the requirement to cover at least the 10 EHB categories,
including the items and services covered in those categories.
In paragraph (b)(2), we propose to define requirements regarding
the scope of benefits that must be provided by a State's EHB-benchmark
plan. In paragraph (b)(2)(i), we propose that the State's EHB-benchmark
plan must be equal in scope of benefits to what is provided under a
typical employer plan. This proposed requirement reflects section
1302(b)(2) of the PPACA, which requires the Secretary to ensure that
the scope of the EHB is equal to the scope of benefits provided under a
typical employer plan, as determined by the Secretary. We recognize
that the scope of benefits covered by employer plans varies, including
variations based on State laws, consumers' purchasing preferences, and
local markets. We believe it is appropriate to recognize this variation
in the definition of a typical employer plan. We also believe that,
although State laws (for example, laws with benefit mandates) may
affect the scope of benefits in plans available in a given State, it is
important that a Federal definition of a typical employer plan maximize
States' flexibility to choose an EHB-benchmark plan, so that States are
not constrained in their selection. Therefore, we propose to define a
typical employer plan as an employer plan within a product (as these
terms are defined in Sec. 144.103 of this subchapter) with substantial
enrollment in the product of at least 5,000 enrollees sold in the small
group or large group market, in one or more States, or a self-insured
group health plan with substantial enrollment of at least 5,000
enrollees in one or more States. We also seek comment on whether the
definition of a typical employer plan should reflect in substantial
part a plan that would be typical in the State in question, and whether
an appropriate way to measure typicality in that case would be to
provide that the typical employer plan be defined to also have at least
100 enrollees enrolled in that plan or product in the applicable State.
We seek comment broadly on whether typicality should be defined in
other ways, including whether it should be based upon the State's 10
base-benchmark plan options for plan year 2017, supplemented as
required to become the State's EHB-benchmark plan under Sec. 156.110,
or on whether the definition of a typical employer plan for this
purpose should be limited to plans that already cover all 10 EHB
categories. We also solicit comment on whether the proposed typical
employer plan definition should exclude self-insured plans, since
States may not have the ability to obtain the required information on
those plans.
Under the proposed definition of a typical employer plan as a plan
with enrollment of at least 5,000 enrollees in one or more States, we
believe that the State's option to select another State's EHB-benchmark
plan at proposed Sec. 156.111(a)(1) would automatically meet this
requirement because each of the available options is an employer plan
that had substantial enrollment. We solicit comment on the proposed
definition of a typical employer plan, including on whether we should
provide additional guidance or requirements for the definition of a
typical employer plan, such as requiring that the plan selected as a
typical employer plan is from a recent year after December 31, 2013,
requiring that the plan provide minimum value, or requiring that the
plan selected as a typical employer plan not be an indemnity plan or an
account-based plan like a health reimbursement arrangement. We also
solicit comment on whether actuaries could develop a standard of
practice for a benefit comparison calculation to determine that a plan
is equal to the scope of benefits provided under a typical employer
plan that could also apply to determine that a State's EHB-benchmark
plan does not exceed the generosity of the most generous plan in
accordance with Option 3 under proposed Sec. 156.111(a)(3).
We specifically seek comment on CMS's draft example of an
acceptable methodology for comparing benefits of a State's EHB-
benchmark plan selection to the benefits of a typical employer
plan.\48\ The purpose of this draft document is to outline an example
of one approach actuaries could follow when comparing benefits in order
to complete the required actuarial certification and associated
actuarial report under proposed Sec. 156.111(e)(2)(i) for typicality
described later in this section. We are particularly interested in
comments on this draft methodology from the actuarial community. We
further request that commenters submit comments to this draft document
as part of their comments to this proposed rule.
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\48\ The Draft Example of an Acceptable Methodology for
Comparing Benefits of a State's EHB-benchmark Plan Selection to
Benefits of a Typical Employer Plan As Proposed under the HHS Notice
of Benefit and Payment Parameters for 2019 (CMS-9930-P) is available
on CCIIO's Regulation and Guidance Web page at https://www.cms.gov/cciio/resources/regulations-and-guidance/.
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In paragraph (b)(2)(ii), we propose that the State's EHB-benchmark
plan must not have benefits unduly weighted towards any of the
categories of benefits at Sec. 156.110(a) as established under section
1302(b)(4)(A) of the PPACA. The purpose of this proposed provision is
to ensure the State's EHB-benchmark plan selection reflects an
appropriate balance among the categories. Additionally, in paragraph
(b)(2)(iii), we propose that the State's EHB-benchmark plan must
provide benefits for diverse segments of the population, including
women, children, persons with disabilities, and other groups as
established under section 1302(b)(4)(C) of the PPACA.
We propose at paragraph (c), that the State must provide reasonable
public notice and an opportunity for public comment on the State's
selection of an EHB-benchmark plan. We believe that some States already
provided public notice and an opportunity for public comment in their
current EHB-benchmark plan selection processes completed for prior plan
years. Recognizing that States have their own processes in place to
provide notice and opportunity for public comment, we propose that
States would determine what constitutes a reasonable public notice and
public comment process. We remind States that any public participation
processes must continue to comply with applicable Federal civil rights
laws, including national
[[Page 51105]]
standards that ensure access to individuals with disabilities. We
solicit comments on whether the State should be required to post the
public notice on their Web site, whether other requirements are needed
for States' public notice and comment processes, and what those
requirements should be. We propose that this process would apply
whenever a State changes its EHB-benchmark plan in accordance with
proposed Sec. 156.111(a).
Lastly, we propose at paragraph (d) that a State must notify HHS of
the selection of a new EHB-benchmark plan by a date to be determined by
HHS for each applicable plan year. We also propose that if the State
does not make a selection by the annual selection date, the State's
EHB-benchmark plan for the applicable plan year would be that State's
EHB-benchmark plan applicable for the prior plan year.
Taken together, these proposed requirements are intended to align
with statutory requirements. With the exception of the proposed change
in this proposed rule to the substitution provision at Sec.
156.115(b), we intend to retain the current issuer requirements related
to EHB at Sec. Sec. 156.115, 156.122,\49\ and 156.125 and those
requirements would continue to apply to all plans subject to the EHB
requirements.
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\49\ 45 CFR 156.122(a)(1) establishes that, generally, a health
plan does not provide EHB unless it covers at least the greater of:
(1) One drug in every United States Pharmacopeia (USP) category and
class; or (2) the same number of prescription drugs in each category
and class as the EHB-benchmark plan. Under the current version of
the USP Medicare Model Guidelines (MMG) drug classification system
used for the EHB drug count at Sec. 156.122(a)(1), this proposal
means that all plans required to comply with EHB will continue to
have to cover at least one drug in the Anti-Addiction/Substance
Abuse Treatment Agents (Opioid Reversal Agent) class. Naloxone is
currently the only active ingredient in the Opioid Reversal Agent
class, and as a result all plans required to comply with EHB would
be required to continue to cover at least one form of naloxone under
this proposed policy. This was previously addressed in the 2018
Letter to Issuers in the Federally-facilitated Marketplaces
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2018-Letter-to-Issuers-in-the-Federally-facilitated-Marketplaces-and-February-17-Addendum.pdf.
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In addition to these proposed requirements in selecting the State's
EHB-benchmark plan, States may also wish to consider the impact of the
EHB-benchmark plan's scope of benefits on the availability of premium
tax credits and cost-sharing reductions for enrollees in the State, as
the premium tax credit is based on the amount of premiums allocable to
EHB and cost-sharing reductions provide reduced cost sharing for EHB
only.\50\ We solicit comments on these proposals and whether other
requirements are needed.
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\50\ The definition of EHB also has an impact on the annual
limitation on cost sharing at section 1302(c) of the PPACA (which is
incorporated into section 2707(b) of the PHS Act) and the
prohibition of annual and lifetime dollar limits at section 2711 of
the PHS Act, as added by the PPACA.
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iii. Data Collection for State's EHB-Benchmark Plans for 2019 Plan Year
and Later (Sec. 156.111(e))
For States that opt to select a new EHB-benchmark plan under Sec.
156.111(a) in any given year, we propose to establish the data
collection requirements under proposed Sec. 156.111(e). We propose a
State must submit documents in a format and manner specified by HHS by
a date determined by HHS.
Specifically, paragraph (e)(1) would require documentation that
would confirm that the State's EHB-benchmark plan complies with the
requirements under proposed Sec. 156.111(a), (b) and (c), which
includes the requirement that the 10 EHB categories of benefits are
covered under the State's EHB-benchmark plan. This documentation would
also include information on which selection option under proposed Sec.
156.111(a) the State is using, including whether the State is using
another State's EHB-benchmark plan.
For a State selecting an EHB-benchmark plan under proposed Sec.
156.111(a)(2) or (3), paragraph (e)(2) would require the State to
submit an actuarial certification and an associated actuarial report
from an actuary, who is a member of the American Academy of Actuaries,
in accordance with generally accepted actuarial principles and
methodologies, affirming that the State's EHB-benchmark plan is equal
in scope of benefits provided under a typical employer plan. We solicit
comments on whether this actuarial certification should also be
required for a State selecting an EHB-benchmark plan under proposed
Sec. 156.111(a)(1). Additionally, we also propose that if the State is
selecting its EHB-benchmark plan using Sec. 156.111(a)(3) that allows
the State to otherwise select a set of benefits that would become its
EHB-benchmark plan, that this actuarial certification would affirm that
the new EHB-benchmark plan does not exceed the generosity of the most
generous among the set of comparison plans specified in paragraph
(a)(3). Specifically, we propose that the actuarial certification and
associated actuarial report would be required to be in accordance with
generally accepted actuarial principles and methodologies. This would
include complying with all applicable Actuarial Standards of Practice
(ASOP) (including but not limited to ASOP 41 on actuarial
communications). For example, ASOP 41 includes disclosure requirements,
including those that apply to the disclosure of information on the
methods and assumptions being used.
The purpose of this provision is to ensure that the scope of EHB is
equal in scope of benefits provided under a typical employer plan and
to provide the information to support the certification from the Chief
Actuary of CMS for the Secretary to submit along with a report to
Congress, consistent with section 1302(b)(2)(B) of the PPACA. As
described previously, we are seeking comment on a draft methodology for
comparing benefits of a State's EHB-benchmark plan selection to the
benefits of a typical employer plan.\51\ We solicit comment on this
proposed actuarial certification and associated actuarial report and on
whether the draft methodology should be the required approach for the
State's actuarial certification and associated actuarial report.
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\51\ The Draft Example of an Acceptable Methodology for
Comparing Benefits of a State's EHB-benchmark Plan Selection to
Benefits of a Typical Employer Plan As Proposed under the HHS Notice
of Benefit and Payment Parameters for 2019 (CMS-9930-P) is available
on CCIIO's Regulation and Guidance Web page at https://www.cms.gov/cciio/resources/regulations-and-guidance/.
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Paragraph (e)(3) would require the State to submit the State's EHB-
benchmark plan document that reflects the benefits and limitations,
including the medical management requirements, a schedule of benefits
and, if the State is selecting its EHB-benchmark plan using the option
in paragraph (a)(3) of this section, a formulary drug list in a format
and manner specified by HHS similar to current Sec. 156.120. The
purpose of this provision is to ensure that the State's EHB-benchmark
plan has a clearly defined set of covered benefits and limits. For a
State that chooses an EHB-benchmark plan under proposed Sec.
156.111(a)(1), the State may submit the plan document from the other
State's EHB-benchmark plan used for the 2017 plan year to fulfill this
proposed requirement. For a State that selects an EHB-benchmark plan
under proposed Sec. 156.111(a)(2), the State would create a combined
plan document by pulling parts of the plan documents from the other
State's or States' benchmark plan documents. States may need to make
conforming edits in the other States' plan documents to align language
and terminology when pulling language from other States' plan
documents. For a State that chooses the option proposed
[[Page 51106]]
at Sec. 156.111(a)(3), the State may need to develop a plan document
for this purpose. Additionally, under proposed Sec. 156.111(e)(3), if
the State is selecting its EHB-benchmark plan using the option in Sec.
156.111(a)(3) of this section, we propose that the State must also
include a formulary drug list for the State's EHB-benchmark plan in a
format and manner specified by HHS. Specifically, the State would need
to submit a formulary drug list in the format and manner specified by
HHS, which is a separate template from the plan document. We also
propose for the purposes of a benefit, such as pediatric dental, that
is defined by another program under the State's EHB-benchmark plan, the
State may submit a separate document that reflects the benefits and
limitations, including the medical management requirements and a
schedule of benefits comparable to how States that defined their dental
coverage using their State's CHIP programs have done previously.
Otherwise, regardless of which option the State is using to select a
new EHB-benchmark plan, the State would be expected to submit one
comprehensive plan document for the entire State's EHB-benchmark plan
benchmark selection.
Lastly, paragraph (e)(4) would require the State to submit
documentation specified by HHS, which is necessary to operationalize
the State's EHB-benchmark plan. This documentation would be used to
provide public resources on a State's EHB-benchmark plan and support
related templates and tools. We propose that this documentation would
include having the State submit a complete and accurate EHB summary
chart that reflects the State's EHB-benchmark plan and aligns with the
documentation that we currently make publicly available on a State's
EHB-benchmark plan. The purpose of this provision is to ensure that
State's EHB-benchmark plan can be operationalized. For States that
choose Sec. 156.111(a)(1) or (a)(2) where the State is developing its
benchmark plan based on another State's EHB-benchmark plan, the State
could develop this document utilizing information from the EHB summary
chart that is currently publicly available.\52\
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\52\ All States' current benchmark plan documents are posted on
CCIIO's Web site at https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html.
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Like our current approach to the EHB-benchmark plan policy, we
propose that HHS would post the State's EHB summary document and the
State's EHB-benchmark plan document that reflects the benefits and
limitations, including the medical management requirements and a
schedule of benefits that may include a new formulary drug count on
CCIIO's Web site. In addition to posting those documents, we are also
considering posting the State's EHB-benchmark plan confirmations
proposed at Sec. 156.111(e)(1). In preparation for the short
timeframes for States to submit such documents in time for issuers to
design plans for plan years 2019 and 2020, we propose that the deadline
for States' submission of the required documents for the State's EHB-
benchmark plan option would be March 16, 2018, for the 2019 plan year
and July 1, 2018, for the 2020 plan year.\53\ Due to the short
timeframes for 2019, we would not be able to update the Plans and
Benefits Template Add-in file used in the Plans and Benefits Template
for States for 2019.\54\ For 2020, we would plan to update the Add-in
file to reflect the State's EHB-benchmark plan.
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\53\ Due to the proposed tight timeframe for 2019, we would not
be able to allow States to submit additional documentation or
changes to submitted documents after the deadline. Any questions or
issues that a State has about the EHB-benchmark plan documents would
need to be asked and resolved prior to the State's submission
deadline.
\54\ Instead, we would only plan to post the State's EHB-
benchmark documents, including an updated drug count, on CCIIO's Web
site. This means that for 2019 the State would be expected to
instruct its issuers on how to manually change the State's current
Add-in file to align with the State's EHB-benchmark plan.
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We propose that in order for a State's selection of a new EHB-
benchmark plan from the proposed options to be accepted, the State's
new EHB-benchmark plan must comply with the associated EHB regulatory
and statutory requirements, including those under this proposed rule.
If a State's EHB-benchmark plan selection does not meet these
regulatory and statutory requirements, the State's current EHB-
benchmark plan would continue to apply. We solicit comments on the
proposed processes and deadlines for the 2019 and 2020 plan years.\55\
We also solicit comments on the proposed data collection and associated
documents and whether other specifications for these documents are
needed.
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\55\ For the 2019 plan year, HHS would post States' EHB-
benchmark plan documents after the proposed State submission
deadline, which would likely be in April 2018.
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c. Provision of EHB (Sec. 156.115)
We are also proposing additional flexibility for States by revising
the rules regarding EHB benefit category substitution. Currently, EHB
compliant plans are required to provide benefits that are substantially
equal to the EHB-benchmark plan, but are allowed to substitute benefits
within categories, if allowed by the State, provided that the benefits
are actuarially equivalent to the benefit that is being replaced.
Substitutions of prescription drug benefits are not permitted.\56\ We
first introduced the concept of benefit substitution in the 2011 EHB
Bulletin.\57\ The EHB Bulletin considered whether to permit benefit
substitution between benefit categories. Some commenters supported wide
latitude for substitution, while others opposed substitution both
within and across categories. In the EHB Rule, we finalized at Sec.
156.115(b)(1) that substitution could only occur within the statutorily
required benefit categories (other than prescription drug benefits),
not between different benefit categories.
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\56\ See Sec. 156.115(b)(1)(iii), as established in the EHB
Rule. Additionally, Sec. 156.122(a)(1) specifies that plans that
provide EHB must cover at least the greater of: (i) One drug in
every United States Pharmacopeia (USP) category and class; or (ii)
The same number of prescription drugs in each category and class as
the EHB-benchmark plan. Additionally, as discussed in the HHS Notice
of Benefit and Payment Parameters for 2016 Final Rule (80 FR 10817)
preamble for Sec. 156.122, if a plan is covering drugs beyond the
number of drugs covered by the benchmark, all of these drugs are EHB
and must count towards the annual limitation on cost sharing.
\57\ Essential Health Benefits Bulletin, Center for Consumer
Information and Insurance Oversight (December 16, 2011), available
at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
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In an effort to promote greater flexibility, consumer choice, and
plan innovation through coverage and plan design options, we propose
modifying paragraph (b)(1)(ii) to allow for substitution to occur
within the same EHB category and between EHB categories, as long as the
substituted benefit is actuarially equivalent to the benefit being
replaced and is not a prescription drug benefit. The plan with
substitutions must still provide benefits that are substantially equal
to the EHB-benchmark plan, must provide an appropriate balance among
the EHB categories such that benefits are not unduly weighted towards
any category, and must provide benefits for diverse segments of the
population. It is generally the State's responsibility to assess that
EHB compliant plans adhere to these requirements.
We believe this modification at Sec. 156.115(b)(1)(ii) balances
the value of comparability of plan benefits with opportunities for plan
innovation and provision of benefit choice in the market. Under this
approach, to comply with the EHB requirements, plans that exercise the
flexibility to substitute benefits within or between EHB categories
must be able to demonstrate actuarial equivalency of substituted
[[Page 51107]]
benefit categories in accordance with the requirements in paragraph
(b)(2) of this section. These protections would ensure that
substitution within or between benefit categories would balance
adequate coverage for patients with plan innovation.
We also note that nothing in this proposal would prohibit plans
required to provide EHB from imposing non-dollar limits, unless
otherwise prohibited by Federal law.\58\ In addition, we note that the
regulation would continue to defer to States, which would continue to
have the option to set criteria for benefit substitution, enforce a
stricter standard on benefit substitution, or prohibit it altogether
consistent with paragraph (b) of this section. We solicit comments on
this proposed change, including on whether other flexibilities with
regard to substitution are needed and whether additional standards are
necessary to assess the scope and quality of benefits being substituted
between categories. Additionally, we are particularly interested in
comments on this proposal that provide examples of how issuers may be
able to utilize this additional proposed flexibility to meaningfully
substitute benefits between categories. We also seek comment on
examples of substitution that issuers would be interested in pursuing.
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\58\ See Frequently Asked Questions on Essential Health Benefits
Bulletin (February 17, 2012), Q9, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/ehb-faq-508.pdf and the EHB rule. As
finalized in the EHB Rule, issuers of QHPs were permitted to make
actuarially equivalent substitutions within statutory categories
under Sec. 156.115(b)(1)(ii). Therefore, and as further explained
in the EHB FAQ, plans are permitted to impose non-dollar limits,
consistent with other guidance, that are at least actuarially
equivalent to the annual dollar limits.
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d. Premium Adjustment Percentage (Sec. 156.130)
Section 1302(c)(4) of the PPACA directs the Secretary of HHS to
determine an annual premium adjustment percentage, which is used to set
the rate of increase for three parameters detailed in the PPACA: The
maximum annual limitation on cost sharing (defined at Sec.
156.130(a)); the required contribution percentage used to determine
eligibility for certain 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 in the annual 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 estimates and projections of average per enrollee employer-
sponsored insurance premiums from the NHEA, which are calculated by the
CMS Office of the Actuary. Accordingly, using the employer-sponsored
insurance data, the premium adjustment percentage for 2019 is the
percentage (if any) by which the most recent NHEA projection of per
enrollee employer-sponsored insurance premiums for 2018 ($6,396)
exceeds the most recent NHEA estimate of per enrollee employer-
sponsored insurance premiums for 2013 ($5,110).\59\ Using this formula,
the proposed premium adjustment percentage for 2019 is 1.2516634051 or
approximately 25 percent. Based on the proposed 2019 premium adjustment
percentage, we propose the following cost-sharing parameters for
calendar year 2019.
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\59\ We note that the 2013 premium used for this calculation has
been updated to reflect the latest NHEA data. See ``NHE Projections
2016-2025--Tables'' available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html in
Tables 1 and 17. A detailed description of the NHE projection
methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2016.pdf.
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i. Maximum Annual Limitation on Cost Sharing for Calendar Year 2019
Under Sec. 156.130(a)(2), for the 2019 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 2019, 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 dollars. Using the premium adjustment
percentage of 1.2516634051 for 2019 as proposed 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,\60\ we propose
that the 2019 maximum annual limitation on cost sharing would be $7,900
for self-only coverage and $15,800 for other than self-only coverage.
This represents an approximately 7 percent increase above the 2018
parameters of $7,350 for self-only coverage and $14,700 for other than
self-only coverage.
---------------------------------------------------------------------------
\60\ See https://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------
e. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
Sections 1402(a) through (c) of the PPACA 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
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 PPACA, section 1402(c)(1)(B)(ii) of the PPACA
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 PPACA
(that is, 73 percent, 87 percent, or 94 percent, depending on the
income of the enrollee). Accordingly, we propose to continue 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 2019
maximum annual limitation on cost sharing would be $7,900 for self-only
coverage and $15,800 for other than self-only 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 2019 benefit year and our proposed results.
Consistent with our analysis in the 2014 through 2018 Payment
Notices, we
[[Page 51108]]
developed three test silver level QHPs, and analyzed the impact on AV
of the reductions described in the PPACA to the estimated 2019 maximum
annual limitation on cost sharing for self-only coverage ($7,900). The
test plan designs are based on data collected for 2017 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 2019, the test silver level QHPs included a PPO with
typical cost-sharing structure ($7,900 annual limitation on cost
sharing, $2,350 deductible, and 20 percent in-network coinsurance
rate), a PPO with a lower annual limitation on cost sharing ($5,250
annual limitation on cost sharing, $3,050 deductible, and 20 percent
in-network coinsurance rate), and an HMO ($7,900 annual limitation on
cost sharing, $3,375 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, $500
emergency department visit, $25 primary care office visit, and $55
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 2019 AV
Calculator and observed how the reductions in the maximum annual
limitation on cost sharing specified in the PPACA affected the AVs of
the plans. We found that the reduction in the maximum annual limitation
on cost sharing specified in the PPACA for enrollees with a household
income between 100 and 150 percent 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 levels (94 and 87 percent,
respectively). In contrast, the reduction in the maximum annual
limitation on cost sharing specified in the PPACA 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.
In prior years, we have found that for individuals with household
incomes of 250 to 400 percent of the FPL, without any change in other
forms of cost sharing, any reduction in the maximum annual limitation
on cost sharing will cause an increase in AV that exceeds the maximum
70 percent level set in the statute. In the Market Stabilization Rule,
we analyzed the effect of reducing the maximum annual limitation on
cost sharing based on how we calculated the 2018 reduced maximum annual
limitation on cost sharing. We stated that we were not certain what the
AV spread of plan designs will be under the finalized policy, whether
issuers will in fact reduce the AVs of their base silver plans to the
lower end of the de minimis range, and whether issuers will retain plan
designs above the 70 percent AV range and that we would monitor 2018
standard silver plan designs. As a result, we did not reduce the
maximum annual limitation on cost sharing for individuals with
household incomes between 250 and 400 percent FPL.\61\
---------------------------------------------------------------------------
\61\ 2014 Payment Notice, 78 FR at 15481; Market Stabilization
Rule. 82 FR at 18370-18371.
---------------------------------------------------------------------------
We seek comment on this analysis and the proposed reductions in the
maximum annual limitation on cost sharing for 2019.
We note that for 2019, as described in Sec. 156.135(d), States are
permitted to submit for approval by HHS State-specific datasets for use
as the standard population to calculate AV.\62\ No State submitted a
dataset by the September 1, 2017 deadline.
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\62\ The annual deadline for submitting State specific data for
the AV Calculator was announced August 15, 2014. See https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/final-state-avc-guidance.pdf.
Table 10--Reductions in Maximum Annual Limitation on Cost Sharing for 2019
----------------------------------------------------------------------------------------------------------------
Reduced maximum Reduced maximum
annual limitation on annual limitation on
Eligibility category cost sharing for cost sharing for
self-only coverage other than self-only
for 2019 coverage for 2019
----------------------------------------------------------------------------------------------------------------
Individuals eligible for cost-sharing reductions under Sec. $2,600 5,200
155.305(g)(2)(i) (that is, 100-150 percent of FPL)...............
Individuals eligible for cost-sharing reductions under Sec. 2,600 5,200
155.305(g)(2)(ii) (that is, 150-200 percent of FPL)..............
Individuals eligible for cost-sharing reductions under Sec. 6,300 12,600
155.305(g)(2)(iii) (that is, 200-250 percent of FPL).............
----------------------------------------------------------------------------------------------------------------
f. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.
156.150)
Section 1302(d)(2) of the PPACA directs the Secretary to issue
regulations on the calculation of AV and its application to the levels
of coverage. In the 2013 EHB Rule, HHS finalized the requirements for
the calculation of AV for stand-alone dental plans. Specifically, Sec.
156.150 prohibits SADPs from using the AV Calculator used by other
individual and small group market plans and requires SADPs to cover the
pediatric dental EHB at one of two AV levels, within an allowable de
minimis variation of 2 percentage points.
We are proposing to remove the requirement for SADP issuers to meet
[[Page 51109]]
the low (70 percent 2 percentage points) and high (80
percent 2 percentage points) AV levels specified in Sec.
156.150(b). Specifically, we are proposing to remove paragraph (b).
SADP issuers would offer the pediatric dental EHB without selecting or
calculating an AV level of that coverage. SADP issuers would continue
to be held to the annual limitation on cost sharing for the pediatric
EHB, as required in paragraph (a), and provide the pediatric dental EHB
as required by Sec. 155.1065, in order to be certified as QHPs.
The PPACA does not specifically require SADP issuers to offer
coverage at the high and low levels of AV. By removing the AV level
requirement, SADP issuers will have the opportunity to offer more
flexible plan designs to consumers. In previous comments, SADP issuers
had noted that it is difficult to meet the low AV requirements and
offer preventive care without cost sharing, which consumers are
accustomed to in the large group market. Issuers could offer SADPs at
varying premiums and levels of coverage, so long as they continue to
offer the pediatric dental EHB and annual limitations on cost sharing.
We believe that this will allow consumers to select from a greater
variety of plans and find one that is more likely to meet their
specific needs.
We seek comment on this proposal.
3. Qualified Health Plan Minimum Certification Standards
a. Qualified Health Plan Certification (Subpart C)
In the Market Stabilization final rule, HHS finalized several
standards to affirm the traditional role of States in overseeing their
health insurance markets while reducing the regulatory burden of
participating in Exchanges for issuers. We believe that robust
participation of QHP issuers in Exchanges will facilitate consumer
access to affordable coverage. In recognition of the call to return to
States their traditional authority to regulate health plans and to
streamline QHP certification processes, HHS proposes to continue to
enhance the State flexibilities in QHP certification that began for
plan year 2018 by identifying areas where States are already performing
reviews that are duplicative of the Federal QHP certification process
and incorporating these reviews into the QHP certification process. In
addition to empowering States, these proposals would reduce issuer
burden.
In the Market Stabilization final rule, we finalized two proposals
related to QHP certification for plan year 2018 around network adequacy
(Sec. 156.230) and essential community providers (Sec. 156.235) that
we now propose for the 2019 benefit year and beyond. Specifically, with
respect to network adequacy, we propose to rely on the States' reviews
in States in which an FFE is operating, provided the State has a
sufficient network adequacy review process. For the 2019 benefit year
and beyond, we propose to defer to the States' reviews in States with
the authority to enforce standards that are at least equal to the
``reasonable access standard'' defined in Sec. 156.230 and means to
assess issuer network adequacy. In States that do not have the
authority and means to conduct sufficient network adequacy reviews, we
propose for the 2019 benefit year and beyond to rely on an issuer's
accreditation (commercial, Medicaid, or Exchange) from an HHS-
recognized accrediting entity, which we propose would include the three
accrediting entities HHS has previously recognized for the
accreditation of QHPs: The National Committee for Quality Assurance,
URAC, and Accreditation Association for Ambulatory Health Care.\63\
Unaccredited issuers would be required to submit an access plan as part
of the QHP application. To show that the QHP's network meets the
requirement in Sec. 156.230(a)(2), the access plan would need to
demonstrate that an issuer has standards and procedures in place to
maintain an adequate network consistent with the National Association
of Insurance Commissioners' Health Benefit Plan Network Access and
Adequacy Model Act (the Model Act is available at https://www.naic.org/store/free/MDL-74.pdf). We propose to further coordinate with States to
monitor network adequacy, for example, through complaint tracking. With
respect to QHP certification review for the essential community
provider (ECP) standard, we propose for the 2019 benefit year and
beyond that we will continue to allow issuers to use the ECP write-in
process to identify ECPs that are not on the HHS list of available ECPs
and will maintain the 20 percent ECP standard. We believe this standard
will substantially reduce the regulatory burden on issuers while
preserving adequate access to care provided by ECPs. As in previous
years, if an issuer's application does not satisfy the ECP standard,
the issuer would be required to include as part of its application for
QHP certification a satisfactory narrative justification describing how
the issuer's provider networks, as presently constituted, provide an
adequate level of service for low-income and medically underserved
individuals and how the issuer plans to increase ECP participation in
the issuer's provider networks in future years. At a minimum, such
narrative justification would include the number of contracts offered
to ECPs for the applicable plan year; the number of additional
contracts an issuer expects to offer and the timeframe of those planned
negotiations; the names of the specific ECPs to which the issuer has
offered contracts that are still pending; and contingency plans for how
the issuer's provider network, as currently designed, would provide
adequate care to enrollees who might otherwise be cared for by relevant
ECP types that are missing from the issuer's provider network.
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\63\ Recognition of Entities for the Accreditation of Qualified
Health Plans 77 FR 70163 (November 23, 2012) and Approval of an
Application by the Accreditation Association for Ambulatory Health
Care (AAAHC) To Be a Recognized Accrediting Entity for the
Accreditation of Qualified Health Plans 78 FR 77470 (December 23,
2013).
---------------------------------------------------------------------------
We also previously outlined areas where HHS will rely on State
reviews of QHP certification standards for States with FFEs starting in
plan year 2018, including States with FFEs that perform plan management
functions in partnership with HHS, in The Guidance to States on Review
of Qualified Health Plan Certification Standards in Federally-
facilitated Marketplaces for Plan Years 2018 and Later,\64\ released on
April 13, 2017. We intended these changes to help streamline the QHP
certification process and avoid duplicative Federal and State efforts.
In that guidance, we provided that in FFE States that do not perform
plan management functions, HHS will continue to review QHP data for
these States, but will rely on State review for licensure and good
standing standards required at Sec. 156.200(b)(4), and for network
adequacy standards required at Sec. 156.230. For FFEs in States
performing plan management functions, HHS will continue to rely on
State plan data review for QHP certification standards, including for
service area and prescription drug formulary outliers and non-
discrimination in cost sharing. We will continue to review plan data
relating to Federal funds or plan display on HealthCare.gov, such as
cost-sharing reduction plan variation at Sec. 156.420 and annual re-
enrollment at Sec. 155.335(j). We do not propose any changes to the
approach described in this guidance.
---------------------------------------------------------------------------
\64\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QHP-Certifcation-Reviews-Guidance-41317.pdf.
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To further streamline QHP certification by avoiding duplicative
[[Page 51110]]
reviews, we also announced in the QHP Rate Outlier Analysis for Plan
Year 2018 and Beyond \65\ that we would rely on States to identify rate
outliers for purposes of QHP certification,\66\ except for those States
that do not have an Effective Rate Review Program. These changes were
intended to allow States and issuers greater flexibility in
facilitating the certification of plans best suited to their markets,
while avoiding duplicative State and Federal activities. We do not
propose any changes to the approach described in this guidance.
---------------------------------------------------------------------------
\65\ https://www.regtap.info/uploads/library/QHP_RateOutlier_FAQ_5CR_071017.pdf.
\66\ This review generally identifies rates that are relatively
low compared to other QHP rates in the same rating area. The
identification of a QHP rate as an outlier does not necessarily
indicate inappropriate rate development; instead, this information
helps inform the determination of whether certifying the QHP to be
offered on the Exchange would be in the interest of consumers.
---------------------------------------------------------------------------
For Plan Years 2019 and later, HHS proposes to further expand the
role of States in the QHP certification process for FFEs, including
FFEs where the State performs plan management functions. Specifically,
we propose to defer to States for additional review areas, including
accreditation requirements at Sec. 156.275, compliance reviews at
Sec. 156.715, minimum geographic area of the plan's service area at
Sec. 155.1055, and quality improvement strategy reporting at Sec.
156.1130, if feasible and appropriate. We believe States currently
perform reviews in these areas that are duplicative of the Federal
reviews for QHP certification. As a result, we do not believe this
policy would require States to undertake additional reviews or change
existing reviews to match the Federal standards for QHPs. We seek
comment on whether States are performing work in these areas, and
whether there are more or different areas of review for which it would
be appropriate for the FFEs to defer to State reviews for QHP
certification. We seek comment regarding the potential benefits as well
as challenges or unintended consequences that States and issuers may
encounter if States performed increased roles in QHP certification
reviews by taking on the reviews noted above, or other, additional
reviews. We also seek comment on the impact for QHP issuers
participating in multiple States and across Exchange types. HHS
anticipates outlining plan year 2019 QHP certification standards in
future guidance, including outlining areas where States performing plan
management functions have flexibility to follow a different approach.
We also propose to amend Sec. 156.200(b)(2) by adding a cross
reference to proposed Sec. 155.706 to align with other proposals in
this rule.
b. Additional Standards Specific to SHOP for Plan Years Beginning Prior
to January 1, 2018 (Sec. 156.285)
As discussed in the following section, we propose to modify the
regulatory requirements regarding additional standards specific to SHOP
for plan years beginning on or after January 1, 2018 and to introduce
those requirements in a new Sec. 156.286. To reflect the proposal that
the requirements currently in Sec. 156.285 would apply only for plan
years beginning before January 1, 2018, we propose to amend the heading
of Sec. 156.285 and add paragraph (f), to state that the section would
only apply for plan years that begin prior to January 1, 2018. We
discuss the proposed new standards applicable for plan years beginning
on or after January 1, 2018 in the following section. These changes
would be effective on the effective date of the final rule, if
finalized as proposed.
c. Additional Standards Specific to SHOP for Plan Years Beginning on or
After January 1, 2018 (Sec. 156.286)
Section 156.285 currently describes the requirements on QHP issuers
participating in SHOPs to accept enrollment and payment information
from a SHOP on behalf of an employer or enrollee. As discussed above,
we propose to amend Sec. 156.285 to make it only applicable for plan
years beginning prior to January 1, 2018, and to modify the additional
standards specific to QHP issuers participating in SHOPs applicable for
plan years beginning on or after January 1, 2018 through the
introduction of a new Sec. 156.286. New Sec. 156.286 would include
only those standards that have been applicable under Sec. 156.285 that
would continue to apply to the SHOPs under the proposed approach
discussed earlier in this preamble, with minor modifications and
clarifications. The proposals described in this section would be
effective on the effective date of the final rule, if finalized as
proposed.
We propose to retain Sec. 156.285(a) as Sec. 156.286(a), but, to
reflect the proposal that a SHOP would not be required to process
enrollments and payments, to require issuers to accept payment not only
from the SHOP, but from a qualified employer or enrollee or a SHOP. We
also propose not to include the requirement currently in Sec.
156.285(a)(4)(ii), as the Federally-facilitated SHOPs would no longer
be involved in premium payments. For the same reason, we also propose a
narrower version of Sec. 156.285(b) as Sec. 156.286(b), requiring
only that issuers adhere to the enrollment periods and processes
established by the SHOP consistent with Sec. 155.726, and establish
uniform enrollment timelines and processes for qualified employers and
group members. We also propose in Sec. 156.286(c) to include only
those requirements from Sec. 156.285(c) that do not relate to the
payment and enrollment processes that we have proposed would no longer
be required.
We also propose not to include a paragraph mirroring paragraph (d)
of Sec. 156.285. This would reflect our proposal to remove the
requirements contained in current Sec. 155.735, and generally not to
impose coverage related timelines on issuers of QHPs through the SHOPs
for plans beginning on or after January 1, 2018. We propose to include
a paragraph mirroring Sec. 155.285(e) as Sec. 156.286(d).
Finally, under our proposed approach, SHOPs would no longer be
required to provide employee enrollment functionality. When enrollments
are completed by working with SHOP issuers or SHOP-registered agent or
brokers, it may not always be immediately apparent to the issuer
whether the enrollment is through the SHOP, and whether it is part of
an employer's offering a choice of plans. To ensure that issuers
offering QHPs through a SHOP do so in a manner that is consistent with
our proposed interpretation of the SHOP provisions of the statute, we
propose to add new paragraphs (e) and (f) in Sec. 156.286. These would
require that QHP issuers offering a QHP through the SHOP accept
enrollments from groups in accordance with the employer choice policies
applicable to the SHOP under Sec. 155.706(b)(3), that they maintain
processes sufficient to identify whether a group market enrollment is
an enrollment through the SHOP, and they maintain records of SHOP
enrollments for a period of 10 years following the enrollment. Proposed
paragraph (f) also would require issuers to utilize a uniform
enrollment form, as required by section 1311(c)(1)(F) of the PPACA. As
noted in the preamble to Sec. 155.716, we intend to update the single
employer application to reflect our proposed changes in Sec. 155.731.
An issuer would be considered to satisfy this proposed requirement if
it used that application form.
Finally, we propose in paragraph (g) to state that the requirements
contained within Sec. 156.286 are only applicable for plan years
beginning on or after January
[[Page 51111]]
1, 2018, effective on the effective date of the final rule, if
finalized as proposed.
d. Meaningful Difference Standard for Qualified Health Plans in the
Federally-Facilitated Exchanges (Sec. 156.298)
We propose to remove Sec. 156.298 to eliminate meaningful
difference standards for QHPs offered through a Federally-facilitated
Exchange or State-Based Exchange on the Federal platform. Under this
standard, in order to be certified as a QHP, a plan must be
meaningfully different from all other QHPs offered by the same issuer
of that plan within a service area and level of coverage in the
Exchange. As defined in Sec. 156.298(b), QHPs are considered
meaningfully different from other plans if a reasonable consumer would
be able to identify one or more material differences among five key
characteristics between the plan and other plans to be offered by the
same issuer.
This meaningful difference standard was implemented to make it
easier for consumers to understand differences between plans, and
choose the right plan option for them. However, with fewer issuers
participating in the Exchange, and fewer plans for consumers to choose
from, we propose to remove these standards, as we no longer believe the
requirement is necessary. We believe removing the meaningful difference
standard would encourage plan design innovation, by providing more
flexibility to issuers in designing plans, and thus increase plan
offerings and choice for consumers.
e. Other Considerations
We seek comment on ways in which HHS can foster market-driven
programs that can improve the management and costs of care and that
provide consumers with quality, person-centered coverage. As we stated
in the 2017 and 2018 Payment Notices, we believe that innovative
issuer, provider, Exchange, and local programs or strategies can
successfully promote and manage care, in a manner that contributes to
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 better meet the goals of affordability, quality, and
access to care.
We are particularly interested in receiving comments on how we may
encourage value based insurance design within the individual and small
group markets and ways to support issuers in using cost sharing to
incentivize more cost-effective enrollee behavior and higher quality
health outcomes, in accordance with section 2713(c) of the PHS Act.
Currently, under our rules, issuers have considerable discretion in the
design of cost-sharing structures, subject to certain statutory AV
requirements, non-discrimination law and rules, and other applicable
law, such as the Paul Wellstone and Pete Domenici Mental Health Parity
and Addiction Equity Act of 2008.
We would like to encourage issuers to offer HDHPs that can be
paired with an HSA as a cost effective options for enrollees. While the
proportion of available HSA-eligible HDHPs has been stable in the FFEs,
the percentage of enrollees in HDHPs has decreased slightly over the
last 3 years as there are certain technical barriers for issuers in
offering HDHPs in the EHB compliant market.\67\ We are particularly
interested in exploring how to use plan display options on
HealthCare.gov to promote the availability of HDHPs to applicants, and
seek comment on how best to do so.
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\67\ For instance, the maximum annual limitation on cost sharing
established at section 1302(c) of the PPACA is increasing at a
faster rate than the maximum out of pocket cost limits for HDHPs
under section 223 of the Code. Therefore, a plan that utilizes the
maximum annual limitation on cost sharing under the PPACA would not
meet the requirements to be an HDHP under the Code that could be
paired with an HSA.
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We are also interested in value based insurance designs that focus
on cost effective drug tiering structures; address overused, higher
cost health services; provide innovative network design that
incentivizes enrollees to use higher quality care; and promote use of
preventive care and wellness services. We solicit comments on how HHS
can better encourage these types of plan designs, and whether any
existing regulatory provisions or practices discourage such designs.
4. Standards for Downstream and Delegated Entities (Sec. 156.340)
This section discusses the responsibilities of a QHP issuer and its
applicable downstream entities. We propose to amend paragraph (a)(2) to
add a cross reference to proposed Sec. 155.706 to align with other
proposals made throughout this proposed rule.
5. Eligibility and Enrollment Standards for Qualified Health Plan
Issuers on State-Based Exchanges on the Federal Platform (Sec.
156.350)
Section 156.350 describes the eligibility and enrollment standards
for issuers that offer QHP coverage in the SBE-FPs. Currently, Sec.
156.350(a)(1) and (2) state that for a QHP issuer to participate in an
SBE-FP for SHOP, it must comply with the requirements at Sec.
156.285(a)(4)(ii) and Sec. 156.285(c)(5) and (c)(8)(iii),
respectively. However, as discussed elsewhere in this proposed rule, to
align with our proposal regarding the SHOPs, we are proposing that
these referenced requirements at Sec. 156.285 would not be applicable
for plan years beginning on or after January 1, 2018, effective on the
effective date of the final rule, if finalized as proposed. We
therefore propose to amend Sec. 156.350(a)(1) and (a)(2) to specify
that they only apply through plan years beginning prior to January 1,
2018.
We seek comment on these proposals.
6. Minimum Essential Coverage
a. Other Coverage That Qualifies as Minimum Essential Coverage (Sec.
156.602)
A CHIP program is a type of government-sponsored coverage, defined
under title XXI of the Act that provides low-cost health coverage to
children in low-income families that do not otherwise have health
coverage. States may be eligible to receive Federal funds to initiate
and expand such programs. A CHIP buy-in program, a ``full pay'' option
where a covered family pays the full premium typically without any
Federal or State assistance, often provides similar or identical
benefits as the State CHIP program for children in families that do not
financially qualify for the State's CHIP program.\68\ CHIP buy-in
programs are not authorized or funded under title XXI of the Act, and
therefore are not government-sponsored minimum essential coverage under
section 5000A(f)(1)(A) of the Code. However, CHIP buy-in programs may
be recognized as minimum essential coverage by the Secretary in
consultation with the Secretary of the Treasury, pursuant to the
Secretary's authority under section 5000A(f)(1)(E) of the Code.
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\68\ Under IRS Notice 2015-37, individuals who may enroll in a
CHIP buy-in program designated as MEC are eligible for MEC under the
CHIP buy-in program for purposes of the premium tax credit under
section 36B of the Code only if they are enrolled in the program.
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In considering whether to recognize coverage as minimum essential
coverage under the application process provided for in Sec. 156.604,
HHS generally evaluates whether the coverage complies with
substantially all the requirements of title I of the PPACA that apply
to non-grandfathered coverage in the individual market, including the
essential health benefits requirements.
[[Page 51112]]
Many CHIP buy-in programs have benefits identical to those offered
through the State's CHIP program under title XXI; however, those
benefits might not meet the ``substantially all'' standard as currently
interpreted by HHS, due primarily to differences between the CHIP buy-
in benefits and those offered under the EHB-benchmark plan. While the
EHB benchmark plan includes benefits to address the healthcare needs of
all individuals, including older adults, the CHIP buy-in programs only
offer coverage to children. Consequently, States may need to increase
the benefits, and as a result, the cost of CHIP buy-in programs in
order to meet the ``substantially all'' standard. Based on discussions
with States that sponsor CHIP buy-in programs, we understand that
administering two programs with different benefits creates a resource
burden on States.
Section 156.602 specifies the types of coverage that are designated
as minimum essential coverage pursuant to the Secretary's authority
under section 5000A(f)(1)(E) of the Code. We propose to amend this
section to include coverage under a CHIP buy-in program that provides
identical coverage to that State's CHIP program under title XXI of the
Act.
We seek comment on this proposal, including its effects on the
individual market risk pool.
We also seek comment on whether CHIP buy-in programs that provide
greater coverage should be categorically designated as minimum
essential coverage, without submitting an application, or whether such
programs must submit an application so that HHS can evaluate any
differences from the State's CHIP program under title XXI to ensure
that the program substantially resembles the State's CHIP program under
title XXI. For example, a CHIP buy-in program could impose less cost
sharing or more generous benefits than the State's CHIP program under
title XXI. We also seek comment on whether other types of government-
sponsored buy-in programs, such as Medicaid buy-in programs, should be
recognized as minimum essential coverage without having to submit an
application, and whether this proposal should apply to such programs.
b. Requirements for Recognition as Minimum Essential Coverage (Sec.
156.604)
We recognize that the benefits in some CHIP buy-in programs are
similar but not identical to the State's CHIP program under title XXI;
for example, they impose greater cost sharing or reduced benefits in
comparison with the State's CHIP program under title XXI.
Under the proposed changes to Sec. 156.602, CHIP buy-in programs
with benefits that differ at all from the State's CHIP program under
title XXI would still be required to submit an application with HHS if
they wish to be recognized as minimum essential coverage. HHS would
evaluate such programs based on the ``substantially all'' standard that
currently applies under Sec. 156.604. We seek comment on whether HHS
should create a new standard of review under which such programs must
``substantially resemble'' the State's CHIP program under title XXI to
qualify as minimum essential coverage under Sec. 156.604. The
``substantially resemble'' standard would not be as stringent as the
``substantially all'' standard, but would give HHS the flexibility to
evaluate CHIP buy-in programs based on whether they are providing
coverage similar to the State's CHIP program under title XXI and are
meeting the health requirements of the children enrolled in the
coverage. We are not proposing to codify the ``substantially resemble''
standard in Sec. 156.604; however, we propose that the Secretary use
the Secretary's discretion and authority under section 5000A(f)(1)(E)
of the Code to recognize as minimum essential coverage a CHIP buy-in
program that provides coverage similar to the State's CHIP program
under title XXI or when the facts and circumstances indicate that the
CHIP buy-in program should be recognized as minimum essential coverage.
We seek comment on this proposal, including its effects on the
individual market risk pool.
7. Quality Rating System (Sec. 156.1120)
We recognize that social risk factors play a major role in health,
and one of our core objectives is to improve patients' outcomes
including reducing health disparities. In addition, we seek to ensure
that the quality of care furnished by providers and health plans is
assessed as fairly and accurately as possible under HHS quality
reporting programs, including the Quality Rating System established
under section 1311(c)(3) of the PPACA, while helping to ensure that
individuals and populations receive high quality, person-centered care.
In response to several comments we received from the Request for
Information, we continue to assess ways to reduce burden and promote
State flexibility in the implementation of all statutorily required
Exchange quality programs, including the Quality Rating System, and we
continue to prioritize strategies to improve the value for consumers.
We received many comments in response to our request for public comment
as part of the annual Quality Rating System Call Letter process, on
whether we should account for social risk factors in the Quality Rating
System, which provides quality ratings (or star ratings from 1 to 5
stars) that account for member experience, medical care and health plan
administration for QHPs, offered through an Exchange. We are not
proposing amendments to the Quality Rating System in this rule. We
continue to evaluate what method or combination of methods would be
most appropriate for accounting for social risk factors in the Quality
Rating System as well as other HHS quality reporting programs. We have
closely reviewed related reports by the Office of the Assistant
Secretary for Planning and Evaluation \69\ and the National Academies
of Sciences, Engineering, and Medicine.\70\ In addition, we continue to
await the results of the National Quality Forum trial \71\ on risk
adjustment for quality measures. We continue to advance healthcare
quality across QHPs, as well as providers, to improve outcomes of their
enrollees with social risk factors without masking potential
disparities or minimizing incentives to improve the outcomes for
disadvantaged populations.
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\69\ Office of the Assistant Secretary for Planning and
Evaluation. Report to Congress: Social Risk Factors and Performance
under Medicare's Value-based Purchasing Programs. (December 21,
2016). Available at https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
\70\ National Academies of Sciences, Engineering, and Medicine.
Accounting for Social Risk Factors in Medicare Payment. (January 10,
2017). Available at https://nationalacademies.org/hmd/reports/2017/accounting-for-social-risk-factors-in-medicare-payment-5.aspx.
\71\ National Quality Forum socioeconomic status (SES) trial
period Web site at https://www.qualityforum.org/ProjectDescription.aspx?projectID=80124.
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We seek comment as part of this rulemaking on types of social risk
factors that may be most appropriate as well as the methods to account
for social risk factors for QHP issuer quality reporting. Examples of
social risk factors include: Low income subsidy; race and ethnicity;
and geographic area of residence. Approaches to account for social risk
factors include stratifying measure scores or risk adjustment of a
particular measure. We seek comment on which social risk factors could
be used alone or in combination, current data sources where this
information would be available, and whether other data should be
collected to better capture the effects of social risk. We will
[[Page 51113]]
take commenters' input into consideration as we continue to assess the
appropriateness and feasibility of accounting for social risk factors
in the Quality Rating System.
8. Direct Enrollment With the QHP Issuer in a Manner Considered To Be
Through the Exchange (Sec. 156.1230)
We propose to amend paragraph (b)(2) of Sec. 156.1230 to conform
with the proposed amendments to Sec. 155.221. The proposed change
would require that, prior to a QHP issuer's Internet Web site being
used to complete a QHP selection, the QHP issuer must engage a third
party entity in accordance with Sec. 155.221 to demonstrate
operational readiness and compliance with applicable requirements. For
a discussion of the provisions of this proposed rule related to third
party entities performing operational readiness reviews, please see the
preamble to Sec. 155.221.
F. Part 157--Employer Interactions With Exchanges and SHOP
Participation
1. Qualified Employer Participation Process in a SHOP for Plan Years
Beginning Prior to January 1, 2018 (Sec. 157.205)
As discussed in the following section, we propose to modify the
regulatory requirements regarding the qualified employer participation
process in a SHOP for plan years beginning on or after January 1, 2018
and to introduce those requirements in a new Sec. 157.206. To reflect
the proposal that the requirements currently in Sec. 157.205 would
apply only for plan years beginning before January 1, 2018, we propose
to amend the heading of Sec. 157.205 and add paragraph (h), to state
that the section would apply only for plan years that begin prior to
January 1, 2018. These changes would be effective on the effective date
of the final rule, if finalized as proposed.
2. Qualified Employer Participation Process in a SHOP for Plan Years
Beginning on or After January 1, 2018. (Sec. 157.206)
Section 157.205 describes requirements for participating SHOP
employers. To reflect the proposal to allow SHOPs to operate in a
leaner fashion, we are proposing several changes to the requirements
related to qualified employer participation process in a SHOP for plan
years beginning on or after January 1, 2018, and propose to introduce
these requirements in Sec. 157.206. With the exception of the proposed
changes to the process described here, the process would remain the
same as in Sec. 157.205. The proposals described in this section would
be effective on the effective date of the final rule, if finalized as
proposed.
Paragraph (d) of Sec. 157.205 requires a qualified employer to
submit any contribution towards the premiums of any qualified employee
according to the standards and processes described in Sec. 155.705.
Because we are proposing that the requirements in Sec. 155.705
regarding employer contribution methods would not apply for plan years
beginning on or after January 1, 2018, we also propose that the
requirement in Sec. 157.705(d) would not apply for those plan years.
Paragraph (e)(1) of Sec. 157.205 describes obligations of
qualified employers to employees hired outside of the initial or annual
open enrollment periods. We propose in Sec. 157.206(d) that qualified
employers must provide employees hired outside of the initial or annual
open enrollment period with information about the enrollment process.
We propose that the requirement in paragraph (e)(1) of Sec. 157.705,
which requires qualified employers to provide these employees with an
enrollment period in accordance with Sec. 155.725(g), would not be
included in Sec. 157.206, as we are proposing that the requirement in
Sec. 155.725(g) would not be applicable for plan years beginning on or
after January 1, 2018. We also propose that the requirement in Sec.
157.205(e)(2) to provide information about the enrollment process in
accordance with Sec. 155.725 would not apply for plan years beginning
on or after January 1, 2018 to reflect the proposal that the process
provided for in many of the provisions in Sec. 155.725 would not apply
for those plan years.
We also propose that the requirements in Sec. 157.205(f) regarding
the process for notifying the SHOP in the event the eligibility status
of an employee, or employee's dependent has changed would not apply for
plan years beginning on or after January 1, 2018. Under the proposed
approach for plan years beginning on or after January 1, 2018, SHOPs
would not be required to process employee enrollment, so there would be
no reason for all qualified employers to provide such information.
Further, we propose that the requirement in Sec. 157.205(g) that
qualified employers adhere to the annual employer election period under
Sec. 155.725(c) would not apply for plan years beginning on or after
January 1, 2018. Elsewhere, we propose that the annual employer
election period provision in Sec. 155.725(c) would not apply for those
plan years, and this proposal would reflect that removal.
Finally, we propose in paragraph (e) of Sec. 157.206 to include
new requirements for qualified employers reflective of the proposed
approach for SHOPs generally. First, since we propose in Sec.
155.716(f) that an employer's determination of eligibility to
participate in the SHOP remains valid until the employer makes a change
that could end its eligibility under Sec. 155.710(b), we propose in
Sec. 157.205(e)(1) that employers must submit a new application to the
SHOP if the employer makes a change that could end its eligibility
under Sec. 155.710 or withdraw from participation in the SHOP. Second,
because under our proposed changes SHOPs would not be required to
process group enrollments, and therefore would not necessarily
communicate with QHP issuers about employer eligibility determinations,
we propose to require employers to notify the QHP issuer of an
unfavorable eligibility determination. However, we propose that the
employer be required to provide the notification within 5 business days
of the end of any applicable appeal process under Sec. 155.741.
Specifically, the end of the appeal process could occur when the time
to file an appeal lapses without an appeal being filed, when the appeal
is rejected or dismissed, or when the appeal process concludes with an
adjudication by the appeals entity, as applicable. We also propose in
paragraph (e)(3) to describe the employer's obligations regarding loss
of eligibility to participate in a SHOP or termination of enrollment or
coverage through the SHOP, if this proposed approach were to be
finalized. Given that under the proposed approach there would not
necessarily be communication between the SHOP and a participating QHP
issuer regarding employer eligibility, enrollment, or terminations,
there may be no way for the SHOP to notify an issuer in the event an
employer becomes ineligible to participate in SHOP. Therefore, we
propose to add paragraph (e)(3) to require employers to notify an
issuer of a loss of eligibility to participate in SHOP, or a desire to
terminate SHOP enrollment or coverage.
We propose in paragraph (f) of Sec. 157.205 that the section would
apply for plan years beginning on or after January 1, 2018, only. If
finalized, these changes would become effective as of the effective
date of the final rule.
We seek comment on this proposal.
[[Page 51114]]
G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
1. Reporting of Federal and State Taxes (Sec. 158.162)
Section 2718 of the PHS Act requires that Federal and State taxes
be reported, but that such amounts are to be excluded from premium
revenue when calculating an issuer's MLR and accompanying rebates.
However, the statute does not define what is included in Federal and
States taxes. The MLR December 1, 2010, interim final rule (75 FR
74864) interprets this language and broadly describes Federal and State
taxes that must be reported but are excluded from premiums in the MLR
and rebate calculations, and Federal and State taxes that must be
reported and are not excluded from premiums in MLR and rebate
calculations. During our review of MLR reports submitted by issuers,
HHS noted that some issuers were excluding employment taxes (such as
the Federal Insurance Contributions Act (FICA), the Railroad Retirement
Tax Act (RRTA), and the Federal Unemployment Act (FUTA) taxes; State
unemployment/reemployment insurance and State employment training
taxes; and other similar taxes and assessments) from earned premiums in
their MLR and rebate calculations, whereas most issuers were including
employment taxes in earned premiums in the MLR and rebate calculations.
In order to provide consistency and clarity for MLR reporting, HHS
amended Sec. 158.162 in the 2016 Payment Notice (80 FR 10750) to
specify that all issuers must include employment taxes in earned
premiums and must not deduct such taxes in the MLR and rebate
calculations starting with the 2016 MLR reporting year.
However, in light of the changes in the market landscape since
Sec. 158.162 was amended in early 2015, HHS is considering whether
revising the decision on the treatment of employment taxes may help
improve market stability, particularly in the individual market, by
providing an incentive for issuers to enter or remain in the market. In
addition, in response to the Request for Information, we received
several comments in favor of allowing issuers to deduct such taxes from
these calculations. Therefore, we are inviting comments on whether, in
order to encourage issuer participation and competition in the markets,
HHS should revise paragraph (a)(2) and paragraph (b)(2)(iv) of Sec.
158.162 to allow all issuers to deduct Federal and State employment
taxes from premiums in their MLR and rebate calculations, starting with
the 2017 MLR reporting year for reports to be filed by July 31, 2018.
We are not reconsidering the treatment of the other taxes that cannot
be excluded from premiums in MLR and rebate calculations (for example,
Federal taxes on investment income and capital gains) because we
believe those taxes can be distinguished from employment taxes and the
NAIC had explicitly recommended to HHS that such taxes should not be
excluded from premiums.\72\
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\72\ National Association of Insurance Commissioners--Model
Regulation Service, Regulation for Uniform Definitions and
Standardized Methodologies for Calculation of the Medical Loss Ratio
for Plan Years 2011, 2012 and 2013 per Section 2718 (b) of the
Public Health Service Act (Oct 27, 2010), available at https://www.naic.org/documents/committees_ex_mlr_reg_asadopted.pdf.
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We solicit comments on this approach from all stakeholders,
including on whether we should instead amend the MLR regulations to
collect the employment tax data separately from other tax data as an
informational item on the MLR Annual Reporting Form to gather data to
inform a decision regarding whether to amend the regulation for future
years, and whether changing the treatment of employment taxes would be
likely to help improve market stability and competition.
2. Allocation of Expenses (Sec. 158.170)
For a discussion of the proposed amendment to Sec. 158.170(b)
regarding the description of the allocation method for quality
improvement activity (QIA) expenses, please see the preamble to Sec.
158.221.
3. Formula for Calculating an Issuer's Medical Loss Ratio (Sec.
158.221)
We propose amending Sec. 158.221 by adding new paragraph (b)(8) to
provide issuers with an option to report quality improvement activity
expenses as a single fixed percentage of premium amount starting with
the 2017 MLR reporting year (for reports to be filed by July 31, 2018).
We also propose making conforming amendments to Sec. 158.170(b)
(Allocation of expenses) in order to recognize the new proposed option
for reporting QIA expenses.
Section 2718(c) of the PHS Act tasked the NAIC with establishing
standardized definitions and methodologies for calculating MLR and
rebates, subject to the certification of the Secretary. Consistent with
the NAIC's recommendation to HHS,\73\ the MLR interim final rule,
published on December 1, 2010 (75 FR 74863), allows issuers to include
in the MLR numerator expenditures for five categories of activities
that improve health care quality. Accordingly, issuers are currently
required to report QIA expenditures in alignment with the five separate
categories codified in Sec. 158.150(b)(2)(i)-(v). Additionally, Sec.
158.170 requires issuers to use and disclose specific allocation
methods to report expenses, including QIA expenditures.
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\73\ National Association of Insurance Commissioners--Model
Regulation Service, Regulation for Uniform Definitions and
Standardized Methodologies for Calculation of the Medical Loss Ratio
for Plan Years 2011, 2012 and 2013 per Section 2718 (b) of the
Public Health Service Act (Oct 27, 2010), available at https://www.naic.org/documents/committees_ex_mlr_reg_asadopted.pdf.
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However, in the course of conducting the MLR audits, HHS observed
that the current MLR regulations require a substantial effort by
issuers to accurately identify, track and report QIA expenses. HHS has
also observed that, between 2011 and 2015, issuers that did report QIA
expenses have reported spending, on average, a consistent percentage of
premium on total QIA: approximately 0.7 percent in 2011, and 0.8
percent in 2012 through 2015.
Given issuers' relatively low and consistent reported expenditures
on QIA and the significant burden associated with identifying, tracking
and reporting these expenditures, we propose adding Sec. 158.221(b)(8)
to permit issuers an option to report on their MLR reporting form a
single QIA amount equal to 0.8 percent of earned premium in the
relevant State and market, in lieu of tracking and reporting the
issuer's actual expenditures for QIA, as defined in Sec. 158.150 and
Sec. 158.151. Under this proposal, all issuers would be able to
include 0.8 percent of earned premium in their MLR numerator as QIA
expenses for the relevant State and market. This is in line with a
comment received in response to the Request for Information requesting
that the MLR formula be simplified. The accompanying proposed
amendments to Sec. 158.170(b) would require issuers that elect the
option to include 0.8 percent of earned premium for QIA expenses to
indicate as such when describing the allocation method used for QIA
expenses. Issuers that spend more than 0.8 percent of earned premium on
QIA would have the option to report the total actual, higher amount
spent and, if choosing this option, would have to report QIA in the
five categories described in Sec. 158.150(b)(2)(i)-(v), as well as
comply with the allocation of expenses requirements established under
Sec. 158.170. We seek comment on this proposal.
[[Page 51115]]
4. Potential Adjustment to the MLR for a State's Individual Market
(Subpart C)
We propose to amend 45 CFR part 158, subpart C to modify the
process and criteria for the Secretary to determine whether to adjust
the 80 percent MLR standard in the individual market in a State. This
proposal is consistent with comments we received on the Request for
Information requesting that issuers be allowed to include additional
expenses in their MLR calculation, since States would be able to more
easily request reductions of the individual market MLR standard, which
would effectively enable issuers in those States to spend more premium
on additional expenses.
Section 2718(d) of the PHS Act provides that the Secretary may
adjust the MLR standard in the individual market if the Secretary
determines it appropriate on account of the volatility of the
individual market due to the establishment of Exchanges. The MLR
December 1, 2010, interim final rule (75 FR 74864) set forth the
framework for a State to request such an adjustment and the process and
criteria for the Secretary to determine whether to grant a State's
request. Subpart C of 45 CFR part 158 specifies that the adjustment
request must be initiated by the State, the adjustment may be granted
for up to 3 years at a time, the information that the State must
provide to support its request, and the criteria that HHS may consider
in making a determination. It also requires the Secretary to invite
public comments on the adjustment requests, allows States to hold
optional public hearings, and enables States to request reconsideration
of adverse determinations.
Section 158.301 specifies that an adjustment may be granted only if
there is a reasonable likelihood that application of the 80 percent MLR
standard may destabilize the individual market in a State. Because in
the current environment, it generally is not the MLR standard in
isolation but rather factors that, taken together, can contribute to
instability of the individual market in certain States, the current
framework restricts the States' ability to obtain adjustments to the
MLR standard as part of innovative solutions for stabilizing their
individual markets. Therefore, as outlined below, we propose to make
amendments throughout subpart C of part 158 to allow for adjustments to
the individual market MLR standard in any State that demonstrates that
a lower MLR standard could help stabilize its individual market, and to
streamline the process for applying for such adjustments to reduce
burdens for States and HHS.
a. Standard for Adjustment to the Medical Loss Ratio (Sec. 158.301)
Currently, Sec. 158.301 permits the Secretary to adjust the MLR
standard that must be met by issuers offering coverage in the
individual market in a State for a given MLR reporting year, if the
Secretary determines that the 80 percent MLR standard may destabilize
the individual market in that State. For the reasons described above,
we propose to amend Sec. 158.301 to permit the Secretary to adjust the
individual market MLR standard in any State if the Secretary determines
that there is a reasonable likelihood that an adjustment to the 80
percent MLR standard will help stabilize the individual market in that
State. We seek comment on this proposal.
b. Information Regarding the State's Individual Health Insurance Market
(Sec. 158.321)
We propose to amend Sec. 158.321 to modify the information that a
State must submit to the Secretary with its request for an adjustment
to the 80 percent MLR standard in its individual market. Currently,
Sec. 158.321 requires the State to describe the State MLR standard and
formula for assessing compliance (Sec. 158.321(a)), its market
withdrawal requirements (Sec. 158.321(b)), and the mechanisms
available to the State to provide consumers with options for alternate
coverage (Sec. 158.321(c)). This information is used to determine what
a State is able to do to mitigate instability in its individual market
without an adjustment to the MLR standard. Because we seek to make the
MLR adjustment process less burdensome on States and make adjustments
available to enable States to develop innovative solutions for
stabilizing their individual markets, we propose to remove the
requirements in Sec. 158.321(a) through (c). Further, all States must
follow the Federal minimum standards for the MLR calculation, market
withdrawals, and guaranteed issue and limits on health status ratings;
therefore, we believe it is not necessary for a State to include this
information as part of its MLR adjustment request. Additionally, we
propose to redesignate paragraph (d) as paragraph (a) and to revise the
redesignated paragraph to describe the information the State must
submit regarding the State's individual health insurance market, as
outlined below.
Current regulations require a State to provide detailed individual
market enrollment and premium data for each issuer at the product level
as well as each issuer's market share of the individual market in the
State (Sec. 158.321(d)(1)). We consider this requirement unduly
burdensome and propose to replace it at Sec. 158.321(a)(2) with a
requirement to submit information on total number of enrollees (life-
years and covered lives) for each type of coverage sold or renewed in
the State's individual market, as described in more detail below. We
believe that enrollment data on life-years and covered lives for each
type of individual market coverage, rather than the number of
individual enrollees by product, would provide sufficient information
because the much more granular product-level detail is not necessary
for HHS to evaluate the likelihood and magnitude of enrollees
potentially moving from one type of coverage to the other and the
impact this may have on the State individual market's risk pool and
market competition. ``Life-years,'' which the MLR Annual Reporting Form
Instructions define as member-months divided by 12, generally represent
average enrollment over the course of a year, while ``covered lives''
are defined in those Form Instructions as enrollment on the last day of
the year. Similarly, we propose to eliminate the requirement currently
in Sec. 158.321(d)(1) to submit product-level premium data in favor of
the total earned premium data in the proposed Sec. 158.321(a)(1) as
described below, and to eliminate the Sec. 158.321(d)(1) requirement
to submit the issuer's individual market share because HHS can
determine it based on the MLR data available to HHS.
Section 158.321(d)(2) also currently requires States to submit
information regarding the total earned premium (Sec.
158.321(d)(2)(i)), agent and broker commissions (Sec.
158.321(d)(2)(iv)), and risk-based capital (RBC) level (Sec.
158.321(d)(2)(viii)), for each issuer that offers individual market
coverage to more than 1,000 enrollees. We consider this information to
continue to be relevant to determining the health of a State's
individual market and whether an adjustment to the MLR standard could
help stabilize the market. We therefore propose to continue to require
States to include information on total earned premium (proposed Sec.
158.321(a)(1)) and total agent and broker commission expenses (proposed
Sec. 158.321(a)(3)) for each type of coverage sold or renewed in the
State's individual market, as described in more detail below, as well
as the RBC level (proposed Sec. 158.321(a)(5)), which, due to the
manner in which RBC is calculated, would only be appropriate to
[[Page 51116]]
report at the issuer level, rather than for each type of coverage. We
also propose to revise the accompanying regulation text for these data
elements for readability. We further propose that State requests should
include information on total incurred claims (proposed Sec.
158.321(a)(1)) for each type of individual market coverage described
below, in lieu of the current more burdensome requirement to provide
reported and estimated individual market MLRs (Sec. 158.321(d)(2)(ii)
through (iii)).
We propose to modify these requirements to require States to only
include the information for each issuer actively offering individual
market coverage. In most States, only a few issuers are actively
participating, while the majority of issuers that have policies in
force are not active and generally cover a much smaller percentage of
the market. HHS can obtain the limited information on such issuers that
would be relevant to analyzing a State's request from the combination
of the MLR data available to HHS and the data on active issuers
provided by the State, rather than requiring a State to submit data on
these issuers as part of its request for an adjustment. We also propose
to add a new Sec. 158.321(b) to require that a State request include
the individual market data required in the proposed new Sec.
158.321(a)(1) through (4) and (6) separately for each issuer actively
offering individual market plans in that State group by the following
categories, as applicable: On-Exchange, off-Exchange, grandfathered
health plans as defined in Sec. 147.140, coverage that meets the
criteria for transitional policies outlined in applicable guidance,\74\
and non-grandfathered single risk pool coverage, in order to enable the
Secretary to assess the situation in the State's individual market and
to appropriately evaluate the State's proposal. Proposed new Sec.
158.321(b) would also require the State to report the RBC information
at the issuer level for each issuer actively offering coverage in the
State's individual market. A State would not be required to provide
information on student health insurance coverage as defined in Sec.
147.145 or individual market excepted benefits as defined in Sec.
148.220.
---------------------------------------------------------------------------
\74\ See, for example, CMS ``Insurance Standards Bulletin
Series--Information--Extension of Transitional Policy through
Calendar Year 2018 (February 23, 2017) available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Extension-Transitional-Policy-CY2018.pdf.
---------------------------------------------------------------------------
To further reduce the burden on States, we propose to remove the
requirements to provide net underwriting profit for each issuer's total
business in the State and after-tax profit and profit margin for the
individual market and total business in the State (Sec.
158.321(d)(2)(vii)), as well as to rename the remaining requirement to
provide the individual market ``net underwriting profit'' to ``net
underwriting gain'' to more accurately reflect the accounting term
(proposed Sec. 158.321(a)(4)). We believe data on the individual
market net underwriting gain provides sufficient information because an
issuer's total gain or loss in a State does not necessarily impact the
issuer's decision to participate in the individual market. We also
propose to delete the requirement to provide information on estimated
MLR rebates (Sec. 158.321(d)(2)(v)) to reduce the burden on States
because HHS can estimate rebate amounts based on available data.
Additionally, we propose to revise the language at current paragraph
Sec. 158.321(d)(2)(ix), proposed to be redesignated at Sec.
158.321(a)(6), to require the State to provide information not only on
notices by issuers covered in Sec. 158.321(a) of market exits, but
also the equally or more pertinent issuer notices of beginning to offer
coverage in the individual market, as well as ceasing or commencing
offering individual market coverage on the Exchange or in specific
geographic areas (for example, counties); and to add a new Sec.
158.321(c) to require similar information on issuers not actively
offering coverage in the individual market that have indicated an
intent to enter or exit the individual market, including ceasing or
commencing offering individual market coverage on the Exchange or in
specific geographic areas. Lastly, we recognize that in many situations
the information proposed to be required in Sec. 158.321(a) will only
be available for the preceding calendar year, but we propose to provide
States with an option to also include information for the current year
(where available), which may be more relevant if a State makes a
request in a later part of the year.
We seek comment on this proposal.
c. Proposal for Adjusted Medical Loss Ratio (Sec. 158.322)
To reduce the burden on States, we propose to remove paragraphs
(a), (c) and (d) of Sec. 158.322, which would remove the requirements
for a State to justify how its proposed adjustment was determined, and
to estimate rebates that would be paid with and without an adjustment
because HHS can make these estimates instead of the State. Consistent
with our proposed changes to Sec. 158.301, we propose to revise Sec.
158.322 to require the State to both provide its proposed, adjusted MLR
standard and explain how this proposed standard would help stabilize
its individual market. We also propose to delete current paragraph (b),
which requires an explanation of how an adjustment would permit issuers
to adjust current business models and practices in order to meet an 80
percent MLR as soon as is practicable, to further reduce burden on
States submitting adjustment requests.
We seek comment on this proposal.
d. Criteria for Assessing Request for Adjustment to the Medical Loss
Ratio (Sec. 158.330)
Section 158.330 lists the criteria that the Secretary may consider
in determining whether to approve a State request to adjust the 80
percent MLR standard for the individual market. We are proposing
amendments throughout the section to reflect the proposal in Sec.
158.301 to allow adjustments if the Secretary determines the adjustment
would help stabilize the individual market in that State, and the
proposed changes to the information requirements in Sec. 158.321.
These changes are intended to further streamline the process and reduce
burdens for States and HHS. Specifically we propose conforming
amendments to the introductory text of Sec. 158.330 to provide that
the Secretary may consider the identified criteria when assessing
whether an adjustment to the individual market MLR standard would be
reasonably likely to help stabilize the individual market in a State
that has requested such an adjustment. We propose to replace the
information currently outlined at Sec. 158.330(a)(1)-(4) regarding
individual market issuers reasonably likely to exit the State with
information regarding the number and financial performance of issuers
actively offering individual market coverage on-Exchange, off-Exchange,
grandfathered health plans as defined in Sec. 147.140, coverage that
meets the criteria for transitional policies outlined in applicable
guidance, and non-grandfathered single risk pool coverage; the number
of issuers reasonably likely to cease or begin offering such individual
market coverage in the State; and the likelihood that an adjustment
would increase competition in the State's individual market, including
in underserved areas (proposed Sec. 158.330(a)). We propose to delete
the existing criteria captured at Sec. 158.330(b) related to
consideration of the number of individual market enrollees covered by
issuers that are reasonably likely to exit the State's individual
market absent
[[Page 51117]]
the requested adjustment because the goal of a State request for
adjustment may be to ensure that health insurance coverage is available
to all, rather than a certain percentage of, consumers who want it, and
that consumers not only have coverage, but also a choice of several
issuers. We propose conforming amendments to the criteria currently
captured at Sec. 158.330(c), proposed to be redesignated at Sec.
158.330(b), regarding whether an adjustment might improve consumers'
access to agents and brokers. Similar to the proposed amendments to
Sec. 158.321 described above to remove the requirement for States to
provide information on available mechanisms to provide alternate
coverage, we propose to replace the current criteria outlined at Sec.
158.330(d)(1)-(5) with consideration of information on the capacity of
any new issuers or issuers remaining in the individual market to write
additional business in the event one or more issuers were to cease or
begin offering individual market coverage on Exchanges, in certain
geographic areas, or in the entire individual market in the State
(proposed Sec. 158.330(c)). We propose to retain and modify the
existing criteria at Sec. 158.330(e), proposed to be redesignated at
Sec. 158.330(d), on the impact on premiums charged, and on benefits
and cost sharing provided, to consumers by issuers remaining in or
entering the individual market in the event one or more issuers were to
cease offering individual market coverage on the Exchange, in certain
geographic areas, or in the entire individual market in the State.
Finally, the proposed amendments retain the existing criteria at Sec.
158.330(f), proposed to be redesignated at Sec. 158.330(e), for
consideration of any other relevant information submitted by the State.
We seek comment on this proposal.
e. Treatment as a Public Document (Sec. 158.341)
Because the format in which States may submit requests for
adjustments may not comply with Federal requirements for documents
posted on Federal Web sites, some of these documents may not be able to
be posted directly to the applicable Federal Web site. For example, a
State may submit spreadsheets containing data or copies of issuer
letters in a format that is not accessible for individuals with visual
impairments. However, HHS is committed to transparency and making this
information promptly available to the public. Therefore, we propose to
amend Sec. 158.341 to reflect that Federal requirements for documents
posted on Federal Web sites may not permit these documents to be
posted, and to specify that instructions for the public to access
information on requests for adjustment to the MLR standard submitted by
States will be provided on the Secretary's Internet Web site.
f. Subsequent Requests for Adjustment to the Medical Loss Ratio (Sec.
158.350)
We propose to make conforming amendments to Sec. 158.350, which
describes the information that a State must submit with a subsequent
request for an adjustment to the MLR standard, to make this information
consistent with our proposed changes to Sec. 158.301 and Sec.
158.330.
We seek comment on this proposal.
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 12. 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 the required issues
under section 3506(c)(2)(A) of the PRA for the following information
collection requirements.
A. Wage Estimates
To derive wage estimates, we generally used data from the Bureau of
Labor Statistics to derive average labor costs (including a 100 percent
increase for fringe benefits and overhead) for estimating the burden
associated with the ICRs.\75\ Table 11 in this proposed rule presents
the mean hourly wage (calculated at 100 percent of salary), the cost of
fringe benefits and overhead, and the adjusted hourly wage.
---------------------------------------------------------------------------
\75\ See May 2016 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates at https://www.bls.gov/oes/current/oes_nat.htm. For State
Government Employees see NAICS 999200--State Government, excluding
schools and hospitals (OES Designation) https://www.bls.gov/oes/current/naics4_999200.htm.
---------------------------------------------------------------------------
As indicated, employee hourly wage estimates have been adjusted by
a factor of 100 percent. This is necessarily a rough adjustment, both
because fringe benefits and overhead costs vary significantly across
employers, and because methods of estimating these costs vary widely
across studies. Nonetheless, there is no practical alternative, and we
believe that doubling the hourly wage to estimate total cost is a
reasonably accurate estimation method.
Table 11--Adjusted Hourly Wages Used in Burden Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupational Mean hourly benefits and Adjusted
Occupation title code wage ($/hr) overhead ($/ hourly wage ($/
hr) hr)
----------------------------------------------------------------------------------------------------------------
Business Operation Specialist *................. 13-1199 $31.59 $31.59 $63.18
Operations Manager.............................. 11-1021 58.70 58.70 117.40
Software Developers, Systems Software........... 15-1133 53.17 53.17 106.34
Actuary......................................... 15-2011 54.87 54.87 109.74
Actuary *....................................... 15-2011 40.41 40.41 80.82
Financial Examiner *............................ 13-2061 33.02 33.02 66.04
Financial Analyst *............................. 13-2051 34.39 34.39 68.78
[[Page 51118]]
Financial Manager *............................. 11-3031 45.83 45.83 91.66
Lawyer *........................................ 23-1011 44.87 44.87 89.74
Secretaries and Administrative Assistants, 43-6014 17.38 17.38 34.76
Except Legal, Medical, and Executive...........
Commissioner **................................. .............. 58.45 58.45 116.90
Market Research Analyst......................... 13-1161 33.95 33.95 67.90
----------------------------------------------------------------------------------------------------------------
* Denotes occupations were wages were obtained for State Government employees (https://www.bls.gov/oes/current/naics4_999200.htm).
** Data on compensation of State Insurance Commissioners collected by the Council of State Governments and
compiled by Ballotpedia (https://www.ballotpedia.org). The wage data used in the burden estimates include the
cost of fringe benefits and the adjusted hourly wage.
B. ICRs Regarding State Flexibility for Risk Adjustment (Sec. 153.320)
We are proposing to allow State regulators to request a reduction
in the calculation of Statewide average premium, beginning for the 2019
benefit year. HHS would require any State that intends to request this
flexibility to submit its proposal for an adjustment to the Statewide
average premium in the small group market within 30 calendar days after
publication of the proposed HHS notice of benefit and payment
parameters for the applicable benefit year for timely review and issuer
notification prior to rate setting. The burden associated with this
requirement is the time and effort for the State regulators to submit
its proposal to HHS. We estimate that it will take a business
operations specialist 32 hours (at a rate of $63.18 per hour) to
prepare the request and 16 hours for a senior manager (at a rate of
$117.40 per hour) to review the request and transmit it electronically
to HHS. We estimate that each State seeking a reduction in the average
premium calculation will incur a burden of 48 hours at a cost of
approximately $3,900 per state to comply with this reporting
requirement (32 hours for the insurance operations analyst and 16 hours
for the senior manager). Although we are unable to precisely estimate
the number of States that will make this request, we expect that no
more than 25 States will make these requests annually, resulting in a
total annual burden of approximately 1,200 hours with an associated
total cost of $97,504. We seek comment on this estimated burden. We
propose to revise the current information collection approved under OMB
control number 0938-1155: Standards Related to Reinsurance, Risk
Corridors, Risk Adjustment, and Payment Appeals, to account for this
additional burden.
C. ICRs Regarding Risk Adjustment Data Validation and 500 Billable
Member Months (Sec. 153.630)
We propose that, beginning with 2017 benefit year risk adjustment
data validation, issuers with 500 billable member months or fewer that
elect to establish and submit data to an EDGE server would not be
subject to the requirement to hire an initial validation auditor or
submit initial validation audit results. Issuers at or below the 500
billable member months threshold would have their risk score adjusted
by a default error rate equal to the lower of either the national
average negative error rate, or the average negative error rate within
a State, as set forth in the 2018 Payment Notice. We note that,
beginning with 2018 benefit year risk adjustment data validation, these
issuers would not be subject to random sampling under the materiality
threshold discussed below, and would continue to not be subject to the
requirement to hire an initial validation auditor or submit initial
validation audit results, but would have their risk scores adjusted by
a default error rate annually. We note that if the proposal to
implement a central tendency approach to payment adjustments is
finalized, then it is possible no adjustment would occur for issuers
below this threshold.
HHS estimates that not requiring issuers that have 500 or fewer
billable member months Statewide to conduct an initial validation audit
beginning in the 2017 benefit year would exempt 50 issuers from an
initial validation audit and reduce administrative costs for each
issuer by 828 hours with an estimated cost reduction on average of up
to $100,000. The total burden reduction for all 50 issuers would be
41,400 hours with an associated reduction in cost or $3,520,000. The
postponement of the materiality threshold to the 2018 benefit year
would not impact issuer burden relative to previous estimates for the
risk adjustment data validation program included in the 2014 and 2015
Payment Notices, particularly given that the program has been converted
to a pilot for the first 2 years of operation. We propose to revise the
current information collection approved under OMB control number 0938-
1155: Standards Related to Reinsurance, Risk Corridors, Risk
Adjustment, and Payment Appeals, to account for this reduction in
burden.
D. ICRs Regarding Health Insurance Issuer Rate Increases: Disclosure
and Review Requirements--Applicability (Sec. 154.103)
We propose to modify Sec. 154.103(b) to exempt student health
insurance coverage as defined in 45 CFR 147.145 from the Federal rate
review requirements. Because we would no longer be reviewing rates for
student health insurance coverage, we expect to collect less
information for the 2019 plan or policy year than collected for
previous years. This would lead to a reduction in burden related to the
submission and review for issuers and States. We estimate that 75
student health insurance issuers will no longer be required to submit
rate increases to HHS. We estimate that each rate review submission
takes 11 hours for an actuary (at a rate of $109.74 per hour) to
prepare, and that each issuer would submit an average of 2.5 plans, at
an estimated annual cost of $3,018, resulting in a total reduction in
the annual burden to issuers of approximately 2,063 hours and an
associated reduction in cost of approximately $226,339. We estimate
that States would no longer submit rate increases for 188 student
health insurance plans to HHS. We estimate a reduction in burden to
States of one hour per plan for an actuary (at a rate of $80.82 per
hour) to prepare and electronically submit the appropriate materials,
for a total reduction in burden of approximately 188 hours annually
with an associated cost reduction of approximately $15,194. We propose
to
[[Page 51119]]
revise our current burden estimate approved under OMB control number
0938-1141: Rate Increase Disclosure and Review Reporting Requirements,
to reflect the reduced burden on States and issuers.
E. ICRs Regarding Rate Increases Subject to Review (Sec. 154.200)
We propose to amend Sec. 154.200 to establish a 15 percent default
threshold for reasonableness review. We expect this to reduce burden
for some issuers because Part II of the Rate Filing Justification
(Consumer Justification Narrative) is only required for increases that
meet or exceed the threshold. Based on rate filings for the 2018 plan
year, we estimate a burden reduction of approximately 17 percent, or
129 fewer Narratives. We reached this estimate by counting the number
of submissions with a product subject to review due to an increase
between 10 percent and 14.9 percent. We estimate that each Consumer
Justification Narrative takes 0.5 hours for an actuary (at a rate of
$109.74 per hour) to prepare and electronically transmit this document
to HHS. We estimate a total reduction in burden of 65 hours and an
associated cost reduction is $7,078. We propose to revise our current
burden estimate approved under OMB control number 0938-1141: Rate
Increase Disclosure and Review Reporting Requirements, to reflect the
reduced burden on issuers.
F. ICRs Regarding the Small Business Health Options Program (SHOP)
We are proposing to grant additional flexibilities, effective on
the effective date of the final rule, if finalized as proposed, and
applicable for plan years beginning on or after January 1, 2018, to
SHOPs, to qualified employers and employees enrolling in SHOP plans,
and to participating QHP issuers and SHOP-registered agents and brokers
in how they interact with a SHOP. Under the proposals outlined
throughout this document, SHOPs would no longer be required to provide
enrollment, premium aggregation services, and online enrollment
functionality through a SHOP Web site. Instead, small groups would
enroll in a SHOP plan through a SHOP-registered agent or broker or
through a participating QHP issuer participating in a SHOP. If this
rule is finalized as proposed, the FF-SHOPs would follow the approach
as outlined. SBEs would have the flexibility to operate a SHOP in a way
that meets the needs of their State and complies with the regulatory
flexibilities outlined herein.
Under the proposed approach, several pieces of information
currently being collected by a SHOP would no longer be collected by a
SHOP, or, the way in which the information is collected would change.
For example, employers, employees, and agents and brokers may be
required to provide the information currently collected by a SHOP to an
issuer for the purposes of enrollment in a SHOP plan. The SHOP however,
would not be the entity collecting the information and the Federal
government thus would experience a reduction in burden. Under the
proposals described throughout this rule, employers and employees would
no longer be required to visit a SHOP Web site in order to enroll in a
SHOP plan and a SHOP would no longer be required to have the capability
or the need to collect enrollment information. Employers would however,
be required to apply to the SHOP to obtain an eligibility
determination, as described in Sec. 155.710, at which point the
employer would be asked to provide: (1) Employer name and address of
employer's locations; (2) Information sufficient to confirm the
employer is a small employer; (3) Employer Identification Number (EIN);
and (4) Information sufficient to confirm that the employer is
offering, at a minimum, all full-time employees coverage in a QHP
through a SHOP. Under current regulations, the employer provides, and a
SHOP collects, this information as part of enrolling in a SHOP QHP
through a SHOP. HHS previously estimated that an employer needed two
hours to complete the eligibility determination when it was included as
part of enrolling in a SHOP QHP and that 6,000 employers would complete
an application annually to determine their eligibility through a SHOP
Web site. Based on these criteria, HHS estimated that the total annual
burden for 6,000 employers was 12,000 hours, with a total annual cost
of $561,240 to complete the SHOP application and eligibility
determination process. With the proposed flexibilities, HHS estimates
that for each employer, an administrative assistant would need less
than 5 minutes (at rate of $34.76 per hour) to complete the required
eligibility determination. Under the proposed flexibilities, employers
would also no longer be required to create an account on an FF-SHOP Web
site in order to complete the eligibility determination or enroll in a
SHOP QHP. Therefore, HHS estimates that it would cost an employer
approximately $3 to complete an eligibility determination. Assuming
that 6,000 employers would complete an eligibility determination, HHS
estimates that the total annual burden would be approximately 500
hours, with an estimated total cost of $17,400. This would result in a
net burden reduction of 11,500 hours and a net cost reduction of
approximately $543,840 annually. Under the proposals in Sec.
157.206(e)(1), employers would be responsible for submitting a new
eligibility determination or, submitting a notice of withdrawal, in the
event the group experienced a change that would impact the group's
eligibility to participate in a SHOP. Under the proposals in Sec.
157.206(e)(2), employers would also be required to notify their QHP
issuer(s) of a determination of ineligibility. Finally, employers would
also, under Sec. 157.206(e)(3) be required to notify their issuer(s)
of their intent to no longer participate in a SHOP. While these
proposals would require employers to communicate with issuers in ways
they do not under current SHOP enrollment practices, HHS does not
anticipate that these practices would increase the burden on employers
as they, under current practice, must notify the SHOP of changes in
eligibility and termination. Although the proposals in Sec. 155.716
impose an information collection requirement, the information that
would be collected is no different from what is already approved under
OMB control number 0938-1193: Data Collection to Support Eligibility
Determinations and Enrollment for Small Businesses in the Small
Business Health Options, and therefore we are not proposing to revise
the information collection at this time.
Employees, under the proposals to Sec. 155.716 would not
experience an increase in burden. Under the proposals described
throughout this proposed rule, employees would no longer be required to
visit an FF-SHOP Web site to create an account, or, for any application
or enrollment purpose, but they may need to provide similar information
to an agent or broker or issuer as a condition of enrollment into a
SHOP QHP. HHS previously estimated that 60,000 employees completed an
application annually, each spending approximately one hour to complete
an online application through an FF-SHOP Web site. The estimated annual
burden was 60,000 burden hours with an annual cost of $1,025,400. With
the proposed flexibilities to a SHOP as described in this rule, HHS
predicts that the burden on employees to complete an online application
would shift as no application would be provided through a SHOP Web
site, but the information may be required by an agent or broker or an
issuer in order for the employee to complete an enrollment into a SHOP
[[Page 51120]]
QHP. The proposals described throughout this proposed rule will allow
agents and brokers and issuers to enroll consumers in SHOP plans using
the channels they are most familiar with, potentially reducing the
burden of enrolling SHOP groups. This information collection is
currently approved under OMB control number 0938-1194: Data Collection
to Support Eligibility Determinations and Enrollment for Employees in
the Small Business Health Options Program. Therefore, we are not
proposing to revise the information collection at this time.
Current regulations, found throughout Sec. Sec. 155.705, 155.715,
155.720, 155.725, require SHOPs to generate certain notices. These
notices may include: (1) Notices of annual election periods, (2)
notices to employers of employee coverage terminations, (3) notices of
application inconsistencies, (4) notices of appeal rights and
instructions, (5) notices of employee and employer eligibility, (6)
notices of employer withdrawal, (7) (in FF-SHOPs only) notices to
employees if a dependent turns 26 and is no longer eligible for
dependent coverage, (8) billing invoices, successful and unsuccessful
payment confirmation notices, and (9) past due payment notices. In
prior guidance, HHS previously estimated costs for paper notices in an
FF-SHOP. In that estimate, HHS assumed that 80 percent of enrollees
requested electronic notices and 20 percent of enrollees requested
paper notices. HHS estimated that mailing paper notices costs a SHOP
Exchange $0.53 per notice. HHS determined that SHOPs sent approximately
48,000 notices to enrollees when (1) a dependent became ineligible to
remain on the plan, (2) successful payment was processed, and (3) a
payment was unsuccessful in the last year. Assuming that 20 percent of
enrollees would opt to receive paper notices instead of electronic
notifications, HHS estimated that approximately 9,600 notices would be
sent, costing FF-SHOPs approximately $5,088. Under the proposed
flexibilities, the SHOPs would only be required to send notices of
employer eligibility and appeals. This cost would not directly be
transferred to issuers as issuers may already be required to send such
notices per other applicable State and Federal Law. This collection is
currently approved under OMB control number 0938-1207: Essential Health
Benefits in Alternative Benefit Plans, Eligibility Notices, Fair
Hearing and Appeal Processes, and Premiums and Cost Sharing; Exchanges:
Eligibility and Enrollment. If this approach is finalized as proposed,
issuers would be required to collect premiums, as premium aggregation
services would no longer be provided by the SHOPs that take advantage
of the proposed flexibilities. HHS does not anticipate a significant
increase of issuers' burden in this scenario, as it is not
significantly different from their current operating practices.
G. ICRs Regarding States Defining the Essential Health Benefits (Sec.
156.111(e))
We propose at Sec. 156.111(e) to revise the collection of data for
selection of States' EHB-benchmark plans for plan years beginning on or
after January 1, 2019. This proposal includes the documentation that
States would be required to submit if the State chooses to change its
EHB-benchmark plan. For this purpose, we propose to amend the currently
approved information collection (OMB Control Number: 0938-1174) to
reflect the proposed policy. Because Sec. 156.111(e) would replace the
current data collection requirements at Sec. 156.120, we would update
the current EHB-benchmark plan selection to account for the proposed
new regulation and any associated burden with this requirement that
would fall on those States that choose to reselect their EHB-benchmark
plan. Under the previous benchmark plan selection policy, 29 States
selected one of the 10 base-benchmark plan options and 22 States
defaulted. The current policy did not allow for States to make an
annual selection. The proposed regulation would allow States to modify
their EHB-benchmark plans annually, but would not require them to
respond to this ICR for any year for which they did not change their
EHB-benchmark plan. As such, for purposes of this proposed regulation,
we estimate that 10 States would choose to make a change to their EHB-
benchmark plans in any given year (total of 30 States over 3 years
within the authorization of this ICR) and would respond to this ICR.
The proposals at Sec. 156.111(e)(1) would require the State to
provide confirmation that the State's EHB-benchmark plan selection
complies with certain requirements, including those under proposed
Sec. 156.111(a), (b), and (c). To complete this requirement, we
estimate that a financial examiner would require 4 hours (at a rate of
$66.04 per hour) to fill out, review, and transmit a complete and
accurate document. We estimate that it would cost each State $264 to
meet this reporting requirement, with a total annual burden for all 10
States of 40 hours and an associated total cost of $2,642.
The proposals in Sec. 156.111(e)(2) would further require the
State to submit an actuarial certification and associated actuarial
report of the methods and assumptions when selecting proposed options
under Sec. 156.111(a)(2) and (3). Specifically, the actuarial
certification that is being collected under this ICR would be required
to include an actuarial report that complies with generally accepted
actuarial principles and methodologies. This would include complying
with all applicable ASOPs (including ASOP 41 on actuarial
communications). For example, ASOP 41 on actuarial communications
includes disclosure requirements, including those that apply to the
disclosure of information on the methods and assumptions being used for
the actuarial certification and report. The actuarial certification for
this proposed requirement is provided in a template and includes an
attestation that the standard actuarial practices have been followed or
that exceptions have been noted. The signing actuary would be required
to be a Member of the American Academy of Actuaries. We are also
seeking comment on a draft document entitled Draft Example of an
Acceptable Methodology for Comparing Benefits of a State's EHB-
benchmark Plan Selection to Benefits of a Typical Employer Plan As
Proposed under the HHS Notice of Benefit and Payment Parameters for
2019 (CMS-9930-P) \76\ that would provide an example of method an
actuary could use to develop this actuarial certification and report.
---------------------------------------------------------------------------
\76\ The Draft Example of an Acceptable Methodology for
Comparing Benefits of a State's EHB-benchmark Plan Selection to
Benefits of a Typical Employer Plan As Proposed under the HHS Notice
of Benefit and Payment Parameters for 2019 (CMS-9930-P) is available
on CCIIO's Regulation and Guidance Web page at https://www.cms.gov/cciio/resources/regulations-and-guidance/.
---------------------------------------------------------------------------
We estimate that an actuary, who is a member of the American
Academy of Actuaries, would require 16 hours (at a rate of $80.82 per
hour) on average for Sec. 156.111(e)(2). This would include the
certification and associated actuarial report from an actuary to
affirm, in accordance with generally accepted actuarial principles and
methodologies that the State's EHB-benchmark plan definition is equal
in scope of benefits provided under a typical employer plan.
Additionally, this estimate of 16 hours would also apply if the State
is selecting its EHB-benchmark plan using the option proposed at Sec.
156.111(a)(3). The option proposed at Sec. 156.111(a)(3) would also
require the actuary to affirm
[[Page 51121]]
that the State's selected EHB-benchmark plan does not exceed the
generosity of the most generous among a set of comparison plans
proposed Sec. 156.111(a)(3), including the State's EHB-benchmark plan
used for the 2017 plan year and any of the State's base-benchmark plan
options for the 2017 plan year described in Sec. 156.100(a)(1),
supplemented as necessary under Sec. 156.110. For these calculations,
the actuary would need to conduct the appropriate calculations to
create and review an actuarial certification and associated actuarial
report, including minimal time required for recordkeeping. The precise
level of effort for the actuary certification and associated actuarial
report under Sec. 156.111(e)(2) would likely vary depending on the
State's approach to its EHB-benchmark plan and this certification
requirement. For example, the State may only need to do one plan
comparison for the purposes of both of these proposed certification
requirements. Specifically, the State could use the same plan, such as
the State's EHB-benchmark plan used for the 2017 plan year, to
determine that the new State's EHB-benchmark plan is equal to the scope
of benefits provided under a typical employer plan. The State could
also use those findings to determine that because the new State EHB-
benchmark plan is equal in scope of benefits to the State's EHB-
benchmark plan used for the 2017 plan year, the new State EHB-benchmark
plan does not exceed the generosity of the most generous of the set of
comparison plans. We estimate that a financial examiner would require
one hour (at a rate of $66.04 per hour) to review, combine, and
electronically transmit these documents to HHS, as part of a State's
EHB-benchmark plan submission. Because this section of the proposed
regulation would only apply to options 2 and 3 under proposed Sec.
156.111(a)(2) and (3), we are estimating that only two thirds of States
(7 of the 10 States) would need to complete and submit this proposed
documentation requirement. Therefore, we estimate that each State would
incur a burden of 17 hours with an associated cost of $1,359, with a
total annual burden for 7 states of 119 hours at associated total cost
of $9,514. We seek comment on this estimate.
The proposals at Sec. 156.111(e)(3) would further require each
State to submit its new EHB-benchmark plan documents. The level of
effort associated with this requirement could depend on the State's
selection of the EHB-benchmark plan options under the proposed
regulation at Sec. 156.111(a). However, for the purposes of this
estimate, we estimate that it would require a financial examiner (at a
rate of $66.04 per hour) 12 hours on average to create, review, and
electronically transmit the State's EHB-benchmark plan document that
accurately reflects the benefits and limitations, including medical
management requirements and a schedule of benefits, resulting in a
burden of 12 hours and an associated cost of $792, with a total annual
burden for all 10 states of 120 hours and an associated cost of $7,925.
The burden for producing these documents is significantly higher than
previous estimates because the previous data collection generally only
required the State (or issuer) to transmit the selected benchmark plan
document. In contrast, in some cases, the proposed Sec. 156.111(a) may
result in the State needing to create a completely new document or
significantly modify the current document to represent the plan
document. Additionally, this estimate of 12 hours also includes the
burden necessary for a State selecting the option at proposed Sec.
156.111(e)(3) where the State would also be required to submit a
formulary drug list for the State's EHB-benchmark plan in a format and
manner specified by HHS. Specifically, the burden for the State
selecting this option would also likely vary as the State could use an
existing formulary drug list or create its own formulary drug list
separately for this purpose. To collect the formulary drug list, the
State would be required to use the template provided by HHS and submit
the formulary drug list as a list of RxNorm Concept Unique Identifiers
(RxCUIs).
Lastly, the proposal at Sec. 156.111(e)(4) would require the State
to submit the documentation necessary to operationalize the State's
EHB-benchmark plan. This reporting requirement includes the EHB summary
file that is currently posted on CCIIO's Web site, used as part of the
QHP certification process, and integrated into HHS's IT Build systems
that feed into the data that is displayed on HealthCare.gov. While this
document would not be a new document, the burden associated with this
document would be new for States. We estimate that it would require a
financial examiner 12 hours, on average, (at a rate of $66.04 per hour)
to create, review, and electronically submit a complete and accurate
document to HHS resulting in a burden of 12 hours and an associated
cost of $792, with a total annual burden for all 10 states of 120 hours
and an associated cost of $7,925.
Under the current policy, the burden estimates 226 respondents per
year, for a total yearly burden total of 165 annual burden hours and a
total annual associated cost of $8,094 to meet these reporting
requirements. Under the proposed policy related to EHB, we estimate
that the total number of respondents would be 10 per year, for a total
yearly burden of 399 hours and an associated cost of $28,005 to meet
these reporting requirements. The estimated burden associated with the
proposed changes represents an increase of 234 hours (increase from 165
hours to 399 hours) and an annual costs increase of $19,911 (from
$8,094 to $28,005) over the approved information collection (OMB
Control Number: 0938-1174).
As part of the update to this OMB Control Number: 0938-1174, we are
also seeking comment on requirements for SADPs to submit voluntary
reporting. This collection includes data on whether the issuer intends
to offer SADP coverage, the anticipated Exchange market in which
coverage would be offered, and the State and service area in which the
issuer offers coverage. The burden associated with meeting this
requirement includes the time and effort needed by the issuer to report
on whether it intends to offer SADP coverage. We estimate that it will
take one half hour for a health insurance issuer to meet this reporting
requirement. We estimate that approximately 175 issuers will respond to
this data collection. Therefore, we anticipate that the reporting
requirement would require a market research analyst one half-hour
annually to identify and submit the responsive records to CMS (at a
rate of $67.90 per hour), for a total cost of $34 a year per reporting
entity. This would result in an annual burden of 87.5 hours for all 175
issuers and a resulting estimated annual cost of $5,941. OMB approvals
are issued for three years; therefore, the aggregate burden for three
years would be approximately 263 hours with an associated cost of
approximately $17,824. We seek comment on these proposed estimates.
H. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.170, 158.221,
158.320-323, 158.340, 158.346, and 158.350)
We are proposing to amend Sec. 158.221 to allow issuers the option
to report quality improvement activity expenses as a single fixed
percentage of premium amount, and make conforming amendments to Sec.
158.170. We do not anticipate that implementing this provision would
require significant changes to the MLR annual reporting
[[Page 51122]]
form and the associated burden. The burden related to this collection
is currently approved under OMB control number 0938-1164; Medical Loss
Ratio Annual Reports, MLR Notices, and Recordkeeping Requirements.
We are also proposing to amend Subpart C to modify the data and
narratives which a State must submit as part of the State's request for
an adjustment to the MLR standard in the individual market for that
State. There is no standardized application form associated with a
State's request, but each request must contain certain data elements in
order to receive consideration by the Secretary, which are described in
Sec. Sec. 158.320-158.323, 158.340, 158.346, and 158.350. The burden
related to the proposed requirements was previously approved under OMB
control number 0938-1114, Medical Loss Ratio (IFR) Information
Collection Requirements and Supporting Regulations; the approval
expired in 2014. We intend to reinstate this information collection,
with modifications to reflect our proposed revisions to subpart C of
part 158. This document serves as the 60-day notice to afford the
public an opportunity to comment on this collection of information
requirement. To obtain copies of a supporting statement and any related
forms for the proposed collection summarized in this document, you may
make your request using one of following: (1) Access CMS's Web site
address at https://www.cms.hhs.gov/PaperworkReductionActof1995; (2)
email your request, including your address, phone number, OMB Control
Number 0938-1114, and CMS document identifier CMS-10361, to
Paperwork@cms.hhs.gov; or (3) call the Reports Clearance Office at
(410) 786-1326.
We are proposing to eliminate collection of the following
information from a State requesting an adjustment: The State MLR
standard and formula for assessing compliance (Sec. 158.321(a)), its
market withdrawal requirements (Sec. 158.321(b)), and the mechanisms
available to the State to provide consumers with options for alternate
coverage (Sec. 158.321(c)); as well as the net underwriting profit for
the total business in the State and the after-tax profit and profit
margin for the individual market and total business in the State (Sec.
158.321(d)(2)(vii)), and the estimated rebate (Sec. 158.321(d)(2)(v))
of each issuer with at least 1,000 enrollees in the State. We expect
this proposal to reduce the burden on States seeking an adjustment. We
are also proposing to replace the requirement that a State requesting
an adjustment must submit enrollment and premium data for every
individual market issuer at the product level (Sec. 158.321(d)(1)) and
the reported and estimated MLRs (Sec. 158.321(d)(2)(ii) and (iii)) for
issuers with at least 1,000 enrollees, with total enrollment (life-
years and covered lives), premium, and total incurred claims for only
active individual market issuers, separately for five types of
individual market coverage: on-Exchange plans, off-Exchange plans,
grandfathered health plans as defined in Sec. 147.140, coverage that
meets the criteria for transitional policies outlined in applicable
guidance, and non-grandfathered single risk pool coverage. States would
not be required to provide information on student health insurance
coverage as defined in Sec. 147.145 or excepted benefits as defined in
Sec. 148.220. We expect this proposal to result in a net reduction in
burden on States seeking an adjustment. We are also proposing to
continue to collect data on total agents' and broker's commission
expenses and net underwriting gain (proposed to be redesignated from
Sec. 158.321(d)(2)(iv) and (vi) to Sec. 158.321(a)(3) and (4),
respectively) for only active individual market issuers, but separately
for the five types of coverage described above. We would continue to
collect information on risk-based capital levels (proposed to be
redesignated from Sec. 158.321(d)(2)(viii) to Sec. 158.321(a)(5)) at
the issuer level. While this proposal would require more breakdown of
the data than Sec. 158.321 currently requires, in most States there
are more issuers with at least 1,000 enrollees than there are active
issuers in the individual market, and consequently we expect that this
proposal would have no net impact on the burden. Additionally, we are
proposing to update Sec. 158.321(d)(2)(ix) to collect more specific
information on issuer notices to the State of changes to participation
in the State's individual market, rather than focusing exclusively on
notices to exit the individual market. We do not expect this proposal
to have an appreciable impact on the burden. We are further proposing
to eliminate the requirement that a State requesting an adjustment
provide information explaining and justifying how its proposed
adjustment was determined and estimating rebates that would be paid
with and without an adjustment (Sec. 158.322(a), (c), and (d)); as
well as to replace what information a State must provide pursuant to
Sec. 158.322(b) with a requirement to explain how the adjustment would
help stabilize the State's individual market. We expect this proposal
to reduce the burden. Lastly, we are proposing to update what
information a State must submit with a subsequent request for
adjustment pursuant to Sec. 158.350. We do not expect this proposal to
change the burden.
Based on preliminary data analysis and previous State requests for
adjustments, we estimate that approximately 22 States would submit
applications in the first year that the proposed MLR adjustment process
is codified. We estimate that it would take approximately 140 hours on
average for each State to complete the application, including gathering
and analyzing data, synthesizing information, and developing a proposal
for an adjusted MLR standard. Specifically, we assume that the
application would take a financial analyst approximately 96 hours (at a
rate of $68.78 per hour), an actuary 6 hours (at a rate of $80.82 per
hour), a financial manager 10 hours (at a rate of $91.66 per hour), a
lawyer 24 hours (at a rate of $89.74 per hour), and the Commissioner 4
hours (at a rate of $116.90 per hour) to assemble and review the
various components of the application, resulting in total of burden for
each state of 140 hours with an associated cost of $10,626 per
response, representing an estimated total burden reduction of 45 hours
per response. The documents would be submitted electronically at
minimal cost. We estimate that the total burden for 22 states to submit
a request for an adjustment to the individual market MLR standard would
be 3,080 hours with an associated cost of approximately $233,767, with
an estimated net total reduction in burden of 620 hours. We recognize
that this burden may vary between States, as some States may have
better access to the required application information elements, while
other States may have to seek some of the required information from
health insurance issuers in their States, which could increase their
burden. Some States may, if providing the requested information is an
undue burden, ask the Secretary to consider their application without
some of the information elements. We seek comment regarding this
information collection requirement.
I. Summary of Annual Burden Estimates for Proposed Requirements
[[Page 51123]]
Table 12--Proposed Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Labor cost
OMB control Burden per annual of Total cost
Regulation section(s) No. Respondents Responses response burden reporting ($)
(hours) (hours) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 153.320............................................ 0938-1155 25 25 48 1,200 97,504.00 97,504.00
Sec. 156.111(e)(1)...................................... 0938-1174 * 10 10 4 40 2,641.60 2,641.60
Sec. 156.111(e)(2)...................................... 0938-1174 * 7 7 17 119 9,514.12 9,514.12
Sec. 156.111(3)(3)...................................... 0938-1174 * 10 10 12 120 7,924.80 7,924.80
Sec. 156.111(e)(4)...................................... 0938-1174 * 10 10 12 120 7,924.80 7,924.80
Sec. Sec. 158.320-323, 158.340, 158.346-350............ 0938-1114 22 22 140 3,080 233,766.72 233,766.72
0938-1174 175 175 0.5 87.5 5,941.25 5,941.25
---------------------------------------------------------------------------------------------
Total................................................. ........... 207 234 ........... 4766.5 365,217.29 365,217.29
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Denote the same entities. For purposes of calculating the total, the highest value is used only once.
** 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 12.
J. 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 and recordkeeping
requirements. These requirements are not effective until they have been
approved by the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit CMS's Web
site at www.cms.hhs.gov/PaperworkReductionActof1995, or call the
Reports Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the ADDRESSES section of this proposed
rule and identify the rule (CMS-9930-P), the ICR's CFR citation, CMS ID
number, and OMB control number.
ICR-related comments are due January 2, 2018.
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 risk adjustment program
for the 2019 benefit year, as well as certain modifications that will
promote State flexibility and control over their insurance markets,
reduce burden on stakeholders, 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 the
risk adjustment program, including the specific parameters applicable
for the 2014, 2015, 2016, 2017, and 2018 benefit years. This rule
proposes additional standards related to essential health benefits;
cost-sharing parameters; qualified health plan certification; the
Exchanges, including terminations, exemptions, eligibility and
enrollment; AV for stand-alone dental plans; MEC; the rate review
program; the medical loss ratio program; the Small Business Health
Options Program; and FFE and SBE-FP 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)), and Executive Order 13771 on Reducing Regulation and
Controlling Regulatory Costs (January 30, 2017).
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.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule--
(1) having an annual effect on the economy of $100 million or more in
any 1 year, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year),
and a ``significant'' regulatory action is subject to review by OMB.
HHS has concluded that this rule is likely to have economic impacts of
$100 million or more in at least 1 year, and therefore, meets the
definition of ``significant rule'' under Executive Order 12866.
Therefore, HHS has provided an assessment of the potential costs,
benefits, and transfers associated with this rule.
The provisions in this proposed rule aim to improve the health and
stability of the Exchanges, and to provide States
[[Page 51124]]
with additional flexibility and control over their insurance markets.
They would reduce regulatory burden, and reduce administrative costs
for issuers and States, and would lower net premiums for consumers.
Through the reduction in financial uncertainty for issuers and
increased affordability for consumers, these provisions are expected to
increase access to affordable health coverage. Although there is some
uncertainty regarding the net effect on enrollment and premiums, we
anticipate that the provisions of this proposed rule would help further
HHS's goal of ensuring that all consumers have access to quality,
affordable healthcare; that markets are stable; and that Exchanges
operate smoothly.
In accordance with Executive Order 12866, HHS has determined that
the benefits of this regulatory action justify the costs.
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 PPACA is to make affordable health insurance available
to individuals who do not have access to affordable employer-sponsored
coverage or government-sponsored coverage. The provisions within this
proposed rule are integral to the goal of expanding coverage. For
example, the risk adjustment program helps prevent risk selection and
decrease the risk of financial loss that health insurance issuers might
otherwise expect in 2019.
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 the risk
adjustment program works as intended, and that States have more control
and flexibility over essential health benefits, QHP certification and
the operation and establishment of Exchanges. Affected entities such as
QHP issuers would incur costs to comply with the proposed provisions,
for example, those related to the functions of a SHOP; including
calculating the minimum participation rate at the employer level and
processing SHOP enrollments for employers and employees; and States
would incur costs to comply with provisions regarding essential health
benefits. 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 13 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 access to
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 any reduction in burden
related to changes in the timing related to States posting proposed and
final rate filing information; increased flexibility for Exchanges
related to the removal of certain requirements for Navigator programs
and non-Navigator assistance personnel entities; increased access to
the direct enrollment pathway stemming from permitting a third-party
entity to conduct operational readiness reviews for agents, brokers,
and issuers; benefits to Exchanges related to proposed simplifications
of verification requirements; benefits to consumers, issuers or
Exchanges related to the changes related to the special enrollment
periods; increased flexibility for States relating to the proposals
regarding the SHOP enrollment process; potential decreases in premiums
to consumers related to removing actuarial value standards for SADPs;
and reductions in burden associated with CHIP buy-in plans with
identical coverage to the CHIP program under title XXI of the Act in
the applicable State being automatically recognized as MEC--and certain
costs--such as the costs incurred by small employers, agents and
brokers, and potential increases in out-of-pocket costs to consumers
related to removing actuarial value standards for SADPs; and costs to
issuers, brokers, agents, and employers related to changes in SHOP
enrollment procedures. The effects in Table 13 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 13 reflect direct
administrative costs to health insurance issuers as a result of the
proposed provisions, and include administrative costs associated with
States requesting a reduction in the calculation of Statewide average
premium for the State's small group market for the purpose of risk
adjustment, the reduction in costs relating to issuers and States
having to no longer submit rate increases for student health insurance
plans to HHS, and costs associated with States seeking an adjustment to
the MLR standard in the State's individual market that are estimated in
the Collection of Information section of this proposed rule. The annual
monetized transfers described in Table 13 include costs associated with
SBE-FP user fees, the risk adjustment user fee paid to HHS by issuers,
and reductions in rebate payments from issuers to consumers related to
QIA and MLR adjustments. We are proposing to collect a total of $38
million in risk adjustment user fees or $1.68 per enrollee per year
from risk adjustment issuers, which is less than the $40 million in
contract costs expected for benefit year 2017 when we established a
similar $1.68 per-enrollee-per-year risk adjustment user fee amount. As
in 2018, the risk adjustment user fee contract costs for 2019 include
additional costs for risk adjustment data validation; however, we
expect reduced costs related to issuer outreach and education as
issuers gain familiarity with the risk adjustment program, and
enrollment remains steady in 2019 HHS risk adjustment covered plans
compared to the billable member month enrollment estimated for 2018.
Also, we expect a decrease in FFE user fee collections necessary as we
estimate lower contract costs due to streamlining of FFE operations and
an increase in premiums but also lower enrollment, resulting in a
proposed user fee rate of 3.5 percent for 2019, which is the same as
the FFE user fee rate established for 2014 through 2018 benefit years.
However, the decrease in user fee collections required to support FFE
functions for the 2019 benefit year will be similar to the updated
costs for the 2018 benefit year, and the user fee rate will yield the
same amount of transfers from FFE issuers to the Federal government as
in the prior benefit year. Therefore, there are no changes to the FFE
user fee transfers to include in Table 13. We are also proposing an
SBE-FP user fee rate to be set at 3.0 percent for benefit year 2019,
which is higher than the 2.0 percent SBE-FP user fee rate we finalized
for the 2018 benefit year. In this rule, we are also proposing to cease
charging user fees on SHOP issuers offering plans through an FFE or
SBE-FP starting for plan years beginning on and after January 1, 2018.
[[Page 51125]]
Table 13--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Qualitative:
Greater market stability resulting from improvements to the risk adjustment methodology.
Potential increased enrollment in the individual market stemming from lower premiums, leading to
improved access to health care for the previously uninsured, especially individuals with medical conditions,
which will result in improved health and protection from the risk of catastrophic medical expenditures.a
More informed Exchange QHP certification decisions.
Increased coverage options for small businesses and employees with less adverse selection.
Cost savings to consumers and issuers due to reduced administrative costs for issuers.
Reduced costs and burden for States with CHIP buy-in plans automatically recognized as recognized as
MEC.b
Potential decreases in premiums associated with States opting to select a new EHB-benchmark plan.
Reduced burden to Exchanges, due to the removal of the requirements that each Exchange must have at
least two Navigator entities, and that one of these entities must be a community and consumer-focused
nonprofit group, and the removal of the requirement that each Navigator (and each non-Navigator entity
subject to Sec. 155.215) maintain a physical presence in the Exchange service area.
Reduced costs and burden and increased flexibility to agents and brokers performing direct
enrollment and their third party auditors due to the removal of the requirement to obtain HHS approval to
perform reviews.
Reduction in administrative costs to issuers due to the removal of the meaningful difference
standard, and proposed changes to the SHOPs.
Reduction in costs and burden to issuers by establishing a 15 percent default threshold for rate
increase reasonableness review.
----------------------------------------------------------------------------------------------------------------
Costs Estimate Year Discount rate Period
(million) dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year) -$28 2016 7 2018-2022
---------------------------------------------------------------
-26.75 2016 3 2018-2022
----------------------------------------------------------------------------------------------------------------
Quantitative:
Costs incurred by issuers and States to comply with provisions in the proposed rule as detailed in
the Collection of Information Requirements section, taking into account the reduction in burden and costs
for issuers and States due to the elimination of the requirement to submit rate reviews to HHS for student
health insurance coverage b and increase in the rate review threshold and the reduction in burden and costs
to States related to the requests for adjustment to the MLR standard in their individual markets.
Reduction in costs to issuers due to changes to the requirements for risk adjustment data
validation.
Reduction in potential costs to Exchanges since they will no longer be required to conduct sampling
as a verification process for eligibility for employer-based insurance starting plan year 2018, and can
instead conduct an alternate process through plan year 2019.
Regulatory familiarization costs.
----------------------------------------------------------------------------------------------------------------
Qualitative:
Costs due to increases in providing medical services (if health insurance enrollment increases).
Costs to issuers of redesigning SADPs to account for the removal of actuarial value standards for
SADPs.
Potential increases in out of pocket costs associated with States opting to select a new EHB-
benchmark plan.
----------------------------------------------------------------------------------------------------------------
Transfers Estimate Year Discount rate Period
(million) dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized ($/year) $16.2 2017 7 2018-2022
---------------------------------------------------------------
17 2017 3 2018-2022
----------------------------------------------------------------------------------------------------------------
Other Annualized Monetized ($/year) 87 2017 7 2018-2022
---------------------------------------------------------------
87 2017 3 2018-2022
----------------------------------------------------------------------------------------------------------------
Quantitative:
Decrease in transfers from health insurance issuers to the Federal government of $2 million related
to the decrease in annual cost of risk adjustment user fees for 2019-2021 (the total risk adjustment user
fee amount for 2018 was $40 million and was previously estimated to remain the same for years 2019-2021).
Increased transfers from SBE-FP issuers to the Federal government of $20 million due to increase in
user fee rate from 2.0 set in 2018 to 3.0 percent proposed for 2019.
Decrease in user fee transfers from SHOP issuers offering plans through an FFE or SBE-FP to the
Federal government of approximately $6 million in 2019.
Reduced transfers from consumers to health insurance issuers in the form of rebates of $75 million
to $87 million due to proposed amendments to the medical loss ratio requirements.c
----------------------------------------------------------------------------------------------------------------
Qualitative:
Lower premium rates in the individual market due to the improved risk profile of the insured,
competition, and pooling.
A decrease in the premiums and risk adjustment transfers in the small group market as a result of
potential State requests to reduce the Statewide average premium for the purposes of the risk adjustment
transfer formula in the small group market.
Potential increases in premiums associated with adjustments to MLR.
Potential decreases in premiums associated with removal of AV standards for SADPs.
Potential increases in out of pocket costs associated with removal of AV standards for SADPs.
----------------------------------------------------------------------------------------------------------------
a Removal of AV standards for SADPs may reduce enrollment due to reductions in coverage and potential higher out-
of-pocket costs.
[[Page 51126]]
b The reduction in burden and costs associated with student health insurance and CHIP buy-in plans could result
in lower premiums for these groups.
c For the purpose of calculating total transfers, the upper bound was used.
This RIA expands upon the impact analyses of previous rules and
utilizes the Congressional Budget Office's (CBO) analysis of the
PPACA's impact on Federal spending, revenue collection, and insurance
enrollment. The PPACA ends the transitional reinsurance program and
temporary risk corridors program after the benefit year 2016.
Therefore, the costs associated with those programs are not included in
Tables 14 or 15 for fiscal years 2019-2022. Table 14 summarizes the
effects of the risk adjustment program on the Federal budget from
fiscal years 2018 through 2022, with the additional, societal effects
of this proposed rule discussed in this RIA. We do not expect the
provisions of this proposed rule to significantly alter CBO's estimates
of the budget impact of the premium stabilization programs that are
described in Table 14. We note that transfers associated with the risk
adjustment program 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
13).
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 2018 Payment Notice for the impacts
associated with the advance payment of premium tax credits, the premium
stabilization programs, and FFE user fee requirements.
Table 14--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk
Corridors Programs From Fiscal Year 2018-2022
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
Year 2018 2019 2020 2021 2022 2018-2022
----------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and Risk 5 5 5 6 6 27
Corridors Program Payments..................
Risk Adjustment, Reinsurance, and Risk 5 5 6 6 6 28
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 $1 million in payments in FY 2018 that are collected in prior
fiscal years. CBO does not expect a shortfall in these programs.
Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 65:
2017 to 2027 Table 2. September 2017. Available at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53091-fshic.pdf.
1. Risk Adjustment
The risk adjustment program is a permanent program created by the
PPACA 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 153 in Title 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 through 2018 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 2019 benefit year, we estimate that the total cost for HHS to
operate the risk adjustment program on behalf of States for 2019 will
be approximately $38 million, slightly less than in 2018, and that the
risk adjustment user fee would be approximately $1.68 per enrollee per
year. This user fee reflects contract costs to support the risk
adjustment data validation process in 2019, lower costs related to risk
adjustment issuer outreach and education, and lower enrollment in risk
adjustment covered QHPs, which results in the same user fee rate as the
2018 benefit year after rounding to the nearest cent.
We believe that our proposal to blend the coefficients calculated
from the 2016 benefit year EDGE enrollee-level data with 2014 and 2015
MarketScan[supreg] data will provide stability within the risk
adjustment program and minimize volatility in changes to risk scores
from the 2018 benefit year to the 2019 benefit year due to differences
in the datasets' underlying populations.
We are proposing to allow States to request a reduction in the
Statewide average premium in the small group market. We expect this
proposed policy would reduce premiums and transfers in the small group
markets proportional to the percent by which the States choose to
reduce the transfers. However, because the risk adjustment program is
budget neutral, any State decision to reduce the Statewide average
premium used to calculate risk adjustment transfers will have no net
impact on risk adjustment transfers.
2. Risk Adjustment Data Validation
This proposed regulation includes changes to the requirements for
risk adjustment data validation that overall would reduce regulatory
burden and costs for issuers of risk adjusted plans. HHS believes the
proposal to only adjust issuers' risk adjustment risk scores whose data
validation error rates materially deviate from the national central
tendency of error rates would help market stability by increasing
issuers' ability to predict risk adjustment transfers and liquidity
needs. We anticipate that, under this proposal, most issuers required
to participate in risk adjustment data validation would not have their
risk scores adjusted, based on our analysis of error rates in the
Medicare risk adjustment data validation program.
The proposal to retroactively adjust transfers for issuers that
exited a State market would result in transfer adjustments for a small
subset of issuers that previously would not have had their transfers
adjusted, but HHS does not expect this policy to increase burden for
these issuers, especially in light of the payment adjustment proposal
described above.
HHS estimates that not requiring issuers that have 500 or fewer
billable member months Statewide to conduct an initial validation audit
beginning in the 2017 benefit year would reduce the administrative
burden and costs on those issuers. The reduction in burden and costs
related to this ICR has been discussed previously in the Collection of
Information Requirements section.
[[Page 51127]]
Under the proposed change to the sampling methodology, issuers that
were the sole issuer in a risk pool would still need to provide a
sample for data validation, but the sample would not include enrollees
from the risk pool where they were the sole issuer. Therefore, this
proposal would not have a significant impact on costs or burden for
affected issuers.
We propose to amend Sec. 153.630(b)(6) to state that a provider
licensed to diagnose mental illness that is prohibited by State privacy
laws from furnishing a complete medical record for data validation may
furnish a signed mental or behavioral health assessment that providers
routinely prepare. For risk adjustment data validation purposes, we
assume a mental or behavioral health assessment is signed by a
qualified provider who is licensed by the State to diagnose mental
illness and, to the extent permissible under governing privacy and
confidentiality laws, contains: (i) The enrollee's name; (ii) gender;
(iii) date of birth; (iv) current status of all mental or behavioral
health diagnoses; and (v) dates of service. The burden associated with
submitting medical records for RADV purposes and therefore, this
proposal, is currently approved under OMB Control Number 0938-1155:
Standards Related to Reinsurance, Risk Corridors, Risk Adjustment, and
Payment Appeals.
We propose to amend Sec. 153.630(b)(9) to state that, if an issuer
of a risk adjustment covered plan (1) fails to engage an initial
validation auditor; (2) fails to submit the results of an initial
validation audit to HHS; (3) engages in misconduct or substantial non-
compliance with the risk adjustment data validation standards and
requirements applicable to issuers of risk adjustment covered plans; or
(4) intentionally or recklessly misrepresents or falsifies information
that it furnishes to HHS, HHS may impose CMPs in accordance with the
procedures set forth in Sec. 156.805(b) through (e). Because risk
adjustment data validation has thus far operated as a pilot program, we
cannot estimate the number of issuers that would be subject to CMPs.
However, we do not expect that a significant number of issuers would
engage in the extreme misconduct required to warrant a CMP under this
proposal.
3. Rate Review
In Sec. 154.103, we propose to exclude student health insurance
coverage from the Federal rate review requirements. This would reduce
burden related to rate review submission and review for issuers and
States. In addition, providing States with more flexibility regarding
timing of submission of rate filing justification, reducing the advance
notification requirement for rate increase announcements, timing of
posting proposed and final rate filing information, and changing the
threshold for reasonableness review to a 15 percent increase rather
than a 10 percent increase, would reduce regulatory burden for issuers
and States. The reduction in burden and costs related to ICRs have been
discussed previously in the Collection of Information Requirements
section.
4. Additional Required Benefits (Sec. 155.170)
In the preamble to Sec. 155.170, we propose to extend the
applicability of the policies governing State-required benefits to the
proposals described at Sec. 156.111 that would provide States with new
options for selecting their EHB-benchmark plans beginning for the 2019
plan year. Specifically, under any of the three proposed EHB-benchmark
plan selection options, or if the State defaults to its current EHB-
benchmark plan, the current policies regarding State-required benefits
would continue to apply if the proposals at Sec. 156.111 are
finalized. Because these policies would continue to be in effect, we do
not anticipate any additional burden on States or issuers due to this
proposal.
5. Standards for Navigators and Certain Non-Navigator Assistance
Personnel (Sec. Sec. 155.210 and 155.215)
We propose to amend Sec. 155.210(c)(2) to remove the requirements
that each Exchange must have at least two Navigator entities and that
one of these entities must be a community and consumer-focused
nonprofit group. We also propose to amend Sec. Sec. 155.210(e)(7) and
155.215(h) to remove the requirements that Navigators and non-Navigator
assistance personnel entities subject to those regulations maintain a
physical presence in the Exchange service area. The proposed amendments
to Sec. 155.210(c)(2) would reduce the burden on Exchanges to have at
least two separate Navigator entities, and as a result, Exchanges may
be able to reduce funding amounts while still meeting program
requirements. Removing these requirements would help promote
flexibility and autonomy for each Exchange to structure its Navigator
program, and to award grant funding to the number and type of entities
that would be most effective for that specific Exchange service area.
To the extent that Exchanges take advantage of these flexibilities,
consumers may have fewer options of Navigator grantees and may not have
access to a Navigator grantee or a non-Navigator assistance personnel
entity that maintains a physical presence in the Exchange service area.
Exchanges continue to have the flexibility to fund more than one
Navigator grantee and SBEs continue to have the flexibility to require
that Navigators maintain a physical presence in the Exchange service
area.
6. Standards for Third-Party Entities To Perform Audits of Agents,
Brokers, and Issuers Participating in Direct Enrollment (Sec. 155.221)
The proposed regulations would replace the existing requirement
that an HHS-approved third party perform audits of agents and brokers
participating in direct enrollment to instead permit a third-party
entity to conduct operational readiness reviews for agents, brokers,
and issuers participating in direct enrollment. HHS anticipates this
approach would reduce the regulatory burden on agents, brokers, and
issuers utilizing this section for enhanced direct enrollment
oversight. HHS also anticipates that this proposal would reduce the
burden on third-party auditors performing reviews under Sec. 155.221,
as those entities would no longer be required to obtain HHS approval to
perform the reviews. Furthermore, we believe this proposal would expand
the available number of qualified third-party auditors by removing any
time and operational restrictions imposed by the HHS pre-approval
requirement, which would provide more flexibility to agents, brokers,
or issuers as they complete operational readiness reviews.
Additionally, we believe this proposal would enable more agents,
brokers and issuers to demonstrate operational readiness by reducing
the burden on HHS for conducting reviews, expediting the ability of
these entities to demonstrate readiness, and increasing the feasibility
of approval for use of innovative pathways, thereby creating more
opportunities for enrollment in QHP coverage for consumers, potentially
increasing enrollment. HHS anticipates that some of the burden would be
lessened by the fact that many agent, brokers, or issuers would already
have the established privacy and security controls, and may have
existing relationships with auditors that could be leveraged for these
reviews. We would provide additional technical details regarding
compliance with the specific requirements under these rules in guidance
in the future. It is difficult to estimate a nationwide effect with
[[Page 51128]]
precision. We seek comment on the impact of this policy.
7. Eligibility Standards (Sec. 155.305)
The requirement in Sec. 155.305(f)(4)(ii) that the Exchange must
send direct notification to the tax filer before denying eligibility
for APTC to consumers who fail to file and reconcile went into effect
in mid-January 2017; therefore, it did not impact operations for the
2017 open enrollment period, which was nearly over then. At that point
in time, for the FFE, the household contacts for non-filers had been
notified of their tax filer's non-compliance, and APTC had been
discontinued at auto re-enrollment for those who did not file a Federal
income tax return according to IRS data or inform the FFE that they had
filed a Federal tax return and reconciled past APTC. Requiring the
Exchange to deny APTC for failure to file and reconcile even in the
absence of ``direct notification . . . to the tax filer'' is unlikely
to add new burden since Exchanges have not yet implemented Sec.
155.305(f)(4)(ii). We do not believe that Exchanges have built an FTI-
compliant noticing infrastructure since the publication of the final
rule establishing Sec. 155.305(f)(4)(ii) that they would need to
dismantle if this proposal is finalized. However, if Sec.
155.305(f)(4)(ii) remains in effect, Exchanges will incur significant
costs, as discussed above, to build the infrastructure necessary to
directly notify tax filers about their tax filing status while
protecting FTI.
8. Verification Requirements (Sec. 55.320)
Verification Requirements in this proposed rule would also amend
Sec. 155.320(d)(4) to allow an Exchange to conduct an HHS-approved
alternative process instead of sampling, as provided under paragraph
(d)(4)(ii) through benefit year 2019. We believe this would relieve
Exchanges from the burden of investing resources to conduct sampling
when the FFEs' study of a sampling-like process found that this method
of verification may not be cost-effective for some Exchanges at this
time. We estimate the burden associated with sampling based in part on
the alternative process used for the FFEs. HHS incurred approximately
$750,000 in costs to design and operationalize this study and the study
indicated that $353,581 of APTC was potentially incorrectly granted to
individuals who inaccurately attested to their eligibility for or
enrollment in a qualifying eligible employer-sponsored plan. We placed
calls to employers to verify 15,125 cases but were only able to verify
1,948 cases. A large number of employers either could not be reached or
were unable to verify a consumer's information, resulting in a
verification rate of approximately 13 percent. The sample-size involved
in the 2016 study did not represent a statistically significant sample
of the target population and did not fulfill all regulatory
requirements for sampling under paragraph (d)(4)(i) of Sec. 155.320.
Taking additional costs into account--namely, the cost of sending
notices to employees as required under paragraph (d)(4)(i)(A), the cost
of building the infrastructure and implementing the first year of
operationalizing this process, and the cost of expanding the number of
cases to a statistically significant sample size of approximately 1
million cases--we estimate that the overall cost of implementing
sampling would be approximately $8 million for the FFE, and between $2
million and $7 million for other Exchanges, depending on their
enrollment volume and existing infrastructure. Therefore, we estimate
that the average per-Exchange cost of implementing sampling that
resembles the FFE's approach would be approximately $4.5 million for a
total cost to State-based Exchanges of $54 million, when assuming 12
State-based Exchanges (operating in 11 States and the District of
Columbia). This cost estimate does not, however, take into account the
cost of notifying consumers when the information provided by their
employer changes their eligibility determination described under
paragraph (d)(4)(i)(E), the cost of providing employees consumer
support that may be needed to understand notices and any change in
eligibility, or the cost of ending those consumers' APTCs, when
necessary. This estimate also does not account for the unique operating
costs of each Exchange, the proposed change to paragraph (d)(4) to
allow Exchanges to continue to use an alternate process through benefit
year 2019, and the flexibility afforded Exchanges described at Sec.
155.315(h) and referenced in Sec. 155.320(a)(2).
We believe these changes would lessen the financial and technical
burdens on Exchanges under current regulation and allow Exchanges to
conduct an alternative process to sampling under paragraph (d)(4) as
approaches to sampling are refined and data bases are compiled over
time. We seek comment on the reduction in burden associated with
extending the option to allow Exchanges to fulfill verification
requirements by conducting an HHS-approved alternative process to
sampling through plan year 2019.
9. Special Enrollment Periods (Sec. 155.420)
We do not anticipate that the revisions to Sec. 155.420 would
create any costs or burdens. The proposed revisions in paragraph
(b)(2)(i) align regulatory policy for special enrollment periods based
on a court order with other similar special enrollment period types,
and create operational efficiencies for Exchanges by streamlining
effective date options across similar special enrollment period
qualifying events related to a qualified individual gaining or becoming
a dependent. For example, this revision to the regulation would enable
the FFE to use a simpler online, automated application pathway for more
special enrollment period-eligible consumers, meaning that fewer
consumers will need to use a manual and costly casework process to use
their special enrollment period. For limited cases when casework
support is required, operations would also be simplified.
Similarly, the revision to paragraph (d)(1)(iii) allows Exchanges
to provide similar treatment to all women losing non-MEC pregnancy-
related coverage, which enables a more streamlined special enrollment
period eligibility process.
Additionally, amending paragraph (a)(5) to exempt qualified
individuals from the prior coverage requirement that applies to certain
special enrollment periods if, for at least 1 of the 60 days prior to
the date of their qualifying event, they lived in a service area where
there were no QHPs offered through an Exchange may provide a pathway to
coverage for a small group of individuals, and is not anticipated to
impact the Exchange risk pool. The Exchange already exempts qualified
individuals who may not previously have had access to QHP coverage
through an Exchange, including those who were previously living in a
foreign country or United States territory and Indians as defined by
section 4 of the Indian Health Care Improvement Act. Therefore, we do
not believe that adding an additional small population to this
exemption will create additional costs or burdens.
Finally, because simplified special enrollment period eligibility
policy provides improved pathways to continuous coverage for special
enrollment period-eligible consumers, we anticipate that the revisions
would reduce burden on consumers, have a positive effect on the risk
pool, and not result in additional costs or burdens for issuers.
[[Page 51129]]
10. Effective Dates for Terminations (Sec. 155.430)
Permitting all enrollee-initiated terminations to become effective
on the date of enrollee request or a later date of their choosing and
removing the special termination effective date for newly eligible
Medicaid/CHIP/basic health plan consumers streamlines termination
effective dates for Exchanges and reduces complication and confusion
among consumers and issuers. There are no new costs incurred by
Exchanges or issuers by aligning these termination dates, as Exchanges
and issuers are well acquainted with same-day termination transactions.
However, enrollees who receive retroactive coverage under Medicaid may
be unable to recoup QHP premiums paid. Nevertheless, operationalizing
the aligned termination dates may reduce system errors and related
casework, as well as confusion for consumers, issuers, and caseworker
and call center staff based on contradictory rules for different
scenarios.
11. Eligibility Standards for Exemptions (Sec. 155.605)
We do not anticipate that the proposed amendment to Sec.
155.605(d) would create additional costs or burdens. The proposed
amendment to Sec. 155.605(d)(2)(iv) would enable the Exchanges to
process the consumer's exemption from the individual shared
responsibility provision due to lack of affordable coverage based on
projected income, for those not eligible for employer-sponsored
coverage, when there is no bronze plan available by allowing the
Exchanges to process the consumer's exemption based on the lowest cost
Exchange metal level plan available in the individual market through
the Exchange in the State in the rating area in which the individual
resides. This proposal would not increase the burden on consumers or
Exchanges. Without these revisions, individuals may lack access to
qualifying or affordable health coverage, but be unable to qualify for
an exemption from the individual shared responsibility provision to
purchase qualifying health coverage and the associated financial
penalty due to the lack of coverage in their area or the inability to
calculate whether coverage is unaffordable. This proposal would also
not result in additional costs or burdens for issuers.
12. Small Business Health Options Program (Part 155, Subpart H, Sec.
155.200, Sec. Sec. 156.285 and 156.286, Sec. 156.350, Sec. Sec.
157.205 and 157.206)
HHS is proposing to grant additional flexibilities, for plan years
beginning on or after January 1, 2018, to small employers enrolling in
SHOP QHPs and to participating QHP issuers in how they interact with a
SHOP. If finalized, these changes would become effective as of the
effective date of the final rule. Under this proposed rule, several
existing requirements on SHOPs would not apply for plan years beginning
on or after January 1, 2018, allowing SBEs the flexibility to operate a
SHOP in a way that makes sense for the small businesses in their State,
with reduced limitations imposed by Federal regulation. The FF-SHOPs,
if this rule is finalized as proposed, would take advantage of the
flexibility of the enrollment approach described through this proposed
rule and operate in a leaner fashion. Under the proposed approach,
SHOPs would no longer be required to enroll small groups in SHOP QHPs
through a SHOP Web site. Instead, small employers would enroll through
a participating QHP issuer, or a SHOP-registered agent or broker.
HHS believes that the proposed changes would reduce burden on
participating QHP issuers, small employers, and agents and brokers for
several reasons. Under the proposed approach to SHOP enrollment for
plan years beginning on or after January 1, 2018, effective on the
effective date of the final rule, if finalized as proposed,
participating QHP issuers would enroll small groups through their
existing enrollment channels--utilizing their existing technologies and
processes. Small groups enrolled in SHOP QHPs for plan years before
January 1, 2018 would not be affected by the proposed changes to
enrollment through a SHOP until they would be due to renew in a SHOP
QHP for the 2018 plan year. While some additional requirements would be
imposed onto issuers, if this approach were to become final, HHS
anticipates that any additional burden on issuers as a result of the
changes proposed in this rule, if finalized, would be negated in an
ultimate net reduction in burden as many Federal regulations are being
removed and any additional requirements onto issuers mainly consist of
practices they currently perform in the private market.
In the 2018 Payment Notice, HHS finalized the removal of a
participation provision that had required certain QHP issuers to
participate in an FF-SHOP in order to participate in an FFE. As a
result, HHS expects that there will be a significant decrease in the
number of issuers in the FF-SHOPs in the 2018 plan year and therefore,
also expects fewer enrollments in the FF-SHOPs and SBE-FPs utilizing
the Federal platform for SHOP. As of January 1, 2017, approximately
7,554 employer groups were enrolled in the FF-SHOPs, covering 38,749
lives. With the anticipated significant decreases in QHP issuer
participation and enrollment beginning in 2018, it is not cost
effective for the Federal government to continue to maintain certain
FF-SHOP functionalities, collect significantly reduced user fees on a
monthly basis, maintain the technologies required to maintain an FF-
SHOP Web site and payment platform, generate enrollment and payment
transaction files, and perform enrollment reconciliation.
Under the proposed approach, issuers would still be subject to
their State requirements, and HHS would minimize Federal requirements
related to SHOP plans (that is, notice requirements, etc.) for plan
years beginning on or after January 1, 2018. For example, issuers are
often required by State law to generate enrollment and payment notices,
and would continue to generate any State-required notices under the
proposed SHOP enrollment approach. Under the proposed approach, the FF-
SHOPs would no longer generate enrollment notices, but the notice
requirements for the FF-SHOPs would not necessarily be transferred
directly to participating QHP issuers. HHS can imagine a scenario where
an issuer might generate an additional notice to a SHOP consumer that
they are not required by Federal law to send, but may be required by
State law, to send.
Issuers, under the proposed approach would still be required to
accept enrollment from employers that offer their employees a choice of
plans. HHS can foresee a circumstance where an employer offers its
employees a choice of plans, across plan categories, and where the
employees choose to enroll in plans offered by multiple issuers. In
this circumstance, it would also be possible that an issuer would
receive one application for enrollment from a group. Under the proposed
approach to SHOP enrollment, the issuer would be required to accept
that single enrollment so long as the employer's group has met the
minimum participation rate for their State, or is enrolling between
November 15 and December 15, when the minimum participation rate rules
do not apply. Given the expected decrease in issuer participation in
the SHOP beginning in plan year 2018, HHS believes that a circumstance,
similar to
[[Page 51130]]
the one discussed above may occur. In the absence of premium
aggregation services, issuers, under the proposed approach would be
working directly with an employer, or their appointed SHOP-registered
agent or broker for matters of enrollment and premium billing and
payment. Under the proposed regulations, issuers would be required to
enroll consumers into plans, even if only one employee of a group would
like to enroll. Further, if this proposal were to become final, issuers
would also be required to process enrollments into SHOP QHPs, and,
handle appeals (other than appeals related to employer eligibility),
administer special enrollment periods and terminations. Issuers would
still be subject to the market wide effective dates outlined in Sec.
147.104(b)(1)(i)(C). While HHS believes that issuers currently perform
the majority of these tasks, issuers may experience an increase in
burden as it relates to the volume of consumers enrolling in their SHOP
QHPs. Overall, HHS believes that under this approach, issuers would see
a net cost savings, as their business processes for SHOP enrollments
could be more closely aligned with their current business practices for
enrollments outside the SHOP, and they would no longer be remitting
user fees for FF-SHOP and SBE-FP SHOP enrollments.
As noted, SBEs would be given the flexibility to adopt an
enrollment approach through which enrollments occur directly with
issuers or SHOP-registered agents or brokers, to continue to operate
with the same functionalities as they currently do or to develop new
practices as permitted by the proposals in this rule. In any case, SBEs
would need to meet only the proposed regulations, therefore minimizing
the overall amount of regulatory requirements that SBEs would otherwise
need to meet. HHS believes that the proposed new flexibility for SBEs
will result in an overall reduction in burden and cost for SBEs because
we are providing SBEs with the flexibility to pursue the enrollment
approach that best meets their needs, because we are reducing the
overall regulatory requirements for the SHOP Exchanges, and for the
same reasons described above regarding why the proposed enrollment
approach would reduce burdens on the FF-SHOP and its stakeholders.
Under the proposed approach for plan years beginning on or after
January 1, 2018, HHS believes that employers seeking to purchase FF-
SHOP coverage would experience a reduction in regulatory burden related
to enrollment, despite the fact that they may be required to visit at
least two Web sites (the SHOP Web site and the issuer's Web site) prior
to completing an enrollment in SHOP coverage as they would be able to
enroll in coverage through a SHOP-registered agent or broker or through
a participating QHP issuer--using issuers' streamlined enrollment
technologies. Employers would also be required, under the proposals
described throughout this document to notify their QHP issuer of their
eligibility to purchase a SHOP QHP and of their ineligibility, if their
eligibility were to be revoked. We believe this would still be less
cumbersome than the existing eligibility and enrollment process.
Under the proposed approach, some employers, specifically those who
offer their employees a choice of plans, would experience an increase
of administrative burden with the removal of a SHOP's premium
aggregation services. Without a SHOP's premium aggregation services,
employers would have to collect the enrollment and payment information
needed from each of the issuers whose plans the employer intends to
offer to its employees. In the event employees select plans from
multiple insurance companies, the employer would be responsible for
distributing the applications for enrollment to the individual issuers,
collecting payments from the employees and sending the individual
payments to each issuer. Due to the expected decrease in issuer
participation in the FF-SHOPs, some SHOP employers will likely only
have one issuer offering FF-SHOP plans in their area and would not be
able to offer their employees a choice of plans across issuers. In
addition, historically, a majority of employers have not offered
employee choice across different issuers. Therefore HHS does not
believe the potential increased burden in this area due the proposed
removal of premium aggregation services to be significant. Employers
would still be able to view a listing of all of the SHOP QHPs
available, by plan category and issuer on a SHOP Web site. HHS expects
that the actual process of enrolling in SHOP QHPs under this approach
would be less burdensome than the existing enrollment approach through
a SHOP Web site. As previously mentioned, HHS anticipates significantly
lower issuer participation in the SHOP in the 2018 plan year. A
decrease in issuer participation unfortunately also results in less
choice for consumers. While employers could experience an increase in
burden, under the proposed flexibilities for SHOPs, HHS anticipates the
benefits of the proposed approach would ultimately outweigh the minimal
additional costs employers could face, if these proposals were to be
finalized.
Further, because the Federal government would experience a dramatic
reduction in the role it plays in operating an FF-SHOP and the contract
support that it requires in order to support it. In 2016, the cost of
running the FF-SHOP Web site was approximately $30 million, and HHS
expects annual expenditures to drop significantly--by at least 90
percent--within a few years, as it responsibly wind-downs the
integration of the FF-SHOPs.
13. User Fees (Sec. 156.50)
To support the operation of FFEs, we require in Sec. 156.50(c)
that a participating issuer offering a plan through an FFE or SBE-FP
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 2019
benefit year, we propose a monthly FFE user fee rate equal to 3.5
percent and for an SBE-FP equal to 3.0 percent of the monthly premium.
This increase in SBE-FP user fee rate from 2.0 percent in 2018 to 3.0
percent in 2019 will increase transfers from SBE-FP issuers to the
Federal government by $20 million. Additionally, we propose to cease
charging monthly user fees to SHOP issuers offering plans through an
FFE or SBE-FP for plan years beginning on and after January 1, 2018,
effective on the effective date of the final rule, if finalized as
proposed. This proposal will decrease user fee transfers from SHOP
issuers offering plans through an FFE or SBE-FP of approximately $6
million.
14. Provision of EHB
In Sec. 156.111, we propose to provide States with more
flexibility by offering States three new methods for selecting their
State EHB-benchmark plans. Under this proposal, if the State does not
select one of the three methods for changing its EHB-benchmark plan,
the State would default to its current EHB-benchmark plan. We recognize
that, to the extent that States take advantage of the proposed EHB-
benchmark plan selection options at Sec. 156.111, States, issuers, and
consumers would experience an increase in burden to develop new
policies and implement new plan designs. We anticipate that
[[Page 51131]]
most States would need to invest resources to analyze the three new
EHB-benchmark selection options to make an informed selection, even if
a State defaults. Several States may select one of the new options, and
would need additional resources to facilitate a public notice and
comment period; develop and submit the necessary documents specified by
HHS (including the requisite actuarial certification) to effectuate the
State's selection; and, if making changes to their EHB-benchmark plan
for 2019, to instruct their issuers on how to manually change the Add-
in file used in the Plans and Benefits Template to align with the
State's EHB-benchmark plan, as discussed in preamble.\77\ Additionally,
in States that choose to select their EHB-benchmark plan under any of
the three available proposed options, issuers offering plans that
provide EHB would incur additional administrative costs associated with
designing plans compliant with the State's newly selected EHB-benchmark
plan.
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\77\ For certain States, taking action on the EHB-benchmark plan
may require legislature action or other high level state approval.
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Due to the many PPACA policies directly or indirectly tied to EHB,
HHS recognizes the impact this proposed policy would have on parties
beyond issuers required to provide EHB-compliant plans. For example,
the State's new EHB-benchmark selection could impact how HHS reviews
and recognizes plans seeking minimal essential coverage
designation,\78\ how issuers set their annual limitation on cost-
sharing, and how issuers determine which benefits may not be subject to
annual and lifetime dollar limits.\79\
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\78\ Consumers generally must maintain minimum essential
coverage or obtain an exemption to avoid the individual shared
responsibility payment. As noted in the preamble to Sec. 156.602 in
this proposed rule, in considering whether to recognize coverage as
MEC under the application process provided for in Sec. 156.604, HHS
generally evaluates whether the coverage complies with substantially
all the requirements of title I of the PPACA that apply to non-
grandfathered coverage in the individual market, including the EHB
requirements.
\79\ The definition of EHB also has an impact on the annual
limitation on cost sharing at section 1302(c) of the PPACA (which is
incorporated into section 2707(b) of the PHS Act) and the
prohibition of annual and lifetime dollar limits at section 2711 of
the PHS Act, as added by the PPACA.
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It is our aim that the flexibility under the proposed policy would
allow for States and issuers to be more innovative in designing benefit
structures and affordable health plans that benefit the consumer.
However, we realize that this proposed policy would have varying impact
on consumers depending on how a State chooses to implement the proposed
policy. Consumers enrolled in individual and small group market plans
would be impacted by changes to EHB in that their benefits may change
and in some cases premiums could increase or decrease depending upon
State implementation of the proposed policies. Additionally, in States
that use one of the proposed methods to select a new EHB-benchmark
plan, the new EHB-benchmark plan selection may impact the amount of
premium tax credit (PTC) and CSRs for enrollees in the State. For these
consumers, subsidies would increase or decrease when compared to their
State's current EHB-benchmark plan. PTC is available only for that
portion of a plan's premium attributed to EHB. To the extent that a
State's EHB-benchmark plan, under the proposal, leads to lower premiums
for the second lowest cost silver plan, PTC would be reduced, but not
the percent of income a consumer with PTC is expected to contribute to
their premium. This effect would represent a transfer from consumers
who receive PTC to the Federal government. Individual and small group
market enrollees who do not receive PTC would experience lower premiums
for less comprehensive coverage that could result in more affordable
coverage options but possibly higher out-of-pocket costs for the
consumer.
We anticipate that States are more likely to select EHB-benchmark
plans under this proposal such that premiums are reduced. The proposal,
however, provides some flexibility for States to select EHB-benchmark
plans in a manner that would increase premiums, for example by
selecting another State's EHB-benchmark plan that provides greater
benefits than the State's current EHB-benchmark plan. To the extent
that a State's EHB-benchmark plan leads to higher premiums for the
second lowest cost silver plan, PTC would be increased.
Consumers who have specific health needs may also be impacted by
the proposed policy. In the individual and small group markets,
depending on the selection made by the State in which the consumer
lives, consumers with less comprehensive plans may no longer have
coverage for certain services. In other States, again depending on
State choices, consumers may gain coverage for some services.
As explained above, HHS anticipates that modifying Sec. 156.111 as
proposed would generate additional costs for States, issuers, and
certain consumers in the short run. However, although we are uncertain
as to how States might take advantage of this flexibility and States
are not required to make any changes under this policy, we also believe
the additional flexibility in plan and benefit design might produce
premium savings, outweighing the potential burdens. The proposed
polices offer issuers in States that utilize the proposed flexibility
to select a new EHB-benchmark plan the opportunity to lower plan
premiums, which would increase affordability of health insurance for
consumers in the individual and small group markets who do not receive
PTC and do not require the benefits that are no longer considered EHB.
When adjusting coverage of services under the proposed options, we
encourage States to consider the spillover effects in addition to the
costs and utilization of these services. Spillover effects include
increased use of other services, such as increased used of emergency
services or increased use of public services provided by the State or
other government entities, when a certain service is no longer covered
by insurance. Depending on the State population's use of services and
health care needs, States may arrive at different conclusions about the
effects of adjusting a particular benefit. Because we do not know how
States would choose to adjust their benchmark plans, we are not able to
predict the effects these modifications may have on costs.
Additionally, we also proposed at Sec. 156.115 to allow for
benefit substitution to occur within the same EHB category or between
EHB categories to offer additional issuer flexibility. Because issuers
are already familiar with substituting benefits within benefit
categories, we do not believe that broadening the policy to allow
benefit substitution between benefit categories would create additional
burden for issuers. This proposal would increase the burden on
consumers who choose between plans offered in the individual and small
group markets as they would need to spend more time and effort
comparing benefits offered by different plans in order to determine
what, if any, benefits have been substituted and what plan would best
suit their health care and financial needs. We also note that States
are generally primarily responsible for enforcement of EHB and continue
to have the option to set criteria for benefit substitution.
Additionally, by allowing substitution between categories, States may
encounter difficulties in ensuring that all categories are filled in
such a way that amounts to EHB.
We solicit comments on the impact of the proposed EHB policy and on
whether other impacts should be considered.
[[Page 51132]]
15. Application to Stand-Alone Dental Plans Inside the Exchange (Sec.
156.150)
In this proposed rule, we are proposing to remove AV requirements
for SADP issuers. We estimate that the proposed change in AV could lead
to a reduction in premiums for certain SADPs. Issuers may choose to
offer more SADPs at varying premiums and levels of coverage. The
offering of more SADPs and SADPs with lower premiums may lead to
increased enrollment in SADPs. Because certain eligible taxpayers could
use premium tax credit to pay for the portion of SADP premiums
attributable to EHB, a reduction in premiums would likely reduce the
benchmark premium for purposes of the premium tax credit, leading to a
small transfer from credit recipients to the government. If enrollment
increases due to potentially lower premiums there could be an overall
increase in the total premium tax credit payments by the government.
The net effect is uncertain. We seek comment on the impact of this
proposed change.
16. Qualified Health Plan Certification
For plan years 2019 and later, we propose to further expand the
role of States in the QHP certification process for FFEs, including
FFEs where the State performs plan management functions. Specifically,
we propose to defer to States for additional review areas, including
accreditation requirements at Sec. 156.275, compliance reviews at
Sec. 156.715, minimum geographic area of the plan's service area at
Sec. 155.1055, and quality improvement strategy reporting at Sec.
156.1130, if feasible and appropriate. We also propose to extend, for
the 2019 benefit year and beyond, the QHP certification review
standards related to network adequacy and essential community providers
that we finalized in the Market Stabilization rule. We do not
anticipate these proposals would increase burden on States because we
believe these reviews are already being performed by States. We
anticipate a slight reduction in burden for issuers due to not needing
to undergo duplicative reviews and a reduction in costs to the Federal
government. We seek comment on whether there are burdens we are not
considering.
In Sec. 156.298, we propose to remove the meaningful difference
standard. If the meaningful difference standard is removed, issuers
would have a potential reduction in administrative costs since they
would no longer have to implement their internal assessments as to
whether their plan offerings meet this standard. Consumers may have
more QHPs to select from. However, we do not have evidence from any
Exchange that removing the meaningful difference standard would create
any new burden on consumers.
We also anticipate that the proposal to remove the meaningful
difference standard would reduce the regulatory burden on SBE-FPs.
Under Sec. 155.200(f)(2)(iv), SBE-FPs are required to establish and
oversee requirements for their issuers that are no less stringent than
the meaningful difference standard as it applies to issuers
participating in the FFEs. Under our proposal, SBE-FPs would no longer
need to establish such a standard or oversee it.
17. Provisions Related to Cost Sharing (Sec. 156.130)
The PPACA provides for the reduction or elimination of cost sharing
for certain eligible individuals enrolled in QHPs offered through the
Exchanges. This assistance helps many low- and moderate-income
individuals and families obtain health insurance--for many people, cost
sharing is a barrier to obtaining needed health care.\80\
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\80\ Brook, Robert H., John E. Ware, William H. Rogers, Emmett
B. Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A.
Goldberg, Kathleen N. Lohr, Patricia Camp and Joseph P. Newhouse.
The Effect of Coinsurance on the Health of Adults: Results from the
RAND Health Insurance Experiment. Santa Monica, CA: RAND
Corporation, 1984. Available at https://www.rand.org/pubs/reports/R3055.
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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 PPACA to the estimated 2019 maximum
annual limitation on cost sharing for self-only coverage. 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 past Payment Notices.
We also proposed the premium adjustment percentage for the 2019
benefit year. Under Sec. 156.130(e), and 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 the percentage (if any) by which the average
per enrollee premium for employer-sponsored health insurance coverage
for the preceding calendar year exceeds such average per enrollee
premium for employer-sponsored health insurance for 2013. The annual
premium adjustment percentage sets the rate of increase for three
parameters detailed in the PPACA: The annual limitation on cost sharing
(defined at Sec. 156.130(a)), the required contribution percentage
used to determine eligibility for certain exemptions under section
5000A of the Code, and the assessable payments under sections 4980H(a)
and 4980H(b) of the Code. We believe that the proposed 2019 premium
adjustment percentage is well within the parameters used in the
modeling of the PPACA, and we do not expect that these proposed
provisions will alter CBO's March 2016 baseline estimates of the budget
impact.
18. Minimum Essential Coverage (Sec. 156.602, Sec. 156.604)
We propose to designate CHIP buy-in programs that provide identical
coverage to the CHIP program under title XXI of the Act in the
applicable State as minimum essential coverage. Currently very few
States offer CHIP buy-in plans and such plans in two states have
applied for and been recognized as minimum essential coverage. This
proposed provision would reduce burden on sponsors of such programs
that might otherwise have had to electronically submit to HHS
information regarding their plans and certify that their plans meet
substantially all of the requirements of Title I of the PPACA, as
applicable to non-grandfathered, individual coverage (including
reviewing and updating documents), make changes to their program to
obtain recognition as minimum essential coverage, and provide a notice
to enrollees informing them that the plan has been recognized as
minimum essential coverage for the purposes of the individual shared
responsibility provision. If CHIP buy-in programs that provide greater
coverage and government-sponsored buy-in programs, such as Medicaid
buy-in programs are categorically recognized as minimum essential
coverage, sponsors of such programs would also experience a similar
reduction in burden. The sponsor of any type of coverage recognized as
minimum essential coverage would continue to be required to provide the
annual information reporting to the IRS specified in section 6055 of
the Code and furnish statements to individuals enrolled in such
coverage to assist them in establishing that they are not subject to
the individual shared responsibility provision of section 5000A of the
Code.
[[Page 51133]]
19. Medical Loss Ratio (Part 158)
We propose to amend Sec. 158.221(b) to allow issuers the option to
report a single quality improvement activity expense amount equal to
0.8 percent of earned premium in the relevant State and market, in lieu
of reporting the actual QIA amounts in five separate categories
described in Sec. 158.150(b)(2)(i)-(v). Based on MLR data for the 2015
MLR reporting year, HHS estimates that the proposed amendment would
decrease rebate payments from issuers to consumers by approximately $23
million.
We also propose to amend several sections of 45 CFR part 158,
subpart C (Sec. Sec. 158.301, 158.321-158.322, 158.330, 158.341,
158.350) to modify the process and criteria for the Secretary to
determine whether to adjust the 80 percent MLR standard in the
individual market in a State. While it is uncertain what specific
adjustments States may request, most adjustments previously granted by
the Secretary have ranged from 70 to 75 percent. Based on MLR data for
the 2015 MLR reporting year, and assuming that 22 States would request
an adjustment (including 17 States that previously requested
adjustments), HHS estimates that the proposed amendments would decrease
rebate payments from issuers to consumers or increase premiums paid by
consumers to issuers by approximately $52 million (assuming a reduction
of the 80 percent MLR standard to 75 percent for all 22 States) to $64
million (assuming a reduction of the MLR standard to 70 percent for all
22 States) annually, for up to 3 years at a time. This represents an
estimated 74 percent to 91 percent reduction, respectively, in rebates
payable in those 22 States, which together accounted for $70 million
out of the nationwide total $107 million in rebates that issuers owed
to individual market consumers for 2015. The actual reduction in
rebates may be lower or higher depending on which States apply for an
adjustment, and whether and how much the Secretary may adjust the
individual market MLR standard in each State.
20. Regulatory Review Costs
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this proposed rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the total number of unique
commenters on last year's proposed rule will be the number of reviewers
of this proposed rule. We acknowledge that this assumption may
understate or overstate the costs of reviewing this rule. It is
possible that not all commenters reviewed last year's rule in detail,
and it is also possible that some reviewers chose not to comment on the
proposed rule. For these reasons we thought that the number of past
commenters would be a fair estimate of the number of reviewers of this
rule. We welcome any comments on the approach in estimating the number
of entities which will review this proposed rule.
We are required to promulgate a substantial portion of this rule
each year under our regulations and we estimate that approximately half
of the remaining provisions would cause additional regulatory review
burden that stakeholders do not already anticipate. We also recognize
that different types of entities are in many cases affected by mutually
exclusive sections of this proposed rule, and therefore for the
purposes of our estimate we assume that each reviewer reads
approximately 50 percent of the rule, excluding the portion of the rule
that we are required to promulgate each year.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this rule is $105.16 per hour, including overhead and fringe
benefits.\81\ Assuming an average reading speed, we estimate that it
would take approximately 1 hour for the staff to review the relevant
portions of this proposed rule that causes unanticipated burden. For
each entity that reviews the rule, the estimated cost is $105.16.
Therefore, we estimate that the total cost of reviewing this regulation
is approximately $70,247 ($105.16 x 668 reviewers).
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\81\ https://www.bls.gov/oes/current/oes_nat.htm.
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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.
For the 2019 benefit year, we considered using only the 2016
benefit year enrollee-level EDGE data to recalibrate the risk
adjustment model coefficients. However, this could lead to uncertainty
in issuers' expectation of risk adjustment transfers due to the sole
use of a new dataset for recalibrating the model coefficients. We
believe that blending multiple years of data will promote stability for
the risk adjustment coefficients year-to-year, particularly for rare
conditions with small sample sizes. Therefore, we are proposing to
blend coefficients calculated from the 2016 benefit year enrollee-level
EDGE data with 2014 and 2015 MarketScan[supreg] data. Additionally,
given the timing of the proposed rule, we are unable to analyze the
enrollee-level EDGE data in time to publish the coefficients calibrated
using the EDGE data in the proposed rule. Similar to the 2018 benefit
year final risk adjustment coefficients, we considered publishing the
2019 benefit year final risk adjustment coefficients in guidance after
the publication of the final rule with more recent MarketScan[supreg]
data that will become available at the end of this year. However, we
expect the 2016 benefit year enrollee-level risk adjustment data will
be available in time for the final rule. Additionally, we are not
proposing to use the 2016 MarketScan[supreg] data that will become
available at the end of this year for the 2019 benefit year risk
adjustment model recalibration. As such, we are proposing to finalize
the 2019 benefit year model coefficients blended with 2016 EDGE data,
and 2014 and 2015 MarketScan[supreg] data in the final rule.
With respect to the risk adjustment data validation program, HHS
considered an alternate policy under which HHS would not adjust payment
transfers for an issuer that exited a market within a State during or
after the benefit year being audited, unless the error rate for the
exited issuer was egregiously high relative to the error rates of other
issuers in the State and market. We would define the error rate
threshold for triggering a payment adjustment as 2 or 3 standard
deviations from a benchmark negative error rate. For exited issuers
that have error rates above the established threshold, we would make a
retroactive adjustment to their final benefit year payment transfer in
the same manner as outlined above. While this alternative approach may
provide returning issuers in the State and market with more certainty
about their risk adjustment transfers for a given benefit year, it does
not offer as much protection against gaming as the proposed policy, and
could result in exited issuers that do not have egregiously high error
rates being overpaid relative to the risk of their enrollee
populations.
We considered maintaining the current applicability of rate review,
and continuing to review student health insurance coverage rate
increases. However, the proposed rule would provide States with greater
flexibility to meet the needs of their markets and reduce the burden
associated with review of plans that are not part of the
[[Page 51134]]
single risk pool. As a practical matter, student health insurance
coverage has generally been given the same plan design flexibility as
plans in the large group market. Just like purchasers of large group
plans, purchasers in the student market are viewed as more
sophisticated, with greater leverage and ability to avoid the
imposition of unreasonable rate increases. Single risk pool pricing,
the primary focus of the rate review program, does not apply to student
health insurance coverage.
We considered maintaining the current 30-day notice requirement for
States to notify HHS prior to posting proposed and final rate
increases. However, such advanced notice may be impractical in some
States so we have decreased the notice requirement to 5 business days.
In adding standards for Sec. 155.221, HHS considered making no
changes to the existing rule and retaining the existing standard for
agents and brokers to contract with a third-party entity approved by
HHS for conducting audits under the section. We believe, however, that
changes to this section are necessary to include issuers and to provide
the necessary flexibility in oversight that both protects consumers and
encourages enrollment pathway innovation for agents, brokers, and
issuers using direct enrollment.
For the proposed amendments to Sec. 155.320, we considered
developing a comprehensive database using information from employers on
the plans they offer to their employees and their family members that
could satisfy verification requirements under paragraph (d)(2) for all
Exchanges. This approach would be resource-intensive for Exchanges, and
would produce a database with limited utility due to data limitations.
Developing a database; recruiting and educating employers to
participate in voluntarily submitting the data; and providing technical
assistance to employers for the first year of implementation on how to
input the data is estimated to cost at least $38 million. Building such
a database would also rely on the voluntary participation of
substantially all employers. This participation would be onerous for
employers. Employers would need to provide individual employee level
data regarding plans the employer will offer, information that may not
be available in time to populate a comprehensive database prior to the
Exchange's plan year. In addition, since the PPACA does not require
employers to provide to the Exchange the relevant information on what
coverage they offer, Exchanges and HHS would not receive data from all
employers. After weighing our options, we decided that this approach
would be overly costly and burdensome, and of limited value due to gaps
in the data Exchanges and HHS would be able to collect. We also
considered removing the requirement to connect to an HHS-approved data
source, and the requirement to use an alternative method if the
Exchange does not connect to the required data sources, but were
concerned about the potential impact on program integrity.
In developing the proposal related to the SHOP enrollment process,
we considered maintaining the status quo, but believe that the increase
in flexibility, cost savings and reduction in burden resulting from the
proposed enrollment approach, would have a positive impact on small
businesses across the country and provide States with needed
flexibility.
In developing the proposal for the new EHB-benchmark plan selection
options described at Sec. 156.111, we considered a variety of
alternatives, including maintaining the current EHB-benchmark policy
without modification. Although maintaining the current policy would
promote stability by preserving the current EHB-benchmarks across all
States, we do not believe it would offer the additional flexibility
that States have requested in selecting an EHB-benchmark plan to best
meet the needs of their consumer population. We also considered whether
it was feasible to offer States increased flexibility by allowing them
to set a range of acceptable EHB within their State, such that issuers
could offer plans within that range with more limited EHB coverage or
more robust EHB coverage. However, we determined that this option did
not meet statutory requirements. To balance stability, flexibility, and
statutory requirements, we instead propose to offer States the expanded
EHB-benchmark plan selection options at Sec. 156.111 as well as the
option to default to the State's current EHB-benchmark plan. We believe
this approach would provide States with the opportunity to take
advantage of greater flexibility in selecting an EHB-benchmark plan
while also providing those States that value stability with the option
to retain their current benchmark plan. We solicit comments on proposed
options at Sec. 156.111.
With respect to the provision regarding removing the AV requirement
for SADPs, we considered making no change or proposing an expansion to
the de minimis range to mirror the expanded de minimis range for QHPs
(-4/+2 percentage points) or of +/-3 percentage points. We determined
that these alternatives were less desirable because they do not provide
issuers with as much flexibility to offer a range of SADPs as the
proposed removal of the AV standards for SADPs.
For the QHP certification standard regarding meaningful difference,
we considered maintaining the requirement on issuers, but we believe
that removing this provision would promote the offering of a variety of
affordable QHPs that will meet consumers' needs, would provide issuers
with more flexibility, and would remove an unnecessary regulatory
requirement.
We considered maintaining the current policy requiring all CHIP
buy-in programs that wish to be recognized as minimum essential
coverage, to comply with the requirements for recognition as MEC
outlined in Sec. 156.604. However, this proposed rule would help
reduce burden on plan sponsors of such programs, while ensuring the
enrollees have a basic standard of coverage that satisfies the
individual shared responsibility provision. In the preamble to Sec.
156.602, we solicit comments on whether CHIP buy-in programs that are
not identical to the State's CHIP program but provide similar or
greater coverage for enrollees should also be designated as MEC or
whether such programs must submit an application so that HHS can
evaluate any differences with the title XXI program to ensure that the
program substantially resembles the title XXI program.
For the proposed amendments to Sec. 158.221(b), we considered
retaining the current quality improvement activity reporting
requirements, since giving issuers the option to report a standardized
rate for QIA expenditures may inhibit HHS from being able to analyze
trends in issuers' investment in improving the quality of healthcare in
the future, and reduce rebates to consumers by allowing issuers to
effectively increase their MLRs by 0.8 percent even if those issuers
engaged in and spent only trivial amounts on QIA. However, this change
would also potentially level the playing field among issuers to a
certain extent and lead to more accurate rebate payments, since many
issuers likely do engage in QIA but forego reporting that spending
because the burden of analyzing, documenting, tracking, allocating, and
reporting QIA expenses exceeds the benefits for MLR purposes. Because
the proposed approach of giving issuers the option to report a minimal,
standardized rate would reduce unwarranted regulatory and economic
burdens for issuers that do not want to track and report the exact QIA
amounts for their MLR calculation, we believe that the
[[Page 51135]]
proposed approach would be more effective and objective than the
current requirements.
For the proposed amendments to part 158, subpart C, we considered
retaining the current requirements for States to request an adjustment
to the 80 percent MLR standard in the individual market in a State.
However, HHS recognizes that many of the current State application
requirements are burdensome and less relevant in the post-2014 reformed
environment, and may preclude or discourage States from proposing
innovative solutions to help stabilize their individual markets.
Therefore, we believe this proposal would reduce regulatory burdens on
States, and provide States with an additional tool to promote stability
in their markets.
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 and risk adjustment data validation programs,
which are intended to stabilize premiums as insurance market reforms
are implemented and Exchanges facilitate increased enrollment. Because
we believe that insurance firms offering comprehensive health insurance
policies generally exceed the size thresholds for ``small entities''
established by the SBA, we do not believe that an initial regulatory
flexibility analysis is required for such firms.
For purposes of the RFA, we expect the following types of entities
to be affected by this proposed rule:
Health insurance issuers.
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.\82\ We
believe that few, if any, insurance companies underwriting
comprehensive health insurance policies (in contrast, for example, to
travel insurance policies or dental discount policies) fall below these
size thresholds.
---------------------------------------------------------------------------
\82\ ``Table of Small Business Size Standards Matched to North
American Industry Classification System Codes'', effective February
26, 2016, U.S. Small Business Administration, available at https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/table-smallbusiness-size-standards.
---------------------------------------------------------------------------
In this proposed rule, we proposed to allow enrollment through a
SHOP-registered agent or broker, or through a participating QHP issuer.
The SHOPs are generally 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.
Based on data from MLR annual report submissions for the 2015 MLR
reporting year, approximately 92 out of over 530 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 50
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. We estimate that 57 of these 92 potentially small entities
would experience a decrease in the rebate amount owed to consumers
under the proposed amendments to the quality improvement activity
reporting provisions in part 158, and 27 of these 57 entities are part
of larger holding groups. In addition, we estimate that no small
entities would be impacted by the proposed amendments to 45 CFR part
158, subpart C. Therefore, we believe that the provisions of this
proposed rule regarding MLR would not affect a substantial number of
small entities, and further, the impact of the proposed QIA provisions
on small entities would be positive.
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. Currently, that threshold is approximately $148 million.
Although we have not been able to quantify all costs, we expect the
combined impact on State, local, or Tribal governments and the private
sector to be below the threshold.
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.
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 rule, HHS attempted to balance the States'
interests in regulating health insurance issuers with the need to
ensure market stability. By doing so, it is HHS's view that we have
complied with the requirements of Executive Order 13132.
Because States have flexibility in designing their Exchange and
Exchange-related programs, State decisions will ultimately influence
both administrative
[[Page 51136]]
expenses and overall premiums. States are not required to establish an
Exchange or risk adjustment program. For States that elected previously
to operate an Exchange, or risk adjustment program, much of the initial
cost of creating these programs was funded by Exchange Planning and
Establishment Grants. After establishment, Exchanges must 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 determining standards relating to
health insurance that is offered in the individual and small group
markets. For example, we propose to provide States with substantially
more flexibility in selecting an EHB-benchmark plan, to explore ways to
make it easier for States to establish and maintain a State Exchange,
to expand the role of States in QHP certification in FFEs, to provide
States with substantially more flexibility in how they operate a SHOP,
to provide States with the option to request an adjustment in the risk
adjustment program for their small group market; and to make it easier
for States to apply for and be granted an adjustment to the MLR
standard in their State. This rule also proposes to return flexibility
to States in their review of rate increases. We propose to give States
the choice to review rate increases for student health insurance
coverage. We propose to eliminate the requirement that proposed and
final rate increases must be posted uniformly, instead allowing States
with an Effective Rate Review program to publish proposed and final
rate increases on a rolling basis if they so choose. We also propose to
reduce the advance notification that States must give HHS about the
posting of rate increases from 30 days to 5 business days. Finally, we
propose that States would no longer be required to seek approval if the
State-specific threshold for reasonableness review is lower than the
Federal default rate review threshold.
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.
I. Reducing Regulation and Controlling Regulatory Costs
Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of
Executive Order 13771 requires an agency, unless prohibited by law, to
identify at least two existing regulations to be repealed when the
agency publicly proposes for notice and comment, or otherwise
promulgates, a new regulation. In furtherance of this requirement,
section 2(c) of Executive Order 13771 requires that the new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with at
least two prior regulations. This proposed rule, if finalized as
proposed, is expected to be an EO 13771 deregulatory action.
List of Subjects
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 153
Administrative practice and procedure, Health care, Health
insurance, Health records, Intergovernmental relations, 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, Advertising, Brokers,
Conflict of interests, Consumer protection, Grants administration,
Grant programs--health, Health care, Health insurance, Health
maintenance organizations (HMO), Health records, Hospitals, Indians,
Individuals with disabilities, Intergovernmental relations, Loan
programs--health, Medicaid, Organization and functions (government
agencies), Public assistance programs, Reporting and recordkeeping
requirements, Technical assistance, Women and youth.
45 CFR Part 156
Administrative practice and procedure, Advertising, Advisory
committees, Conflict of interests, Consumer protection, Grant
programs--health, Grants administration, Health care, Health insurance,
Health maintenance organization (HMO), Health records, Hospitals,
Indians, 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 157
Employee benefit plans, Health insurance, Health maintenance
organizations (HMO), Health records, Hospitals, Indians, Individuals
with disabilities, Medicaid, Organization and functions (government
agencies), Public assistance programs, Reporting and recordkeeping
requirements, Technical assistance, Women and 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 147, 153, 154, 155,
156, 157 and 158 as set forth below.
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
1. 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
2. Section 147.102 is amended by revising paragraph (c)(3)(iii)((D) to
read as follows:
Sec. 147.102 Fair health insurance premiums.
* * * * *
(c) * * *
(3) * * *
(iii) * * *
(D) To the extent permitted by applicable state law and, in the
case of coverage offered through a SHOP, as permitted by the SHOP,
apply this paragraph (c)(3)(iii) uniformly among group health plans
enrolling in that product, giving those group health plans
[[Page 51137]]
the option to pay premiums based on average enrollee premium amounts.
* * * * *
0
3. Section 147.104 is amended by--
0
a. Revising paragraphs (b)(1)(i)(B), (b)(1)(i)(C) and (b)(1)(ii);
0
b. Removing paragraph (b)(1)(iii); and
0
c. Revising paragraphs (b)(2)(i) introductory text and (ii).
The revisions read as follows:
Sec. 147.104 Guaranteed availability of coverage
* * * * *
(b) * * *
(1) * * *
(i) * * *
(B) In the case of a group health plan in the small group market
that cannot comply with employer contribution or group participation
rules for the offering of health insurance coverage, as allowed under
applicable State law, and in the case of a QHP offered in the SHOP, as
permitted by Sec. 156.285(e) or Sec. 156.286(e) of this subchapter, a
health insurance issuer may restrict the availability of coverage to an
annual enrollment period that begins November 15 and extends through
December 15 of each calendar year.
(C) With respect to coverage in the small group market, and in the
large group market if such coverage is offered through a SHOP in a
State, for a plan selection received on the first through the fifteenth
day of any month, the coverage effective date must be the first day of
the following month. For a plan selection received on the 16th through
last day of any month, the coverage effective date must be the first
day of the second following month. In either such case, a small
employer may instead opt for a later effective date within a quarter
for which small group market rates are available.
(ii) Individual market. A health insurance issuer in the individual
market must allow an individual to purchase health insurance coverage
during the initial and annual open enrollment periods described in
Sec. 155.410(b) and (e) of this subchapter. Coverage must become
effective consistent with the dates described in Sec. 155.410(c) and
(f) of this subchapter.
(2) * * *
(i) A health insurance issuer in the individual market must provide
a limited open enrollment period for the triggering events described in
Sec. 155.420(d) of this subchapter, excluding, with respect to
coverage offered outside of an Exchange, the following:
* * * * *
(ii) In applying this paragraph (b)(2), a reference in Sec.
155.420 (other than in Sec. 155.420(a)(5)) of this subchapter to a
``QHP'' is deemed to refer to a plan, a reference to ``the Exchange''
is deemed to refer to the applicable State authority, and a reference
to a ``qualified individual'' is deemed to refer to an individual in
the individual market.
* * * * *
PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT
0
4. 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
5. Section 153.630 is amended by revising paragraphs (b)(6), (8), and
(9) to read as follows:
Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.
* * * * *
(b) * * *
(6) An issuer must provide the initial validation auditor and the
second validation auditor with all relevant source enrollment
documentation, all claims and encounter data, and medical record
documentation from providers of services to each enrollee in the
applicable sample without unreasonable delay and in a manner that
reasonably assures confidentiality and security in transmission.
Notwithstanding any other provision of this section, a qualified
provider that is licensed to diagnose mental illness by the State and
that is prohibited from furnishing a complete medical record by
applicable Federal or State privacy laws concerning any enrollee's
treatment for one or more mental or behavioral health conditions may
furnish a signed mental or behavioral health assessment that, to the
extent permissible under such laws, should contain: the enrollee's
name; gender; date of birth; current status of all mental or behavioral
health diagnoses; and dates of service. The mental or behavioral health
assessment should be signed by the provider and submitted with an
attestation that the provider is prohibited from furnishing a complete
medical record by applicable State or Federal privacy laws.
* * * * *
(8) The initial validation auditor must measure and report to the
issuer and HHS, in a manner and timeframe specified by HHS, its inter-
rater reliability rates among its reviewers. The initial validation
auditor must achieve a consistency measure of at least 95 percent for
his or her review outcomes, except that for validation of risk
adjustment data for the 2015 and 2016 benefit years, the initial
validation auditor may meet an inter-rater reliability standard of 85
percent for review outcomes.
(9) HHS may impose civil money penalties in accordance with the
procedures set forth in Sec. 156.805(b) through (e) of this subchapter
if an issuer of a risk adjustment covered plan--
(i) Fails to engage an initial validation auditor;
(ii) Fails to submit the results of an initial validation audit to
HHS;
(iii) Engages in misconduct or substantial non-compliance with the
risk adjustment data validation standards and requirements applicable
to issuers of risk adjustment covered plans; or
(iv) Intentionally or recklessly misrepresents or falsifies
information that it furnishes to HHS.
* * * * *
PART 154--HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND
REVIEW REQUIREMENTS
0
6. 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
7. Section 154.103 is amended by revising paragraph (b) to read as
follows:
Sec. 154.103 Applicability.
* * * * *
(b) Exceptions. The requirements of this part do not apply to--
(1) Grandfathered health plan coverage as defined in Sec. 147.140
of this subchapter;
(2) Excepted benefits as described in section 2791(c) of the PHS
Act; and
(3) For plan years beginning on or after January 1, 2019, student
health insurance coverage as defined in Sec. 147.145 of this
subchapter.
0
8. Revise Sec. 154.200 to read as follows:
Sec. 154.200 Rate increases subject to review.
(a) A rate increase filed in a State, or effective in a State that
does not require a rate increase to be filed, is subject to review if:
(1) The rate increase is 15 percent or more applicable to a 12-
month period that begins on January 1, as calculated under paragraph
(b) of this section; or
(2) The rate increase meets or exceeds a State-specific threshold
applicable to a 12-month period that begins on January 1, as calculated
under paragraph (b) of this section, determined by the Secretary. A
State-specific threshold shall be based on factors
[[Page 51138]]
impacting rate increases in a State to the extent that the data
relating to such State-specific factors are available by August 1 of
the preceding year. States interested in proposing a State-specific
threshold greater than the Federal default stated in paragraph (a)(1)
of this section are required to submit a proposal for approval of such
threshold to the Secretary by August 1 of the preceding year.
(b) A rate increase meets or exceeds the applicable threshold set
forth in paragraph (a) of this section if 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.
(c) If a rate increase that does not otherwise meet or exceed the
threshold under paragraph (b) of this section meets or exceeds the
threshold when combined with a previous increase or increases during
the 12-month period preceding the date on which the rate increase would
become effective, then the rate increase must be considered to meet or
exceed the threshold and is subject to review under Sec. 154.210, and
such review shall include a review of the aggregate rate increases
during the applicable 12-month period.
0
9. Section 154.215 is amended by revising paragraph (h)(2) to read as
follows:
Sec. 154.215 Submission of rate filing justification.
* * * * *
(h) * * *
(2) CMS will make available to the public on its 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's Freedom of Information Act
regulations, 45 CFR 5.31(d).
* * * * *
0
10. Section 154.301 is amended by revising paragraph (b)(2), and
removing paragraph (b)(3) to read as follows:
Sec. 154.301 CMS's determinations of Effective Rate Review Programs.
* * * * *
(b) * * *
(2) If a State intends to make the information in paragraph
(b)(1)(i) of this section available to the public prior to the date
specified by the Secretary, or if it intends to make the information in
paragraph (b)(1)(ii) of this section available to the public prior to
the first day of the annual open enrollment period in the individual
market for the applicable calendar year, the State must notify CMS in
writing, no later than five (5) business days prior to the date it
intends to make the information public, of its intent to do so and the
date it intends to make the information public.
* * * * *
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
11. 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
12. Section 155.106 is amended by revising paragraph (c) introductory
text to read as follows:
Sec. 155.106 Election to operate an Exchange after 2014.
* * * * *
(c) Process for State Exchanges that seek to utilize the Federal
platform for select functions. States may seek approval to operate a
State Exchange utilizing the Federal platform for only the individual
market. A State seeking approval to operate a State Exchange utilizing
the Federal platform for the individual market to support select
functions through a Federal platform agreement under Sec. 155.200(f)
must:
* * * * *
0
13. Section 155.200 is amended by removing and reserving paragraphs
(f)(2)(ii) through (iv); and revising paragraph (f)(4) introductory
text to read as follows;
Sec. 155.200 Functions of an Exchange.
* * * * *
(f) * * *
(2) * * *
(ii) [Reserved]
(iii) [Reserved]
(iv) [Reserved]
* * * * *
(4) A State Exchange on the Federal platform that utilizes the
Federal platform for SHOP functions, for plan years beginning on or
after January 1, 2018, must require its QHP issuers to make any changes
to rates in accordance with the timeline applicable in a Federally-
facilitated SHOP under Sec. 155.706(b)(6)(i)(A). A State Exchange on
the Federal platform that utilizes the Federal platform for SHOP
functions, as set forth in paragraphs (f)(4)(i) through (vii) of this
section, for plan years beginning prior to January 1, 2018, must--
* * * * *
0
14. Section 155.210 is amended by revising paragraphs (c)(2)
introductory text and (e)(7) to read as follows:
Sec. 155.210 Navigator program standards.
* * * * *
(c) * * *
(2) The Exchange must include an entity from at least one of the
following categories for receipt of a Navigator grant:
* * * * *
(e) * * *
(7) In a Federally-facilitated Exchange, no individual or entity
shall be ineligible to operate as a Navigator solely because its
principal place of business is outside of the Exchange service area;
* * * * *
0
15. Section 155.215 is amended by revising paragraph (h) 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.
* * * * *
(h) In a Federally-facilitated Exchange, no individual or entity
shall be ineligible to operate as a non-Navigator entity or as non-
Navigator assistance personnel solely because its principal place of
business is outside of the Exchange service area.
* * * * *
0
16. Section 155.221 is revised to read as follows:
Sec. 155.221 Standards for third-parties to perform audits of agents,
brokers, and issuers participating in direct enrollment.
(a) An agent, broker, or issuer participating in direct enrollment
must engage a third-party entity to conduct an annual review to
demonstrate operational readiness in accordance with Sec.
155.220(c)(3)(i)(K) and with Sec. 156.1230(b)(2) of this subchapter.
The third-party entity will be a downstream or delegated entity of the
agent, broker or issuer that participates or wishes to participate in
direct enrollment.
(b) An agent, broker, or issuer participating in direct enrollment
must satisfy the requirement to demonstrate operational readiness under
paragraph (a) of this section by engaging a third-party entity that
meets each of the following standards:
(1) Has experience conducting audits or similar services, including
experience
[[Page 51139]]
with relevant privacy and security standards;
(2) Adheres to HHS specifications for content, format, privacy, and
security in the conduct of an operational readiness review, which
includes ensuring that agents, brokers, and issuers are in compliance
with the applicable privacy and security standards and other applicable
requirements;
(3) Collects, stores, and shares with HHS all data related to the
third-party entity's audit of agents, brokers, and issuers in a manner,
format, and frequency specified by HHS until 10 years from the date of
creation, and complies with the privacy and security standards HHS
adopts for agents, brokers, and issuers as required in accordance with
Sec. 155.260;
(4) Discloses to HHS any financial relationships between the entity
and individuals who own or are employed by an agent, broker, or issuer
for which it is conducting an operational readiness review.
(5) Complies with all applicable Federal and State requirements;
(6) Ensures, on an annual basis, that appropriate staff
successfully complete operational readiness review training as
established by HHS prior to conducting audits under paragraph (a) of
this section;
(7) Permits access by the Secretary and the Office of the Inspector
General (OIG) or their designees in connection with their right to
evaluate through audit, inspection, or other means, to the third-party
entity's books, contracts, computers, or other electronic systems,
relating to the third-party entity's audits of agent's, broker's, or
issuer's obligations in accordance with Federal standards under
paragraph (a) of this section until 10 years from the date of creation;
and
(8) Complies with other minimum business criteria as specified in
guidance by HHS.
(c) An agent, broker or issuer may engage multiple third-party
entities to conduct the audit under paragraph (a) of this section and
each third-party entity must satisfy the standards outlined under
paragraph (b) of this section.
0
17. Section 155.305 is amended by revising paragraph (f)(4) to read as
follows:
Sec. 155.305 Eligibility standards.
* * * * *
(f) * * *
(4) Compliance with filing requirement. The Exchange may not
determine a tax filer eligible for APTC if HHS notifies the Exchange as
part of the process described in Sec. 155.320(c)(3) that APTC were
made on behalf of the tax filer or either spouse if the tax filer is a
married couple for a year for which tax data would be utilized for
verification of household income and family size in accordance with
Sec. 155.320(c)(1)(i), and the tax filer or his or her spouse did not
comply with the requirement to file an income tax return for that year
as required by 26 U.S.C. 6011, 6012, and implementing regulations and
reconcile the advance payments of the premium tax credit for that
period.
* * * * *
0
18. Section 155.320 is amended by--
0
a. Revising paragraphs (c)(3)(iii) introductory text, and paragraph
(c)(3)(iii)(A);
0
b. Adding paragraphs (c)(3)(iii)(D) through (F);
0
c. Revising paragraph (c)(3)(vi)(C), (D), (F) and (G); and
0
d. Revising paragraph (d)(4) introductory text.
The revisions and additions read as follows:
Sec. 155.320 Verification process related to eligibility for
insurance affordability programs.
* * * * *
(c) * * *
(3) * * *
(iii) Verification process for changes in household income. (A)
Except as specified in paragraph (c)(3)(iii)(B), (C), and (D) of this
section, if an applicant's attestation, in accordance with paragraph
(c)(3)(ii)(B) of this section, indicates that a tax filer's annual
household income has increased or is reasonably expected to increase
from the data described in paragraph (c)(3)(ii)(A) of this section for
the benefit year for which the applicant(s) in the tax filer's family
are requesting coverage and the Exchange has not verified the
applicant's MAGI-based income through the process specified in
paragraph (c)(2)(ii) of this section to be within the applicable
Medicaid or CHIP MAGI-based income standard, the Exchange must accept
the applicant's attestation regarding a tax filer's annual household
income without further verification.
* * * * *
(D) If an applicant's attestation to projected annual household
income, as described in paragraph (c)(3)(ii)(B) of this section, is
greater than or equal to 100 percent but not more than 400 percent of
the FPL for the benefit year for which coverage is requested and is
more than a reasonable threshold above the annual household income
computed in accordance with paragraph (c)(3)(ii)(A) of this section,
the data described in paragraph (c)(3)(ii)(A) of this section indicates
that projected annual household income is under 100 percent FPL, and
the Exchange has not verified the applicant's MAGI-based income through
the process specified in paragraph (c)(2)(ii) of this section to be
within the applicable Medicaid or CHIP MAGI-based income standard, the
Exchange must proceed in accordance with Sec. 155.315(f)(1) through
(4). For the purposes of this paragraph, a reasonable threshold is
established by the Exchange in guidance and approved by HHS, but must
not be less than 10 percent, and can also include a threshold dollar
amount. Applicants that would otherwise be eligible for APTC based on
Sec. 155.305(f)(2) are not subject to the verification described in
this paragraph.
(E) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation, the Exchange must determine the applicant's
eligibility based on the information described in paragraph
(c)(3)(ii)(A) of this section, notify the applicant of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g), and implement such determination in accordance with
the effective dates specified in Sec. 155.330(f).
(F) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation and the information described in paragraph
(c)(3)(ii)(A) of this section is unavailable, the Exchange must
determine the tax filer ineligible for advance payments of the premium
tax credit and cost-sharing reductions, notify the applicant of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g), and discontinue any advance payments of the premium
tax credit and cost-sharing reductions in accordance with the effective
dates specified in Sec. 155.330(f).
* * * * *
(vi) * * *
(C) Increases in annual household income. If an applicant's
attestation, in accordance with paragraph (c)(3)(ii)(B) of this
section, indicates that a tax filer's annual household income has
increased or is reasonably expected to increase from the data described
in paragraph (c)(3)(vi)(A) of this section to the benefit year for
which the applicant(s) in the tax filer's family are requesting
coverage and the Exchange has not verified the applicant's MAGI-based
income through the process specified in paragraph (c)(2)(ii) of this
section to be within the applicable Medicaid or CHIP MAGI-based income
standard, the Exchange must accept the applicant's attestation
[[Page 51140]]
for the tax filer's family without further verification, unless:
(1) The Exchange finds that an applicant's attestation of a tax
filer's annual household income is not reasonably compatible with other
information provided by the application filer, or
(2) The data described in paragraph (c)(3)(vi)(A) of this section
indicates that projected annual household income is under 100 percent
FPL and the applicant's attestation to projected household income, as
described in paragraph (c)(3)(ii)(B) of this section, is greater than
or equal to 100 percent but not more than 400 percent of the FPL for
the benefit year for which coverage is requested and is more than a
reasonable threshold above the annual household income as computed
using data sources described in paragraph (c)(3)(vi)(A) of this
section, in which case the Exchange must follow the procedures
specified in Sec. 155.315(f)(1) through (4). The reasonable threshold
used under this paragraph must be equal to the reasonable threshold
established in accordance with paragraph (c)(3)(iii)(D) of this
section.
(D) Decreases in annual household income and situations in which
electronic data is unavailable. If electronic data are unavailable or
an 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 as computed
using data sources described in paragraphs (c)(3)(vi)(A) of this
section, the Exchange must follow the procedures specified in Sec.
155.315(f)(1) through (4). The reasonable threshold used under this
paragraph must be equal to the reasonable threshold established in
accordance with paragraph (c)(3)(vi) of this section.
* * * * *
(F) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation, the Exchange must determine the applicant's
eligibility based on the information described in paragraph
(c)(3)(ii)(A) of this section, notify the applicant of such
determination in accordance with the notice requirements specified in
Sec. 155.310(g), and implement such determination in accordance with
the effective dates specified in Sec. 155.330(f).
(G) If, at the conclusion of the period specified in Sec.
155.315(f)(2)(ii), the Exchange remains unable to verify the
applicant's attestation for the tax filer and the information described
in paragraph (c)(3)(ii)(A) of this section is unavailable, the Exchange
must determine the tax filer ineligible for advance payments of the
premium tax credit and cost-sharing reductions, notify the applicant of
such determination in accordance with the notice requirement specified
in Sec. 155.310(g), and discontinue any advance payments of the
premium tax credit and cost-sharing reductions in accordance with the
effective dates specified in Sec. 155.330(f).
* * * * *
(d) * * *
(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 through 2019, 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.
* * * * *
0
19. Section 155.420 is amended by:
0
a. Revising paragraphs (a)(4)(iii), (a)(5) and (b)(2)(i);
0
b. Removing paragraph (b)(2)(v);
0
c. Redesignating paragraph (b)(2)(vi) as paragraph (b)(2)(v);
0
d. Revising paragraph (d)(1)(iii); and
0
e. Revising paragraph (d)(10)(i).
The revisions read as follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
(4) * * *
(iii) For the other triggering events specified in paragraph (d) of
this section, except for paragraphs (d)(2)(i), (d)(4), (d)(6)(i) and
(ii) for becoming newly eligible for CSRs, (d)(8), (d)(9), (d)(10) and
(d)(12) of this section:
(A) If an enrollee qualifies for a special enrollment period, the
Exchange must allow the enrollee and his or her dependents to change to
another QHP within the same level of coverage (or one metal level
higher or lower, if no such QHP is available), as outlined in Sec.
156.140(b) of this subchapter; or
(B) If a dependent qualifies for a special enrollment period, and
an enrollee is adding the dependent to his or her QHP, the Exchange
must allow the enrollee to add the dependent to his or her current QHP;
or, if the QHP's business rules do not allow the dependent to enroll,
the Exchange must allow the enrollee and his or her dependents to
change to another QHP within the same level of coverage (or one metal
level higher or lower, if no such QHP is available), as outlined in
Sec. 156.140(b) of this subchapter, or enroll the new qualified
individual in a separate QHP.
(5) Prior coverage requirement. Qualified individuals who are
required to demonstrate coverage in the 60 days prior to a qualifying
event can either demonstrate that they had minimum essential coverage
as described in 26 CFR 1.5000A-1(b) for 1 or more days during the 60
days preceding the date of the qualifying event; lived in a foreign
country or in a United States territory for 1 or more days during the
60 days preceding the date of the qualifying event; are an Indian as
defined by section 4 of the Indian Health Care Improvement Act; or
lived in a service area for 1 or more days during the 60 days preceding
the date of the qualifying event where no qualified health plan was
offered through the Exchange.
(b) * * *
(2) * * *
(i) In the case of birth, adoption, placement for adoption,
placement in foster care, or child support or other court order as
described in paragraph (d)(2)(i) of this section, the Exchange must
ensure that coverage is effective for a qualified individual or
enrollee on the date of birth, adoption, placement for adoption,
placement in foster care, or effective date of court order; or it may
permit the qualified individual or enrollee to elect a coverage
effective date of the first of the month following plan selection; or
in accordance with paragraph (b)(1) of this section. If the Exchange
permits the qualified individual or enrollee to elect a coverage
effective date of either the first of the month following the date of
plan selection or in accordance with paragraph (b)(1) of this section,
the Exchange must ensure coverage is effective on the date duly
selected by the qualified individual or enrollee.
* * * * *
(d) * * *
(1) * * *
(iii) Loses pregnancy-related coverage described under section
1902(a)(10)(A)(i)(IV) and
[[Page 51141]]
(a)(10)(A)(ii)(IX), of the Act (42 U.S.C. 1396a(a)(10)(A)(i)(IV),
(a)(10)(A)(ii)(IX)) or loses access to health care services through
coverage provided to a pregnant woman's unborn child, based on the
definition of a child in 42 CFR 457.10. The date of the loss of
coverage is the last day the qualified individual would have pregnancy-
related coverage or access to health care services through the unborn
child coverage; or
* * * * *
(10) * * *
(i) Is a victim of domestic abuse or spousal abandonment as defined
by 26 CFR 1.36B-2 or a dependent or unmarried victim within a
household, is enrolled in minimum essential coverage, and seeks to
enroll in coverage separate from the perpetrator of the abuse or
abandonment; or
* * * * *
0
20. Section 155.430 is amended by:
0
a. Revising paragraph (d)(1);
0
b. Removing paragraphs (d)(2)(i) through (iv);
0
c. Adding new paragraph (d)(2)(i); and
0
d. Redesignating paragraph (d)(2)(v) as (d)(2)(ii).
The revisions and additions read as follows:
Sec. 155.430 Termination of Exchange enrollment or coverage.
(d) * * *
(1) For purposes of this section, changes in eligibility for
advance payments of the premium tax credit and cost sharing reductions,
including terminations, must adhere to the effective dates specified in
Sec. 155.330(f).
(2) * * *
(i) On the date on which the termination is requested by the
enrollee or on another prospective date selected by the enrollee; or
* * * * *
0
21. Section 155.500 is amended by revising the definitions of ``Appeal
request'' and ``Appeals entity'' to read as follows:
Sec. 155.500 Definitions.
* * * * *
Appeal request means a clear expression, either orally or in
writing, by an applicant, enrollee, employer, or small business
employer or employee to have any eligibility determination or
redetermination contained in a notice issued in accordance with Sec.
155.310(g), Sec. 155.330(e)(1)(ii), Sec. 155.335(h)(1)(ii), Sec.
155.610(i), Sec. 155.715(e) or (f), or Sec. 155.716(e) reviewed by an
appeals entity.
Appeals entity means a body designated to hear appeals of
eligibility determinations or redeterminations contained in notices
issued in accordance with Sec. 155.310(g), Sec. 155.330(e)(1)(ii),
Sec. 155.335(h)(1)(ii), Sec. 155.610(i), Sec. 155.715(e) and (f), or
Sec. 155.716(e).
* * * * *
0
22. Section 155.605 is amended by revising paragraph (d)(2)(iv) to read
as follows:
Sec. 155.605 Eligibility standards for exemptions.
* * * * *
(d) * * *
(2) * * *
(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. If there is not a
bronze level plan offered through the Exchange in the individual's
rating area, the Exchange must use the annual premium for the lowest
cost Exchange metal level plan available in the individual market
through the Exchange in the State in the rating area in which the
individual resides to determine whether coverage exceeds the
affordability threshold specified in section 5000A(e)(1) of the Code;
and
* * * * *
0
23. Section 155.610 is amended by revising paragraph (h)(2) to read as
follows:
Sec. 155.610 Eligibility process for exemptions.
* * * * *
(h) * * *
(2) The Exchange will only accept an application for an exemption
described in Sec. 155.605(d)(1) during one of the 3 calendar years
after the month or months during which the applicant attests that the
hardship occurred.
0
24. Section 155.700 is amended by revising paragraph (a) to read as
follows:
Sec. 155.700 Standards for the establishment of a SHOP.
(a) General requirement. (1) For plan years beginning before
January 1, 2018, an Exchange must provide for the establishment of a
SHOP that meets the requirements of this subpart and is designed to
assist qualified employers and facilitate the enrollment of qualified
employees into qualified health plans.
(2) For plan years beginning on or after January 1, 2018, an
Exchange must provide for the establishment of a SHOP that meets the
requirements of this subpart and is designed to assist qualified
employers in facilitating the enrollment of their employees in
qualified health plans.
* * * * *
0
25. Section 155.705 is amended by revising the section heading and
adding paragraph (e) to read as follows:
Sec. 155.705 Functions of a SHOP for plan years beginning prior to
January 1, 2018.
* * * * *
(e) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.706 is
applicable for plan years beginning on or after January 1, 2018.
0
26. Section 155.706 is added to read as follows:
Sec. 155.706 Functions of a SHOP for plan years beginning on or after
January 1, 2018.
(a) Exchange functions that apply to SHOP. The SHOP must carry out
all the required functions of an Exchange described in this subpart and
in subparts C, E, K, and M of this part, except:
(1) Requirements related to individual eligibility determinations
in subpart D of this part;
(2) Requirements related to enrollment of qualified individuals
described in subpart E of this part;
(3) The requirement to issue certificates of exemption in
accordance with Sec. 155.200(b); and
(4) Requirements related to the payment of premiums by individuals,
Indian tribes, tribal organizations and urban Indian organizations
under Sec. 155.240.
(b) Unique functions of a SHOP. The SHOP must also provide the
following unique functions:
(1) Enrollment and eligibility functions. The SHOP must adhere to
the requirements outlined in subpart H.
(2) Employer choice requirements. The SHOP must allow a qualified
employer to select a level of coverage as described in section
1302(d)(1) of the Affordable Care Act, in which all QHPs within that
level are made available to the qualified employees of the employer.
(3) SHOP options with respect to employer choice requirements. (i)
For plan years beginning on or after January 1, 2018, SHOP:
(A) Must allow an employer to make available to qualified employees
all QHPs at the level of coverage selected by the employer as described
in paragraph (b)(2) of this section, and
(B) May allow an employer to make one or more QHPs available to
qualified
[[Page 51142]]
employees by a method other than the method described in paragraph
(b)(2) of this section.
(ii) For plan years beginning on or after January 1, 2018, a
Federally-facilitated SHOP will provide a qualified employer a choice
of two methods to make QHPs available to qualified employees:
(A) The employer may choose a level of coverage as described in
paragraph (b)(2) of this section, or
(B) The employer may choose a single QHP.
(iii) For plan years beginning on or after January 1, 2018, a SHOP
may, and a Federally-facilitated SHOP will provide a qualified employer
a choice of two methods to make stand-alone dental plans available to
qualified employees:
(A) The employer may choose to make available a single stand-alone
dental plan.
(B) The employer may choose to make available all stand-alone
dental plans offered through the SHOP at a level of coverage as
described in Sec. 156.150(b)(2) of this subchapter.
(iv) A SHOP may also provide a qualified employer with a choice of
a third method to make QHPs available to qualified employees by
offering its qualified employees a choice of all QHPs offered through
the 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. A State with a
Federally-facilitated SHOP may recommend that the Federally-facilitated
SHOP not make this additional option available in that State, by
submitting a letter to HHS in advance of the annual QHP certification
application deadline, by a date to be established by HHS. The State's
letter must describe and justify the State's recommendation, based on
the anticipated impact this additional option would have on the small
group market and consumers.
(v) A SHOP may also provide a qualified employer with a choice of a
third method to make stand-alone dental plans available to qualified
employees by offering its qualified employees a choice of all stand-
alone dental plans offered through the SHOP by a single issuer across
all available levels of coverage, as described in Sec. 156.150(b)(2)
of this subchapter, if such levels are available. If levels of coverage
are not available, a SHOP may make a choice of all stand-alone dental
plans available. A State with a Federally-facilitated SHOP may
recommend that the Federally-facilitated SHOP not make this additional
option available in that State, by submitting a letter to HHS in
advance of the annual QHP certification application deadline, by a date
to be established by HHS. The State's letter must describe and justify
the State's recommendation, based on the anticipated impact this
additional option would have on the small group market and consumers.
(vi) States operating 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,
except that a State with a State-based Exchange utilizing the Federal
platform for SHOP enrollment functions may decide against offering the
employer choice models specified in paragraphs (b)(3)(iv) and (b)(3)(v)
of this section in that State, provided that the State notifies HHS of
that decision in advance of the annual QHP certification application
deadline, by a date to be established by HHS.
(4) The SHOP may, upon an election by a qualified employer, enter
into an agreement with a qualified employer to facilitate the
administration of continuation coverage by collecting premiums for
continuation coverage enrolled in through the SHOP directly from a
person enrolled in continuation coverage through the SHOP consistent
with applicable law and the terms of the group health plan, and
remitting premium payments for this coverage to QHP issuers.
(5) QHP Certification. With respect to certification of QHPs in the
small group market, the SHOP must ensure each QHP meets the
requirements specified in Sec. 156.285 of this subchapter.
(6) Rates and rate changes. The SHOP must--
(i) Require all QHP issuers to make any change to rates at a
uniform time that is no more frequently than quarterly.
(A) In a Federally-facilitated SHOP, rates may be updated quarterly
with effective dates of January 1, April 1, July 1, or October 1 of
each calendar year. The updated rates must be submitted to HHS at least
60 days in advance of the effective date of the rates.
(B) [Reserved]
(ii) Prohibit all QHP issuers from varying rates for a qualified
employer during the employer's plan year.
(7) QHP availability in merged markets. If a State merges the
individual market and the small group market risk pools in accordance
with section 1312(c)(3) of the Affordable Care Act, the SHOP may permit
employer groups to enroll in any QHP meeting level of coverage
requirements described in section 1302(d) of the Affordable Care Act.
(8) QHP availability in unmerged markets. If a State does not merge
the individual and small group market risk pools, the SHOP must permit
employer groups to enroll only in QHPs in the small group market.
(9) SHOP expansion to large group market. If a State elects to
expand the SHOP to the large group market, a SHOP must allow issuers of
health insurance coverage in the large group market in the State to
offer QHPs in such market through a SHOP beginning in 2017 provided
that a large employer meets the qualified employer requirements other
than that it be a small employer.
(10) Participation rules. Subject to Sec. 147.104 of this
subchapter, the SHOP may authorize a uniform group participation rate
for the offering of health insurance coverage in the SHOP, which must
be a single, uniform rate that applies to all groups and issuers in the
SHOP. If the SHOP authorizes a minimum participation rate, such rate
must be based on the rate of employee participation in the SHOP, not on
the rate of employee participation in any particular QHP or QHPs of any
particular issuer.
(i) Subject to Sec. 147.104 of this subchapter, a Federally-
facilitated SHOP must use a minimum participation rate of 70 percent,
calculated as the number of full-time employees accepting coverage
offered by a qualified employer plus the number of full-time employees
who, at the time the employer submits the SHOP group enrollment, are
enrolled in coverage through another group health plan, governmental
coverage (such as Medicare, Medicaid, or TRICARE), coverage sold
through the individual market, or in other minimum essential coverage,
divided by the number of full-time employees offered coverage.
(ii) Notwithstanding paragraphs (b)(10)(i) of this section, a
Federally-facilitated SHOP may utilize a different minimum
participation rate in a State if there is evidence that a State law
sets a minimum participation rate or that a higher or lower minimum
participation rate is customarily used by the majority of QHP issuers
in that State for products in the State's small group market outside
the SHOP.
(11) Premium calculator. In the SHOP, the premium calculator
described in Sec. 155.205(b)(6) must facilitate the comparison of
available QHPs.
(c) Coordination with individual market Exchange for eligibility
determinations. A SHOP that collects employee eligibility or enrollment
data
[[Page 51143]]
must provide data related to eligibility and enrollment of a qualified
employee to the individual market Exchange that corresponds to the
service area of the SHOP, unless the SHOP is operated pursuant to Sec.
155.100(a)(2).
(d) Duties of Navigators in the SHOP. In States that have elected
to operate only a SHOP pursuant to Sec. 155.100(a)(2), at State option
and if State law permits the Navigator duties described in Sec.
155.210(e)(3) and (4) may be fulfilled through referrals to agents and
brokers.
(e) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
27. Section 155.715 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 155.715 Eligibility determination process for SHOP for plan
years beginning prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Sec. 155.716 is
applicable for plan years beginning on or after January 1, 2018.
0
28. Section 155.716 is added to read as follows:
Sec. 155.716 Eligibility determination process for SHOP for plan
years beginning on or after January 1, 2018.
(a) General requirement. The SHOP must determine whether an
employer requesting a determination of eligibility to participate in a
SHOP is eligible in accordance with the requirements of Sec. 155.710.
(b) Applications. The SHOP must accept a SHOP single employer
application form from employers, in accordance with the relevant
standards of Sec. 155.730.
(c) Verification of eligibility. For the purpose of verifying
employer eligibility, the SHOP--
(1) May establish, in addition to or in lieu of reliance on the
application, additional methods to verify the information provided by
the applicant on the applicable application;
(2) Must collect only the minimum information necessary for
verification of eligibility in accordance with the eligibility
standards described in Sec. 155.710; and
(3) May not perform individual market Exchange eligibility
determinations or verifications described in subpart D of this part.
(d) Eligibility adjustment period. When the information submitted
on the SHOP single employer application is inconsistent with
information collected from third-party data sources through the
verification process described in paragraph (c)(1) of this section or
otherwise received by the SHOP, the SHOP must--
(1) Make a reasonable effort to identify and address the causes of
such inconsistency, including through typographical or other clerical
errors;
(2) Notify the employer of the inconsistency;
(3) Provide the employer with a period of 30 days from the date on
which the notice described in paragraph (d)(2) of this section is sent
to the employer to either present satisfactory documentary evidence to
support the employer's application, or resolve the inconsistency; and
(4) If, after the 30-day period described in paragraph (d)(2) of
this section, the SHOP has not received satisfactory documentary
evidence, the SHOP must--
(i) Notify the employer of its denial or termination of eligibility
in accordance with paragraph (e) of this section and of the employer's
right to appeal such determination; and
(ii) If the employer was enrolled pending the confirmation or
verification of eligibility information, discontinue the employer's
participation in the SHOP at the end of the month following the month
in which the notice is sent.
(e) Notification of employer eligibility. The SHOP must provide an
employer requesting eligibility to purchase coverage through the SHOP
with a notice of approval or denial or termination of eligibility and
the employer's right to appeal such eligibility determination.
(f) Validity of Eligibility Determination. An employer's
determination of eligibility to participate in SHOP remains valid until
the employer makes a change that could end its eligibility under Sec.
155.710(b) or withdraws from participation in the SHOP.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
29. Section 155.720 is amended by revising the section heading and
adding paragraph (j) to read as follows:
Sec. 155.720 Enrollment of employees into QHPs under SHOP for plan
years beginning prior to January 1, 2018.
* * * * *
(j) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.721 is
applicable for plan years beginning on or after January 1, 2018.
0
30. Section 155.721 is added to read as follows:
Sec. 155.721 Record retention and IRS Reporting for plan years
beginning on or after January 1, 2018.
(a) Records. The SHOP must receive and maintain for at least 10
years records of qualified employers participating in the SHOP.
(b) Reporting requirement for tax administration purposes. The SHOP
must, at the request of the IRS, report information to the IRS about
employer eligibility to participate in SHOP coverage.
(c) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
31. Section 155.725 is amended by revising the section heading and
adding paragraph (l) to read as follows:
Sec. 155.725 Enrollment periods under SHOP for plan years beginning
prior to January 1, 2018.
* * * * *
(l) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.726 is
applicable for plan years beginning on or after January 1, 2018.
0
32. Section 155.726 is added to read as follows:
Sec. 155.726 Enrollment periods under SHOP for plan years beginning
on or after January 1, 2018.
(a) General requirements. The SHOP must ensure that issuers
offering QHPs through the SHOP adhere to applicable enrollment periods,
including special enrollment periods.
(b) Rolling enrollment in the SHOP. The SHOP must permit a
qualified employer to purchase coverage for its small group at any
point during the year. The employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date of
coverage, unless the plan is issued in a State that has elected to
merge its individual and small group risk pools under section
1312(c)(3) of the Affordable Care Act, in which case the plan year will
end on December 31 of the calendar year in which coverage first became
effective.
(c)(1) Special enrollment periods. The SHOP must ensure that
issuers offering QHPs through the SHOP provide special enrollment
periods consistent with the section, during which certain qualified
employees or dependents of qualified employees may enroll in QHPs and
enrollees may change QHPs.
(2) The SHOP must ensure that issuers offering QHPs through a SHOP
provide a special enrollment period for a qualified employee or a
dependent of a qualified employee who;
[[Page 51144]]
(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), (9), (10), (11), or (12);
(ii) Loses eligibility for coverage under a Medicaid plan under
title XIX of the Social Security Act or a State child health plan under
title XXI of the Social Security Act; or
(iii) Becomes eligible for assistance, with respect to coverage
under a SHOP, under such Medicaid plan or a State child health plan
(including any waiver or demonstration project conducted under or in
relation to such a plan).
(3) A qualified employee or dependent of a qualified employee who
experiences a qualifying event described in paragraph (j)(2) of this
section has:
(i) Thirty (30) days from the date of a triggering event described
in paragraph (c)(2)(i) of this section to select a QHP through the
SHOP; and
(ii) Sixty (60) days from the date of a triggering event described
in paragraph (c)(2)(ii) or (iii) of this section to select a QHP
through the SHOP;
(4) A dependent of a qualified employee is not eligible for a
special enrollment period if the employer does not extend the offer of
coverage to dependents.
(5) The effective dates of coverage for special enrollment periods
are determined using the provisions of Sec. 155.420(b).
(6) Loss of minimum essential coverage is determined using the
provisions of Sec. 155.420(e).
(d) Limitation. Qualified employees will not be able to enroll
unless the employer group meets any applicable minimum participation
rate implemented under Sec. 155.706(b)(10).
(e) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
33. Section 155.730 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 155.730 Application standards for SHOP for plan year beginning
prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.731 is
applicable for plan years beginning on or after January 1, 2018.
0
34. Section 155.731 is added to read as follows:
Sec. 155.731 Application standards for SHOP for plan years beginning
on or after January 1, 2018.
(a) General requirements. Application forms used by the SHOP must
meet the requirements set forth in this section.
(b) Single employer application. The SHOP must use a single
application to determine employer eligibility. Such application must
collect the following--
(1) Employer name and address of employer's locations;
(2) Information sufficient to confirm the employer is a small
employer;
(3) Employer Identification Number (EIN); and
(4) Information sufficient to confirm that the employer is
offering, at a minimum, all full-time employees coverage in a QHP
through a SHOP.
(c) Model application. The SHOP may use the model single employer
application provided by HHS.
(d) Alternative employer application. The SHOP may use an
alternative application if such application is approved by HHS and
collects the information described in paragraph (b).
(e) Filing. The SHOP must:
(1) Accept applications from SHOP application filers; and
(2) Provide the tools to file an employer eligibility application
via an Internet Web site.
(f) Additional safeguards. (1) The SHOP may not provide to the
employer any information collected on an employee application with
respect to spouses or dependents other than the name, address, and
birth date of the spouse or dependent.
(2) The SHOP is not permitted to collect information on the single
employer or on an employee application unless that information is
necessary to determine SHOP eligibility or effectuate enrollment
through the SHOP.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
0
35. Section 155.735 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 155.735 Termination of SHOP enrollment or coverage for plan
years beginning prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning before January 1, 2018.
0
36. Section 155.740 is amended by revising the section heading and
adding paragraph (p) to read as follows:
Sec. 155.740 SHOP employer and employee eligibility appeals
requirements for plan years beginning prior to January 1, 2018.
* * * * *
(p) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 155.741 is
applicable for plan years beginning on or after January 1, 2018.
0
37. Section 155.741 is added to subpart H to read as follows:
Sec. 155.741 SHOP employer and employee eligibility appeals
requirements for plan year beginning on or after January 1, 2018.
(a) Definitions. The definitions in Sec. Sec. 155.20, 155.300, and
155.500 apply to this section.
(b) General requirements. (1) A State, establishing an Exchange
that provides for the establishment of a SHOP pursuant to Sec. 155.100
must provide an eligibility appeals process for the SHOP. Where a State
has not established an Exchange that provides for the establishment of
a SHOP pursuant to Sec. 155.100, HHS will provide an eligibility
appeals process for the SHOP that meets the requirements of this
section and the requirements in paragraph (b)(2) of this section.
(2) The appeals entity must conduct appeals in accordance with the
requirements established in this section and Sec. Sec. 155.505(e)
through (h) and 155.510(a)(1) and (2) and (c).
(c) Employer right to appeal. An employer may appeal--
(1) A notice of denial or termination of eligibility under Sec.
155.716(e); or
(2) A failure by the SHOP to provide a timely eligibility
determination or a timely notice of an eligibility determination in
accordance with Sec. 155.716(e).
(d) Appeals notice requirement. Notices of the right to appeal a
denial of eligibility under Sec. 155.716(e) must be written and
include--
(1) The reason for the denial or termination of eligibility,
including a citation to the applicable regulations; and
(2) The procedure by which the employer may request an appeal of
the denial or termination of eligibility.
(e) Appeal request. The SHOP and appeals entity must--
(1) Allow an employer to request an appeal within 90 days from the
date of the notice of denial or termination of eligibility to--
(i) The SHOP or the appeals entity; or
(ii) HHS, if no State Exchange that provides for establishment of a
SHOP has been established;
(2) Accept appeal requests submitted through any of the methods
described in Sec. 155.520(a)(1);
(3) Comply with the requirements of Sec. 155.520(a)(2) and (3);
and
(4) Consider an appeal request valid if it is submitted in
accordance with paragraph (e)(1) of this section.
[[Page 51145]]
(f) Notice of appeal request. (1) Upon receipt of a valid appeal
request, the appeals entity must--
(i) Send timely acknowledgement to the employer of the receipt of
the appeal request, including--
(A) An explanation of the appeals process; and
(B) Instructions for submitting additional evidence for
consideration by the appeals entity.
(ii) Promptly notify the SHOP of the appeal, if the appeal request
was not initially made to the SHOP.
(2) Upon receipt of an appeal request that is not valid because it
fails to meet the requirements of this section, the appeals entity
must--
(i) Promptly and without undue delay, send written notice to the
employer that is appealing that--
(A) The appeal request has not been accepted,
(B) The nature of the defect in the appeal request; and
(C) An explanation that the employer may cure the defect and
resubmit the appeal request if it meets the timeliness requirements of
paragraph (e) of this section, or within a reasonable timeframe
established by the appeals entity.
(ii) Treat as valid an amended appeal request that meets the
requirements of this section.
(g) Transmittal and receipt of records. (1) Upon receipt of a valid
appeal request under this section, or upon receipt of the notice under
paragraph (f)(2) of this section, the SHOP must promptly transmit, via
secure electronic interface, to the appeals entity--
(i) The appeal request, if the appeal request was initially made to
the SHOP; and
(ii) The eligibility record of the employer that is appealing.
(2) The appeals entity must promptly confirm receipt of records
transmitted pursuant to paragraph (g)(1) of this section to the SHOP
that transmitted the records.
(h) Dismissal of appeal. The appeals entity--
(1) Must dismiss an appeal if the employer that is appealing--
(i) Withdraws the request in accordance with the standards set
forth in Sec. 155.530(a)(1); or
(ii) Fails to submit an appeal request meeting the standards
specified in paragraph (e) of this section.
(2) Must provide timely notice to the employer that is appealing of
the dismissal of the appeal request, including the reason for
dismissal, and must notify the SHOP of the dismissal.
(3) May vacate a dismissal if the employer makes a written request
within 30 days of the date of the notice of dismissal showing good
cause why the dismissal should be vacated.
(i) Procedural rights of the employer. The appeals entity must
provide the employer the opportunity to submit relevant evidence for
review of the eligibility determination.
(j) Adjudication of SHOP appeals. SHOP appeals must--
(1) Comply with the standards set forth in Sec. 155.555(i)(1) and
(3); and
(2) Consider the information used to determine the employer's
eligibility as well as any additional relevant evidence submitted
during the course of the appeal by the employer or employee.
(k) Appeal decisions. Appeal decisions must--
(1) Be based solely on--
(i) The evidence referenced in paragraph (j)(2) of this section;
(ii) The eligibility requirements for the SHOP under Sec.
155.710(b), as applicable.
(2) Comply with the standards set forth in Sec. 155.545(a)(2)
through (5)
(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 the employer is found ineligible under the decision, then
the appeal decision is effective as of the date of the notice of the
appeal decision.
(l) Notice of appeal decision. The appeals entity must issue
written notice of the appeal decision to the employer and to the SHOP
within 90 days of the date the appeal request is received.
(m) Implementation of SHOP appeal decisions. The SHOP must promptly
implement the appeal decision upon receiving the notice under paragraph
(l) of this section.
(n) Appeal record. Subject to the requirements of Sec. 155.550,
the appeal record must be accessible to the employer in a convenient
format and at a convenient time.
(o) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
38. 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
39. Section 156.100 is amended by revising the section heading and the
introductory text and by adding paragraph (d) to read as follows:
Sec. 156.100 State selection of benchmark plan for plan years
beginning prior to January 1, 2019.
For plan years beginning before January 1, 2019, each State may
identify a single EHB-benchmark plan according to the selection
criteria described below:
* * * * *
(d) Applicability date: For plan years beginning on or after
January 1, 2019, Sec. 156.111 applies in place of this section.
0
40. Section 156.111 is added to Subpart B to read as follows:
Sec. 156.111 State selection of EHB-benchmark plan for plan years
beginning on or after January 1, 2019.
(a) Subject to paragraphs (b), (c), (d) and (e) of this section,
for plan years beginning on or after January 1, 2019, a State may
change its EHB-benchmark plan by:
(1) Selecting the EHB-benchmark plan that another State used for
the 2017 plan year under Sec. 156.100 and Sec. 156.110 of this
subpart;
(2) Replacing one or more categories of EHBs under Sec. 156.110(a)
of this subpart under its EHB-benchmark plan used for the 2017 plan
year with the same category or categories of EHB from the EHB-benchmark
plan that another State used for the 2017 plan year under Sec. 156.100
and Sec. 156.110 of this subpart; or
(3) Otherwise selecting a set of benefits that would become the
State's EHB-benchmark plan, provided that the new EHB-benchmark plan
does not exceed the generosity of the most generous among a set of
comparison plans, including:
(i) The State's EHB-benchmark plan used for the 2017 plan year, and
(ii) Any of the State's base-benchmark plan options for the 2017
plan year described in Sec. 156.100(a)(1) of this subpart,
supplemented as necessary under Sec. 156.110 of this subpart.
[[Page 51146]]
(b) A State's EHB-benchmark plan must:
(1) EHB coverage. Provide an appropriate balance of coverage for
the categories of benefits at Sec. 156.110(a) of this subpart.
(2) Scope of benefits. (i) Be equal in scope of benefits to what is
provided under a typical employer plan, defined as:
(A) An employer plan within a product (as these terms are defined
in Sec. 144.103 of this subchapter) with substantial enrollment in the
product of at least 5,000 enrollees sold in the small group or large
group market, in one or more States; or
(B) A self-insured group health plan with substantial enrollment of
at least 5,000 enrollees in one or more States;
(ii) Not have benefits unduly weighted towards any of the
categories of benefits at Sec. 156.110(a) of this subpart; and
(iii) Provide benefits for diverse segments of the population,
including women, children, persons with disabilities, and other groups.
(c) The State must provide reasonable public notice and an
opportunity for public comment on the State's selection of an EHB-
benchmark plan.
(d) A State must notify HHS of the selection of a new EHB-benchmark
plan by a date to be determined by HHS for each applicable plan year.
(1) If the State does not make a selection by the annual selection
date, the State's EHB-benchmark plan for the applicable plan year would
be that State's EHB-benchmark plan applicable for the prior year.
(2) [Reserved]
(e) A State changing its EHB-benchmark plan under this section must
submit documents in a format and manner specified by HHS by a date
determined by HHS. These must include:
(1) A document confirming that the State's EHB-benchmark plan
definition complies with the requirements under paragraphs (a), (b) and
(c) of this section, including information on which selection option
under paragraph (a) of this section the State is using, and whether the
State is using another State's EHB-benchmark plan;
(2) If the State is selecting its EHB-benchmark plan using the
options in paragraph (a)(2) or (3) of this section, an actuarial
certification and an associated actuarial report from an actuary, who
is a member of the American Academy of Actuaries, in accordance with
generally accepted actuarial principles and methodologies that affirms:
(i) That the State's EHB-benchmark plan definition is equal in
scope to benefits provided under a typical employer plan; and
(ii) If the State is selecting its EHB-benchmark plan using the
option in paragraph (a)(3) of this section, that the new EHB-benchmark
plan does not exceed the generosity of the most generous among the
plans listed in paragraph (a)(3)(i) and (ii) of this section;
(3) The State's EHB-benchmark plan document that reflects the
benefits and limitations, including medical management requirements, a
schedule of benefits and, if the State is selecting its EHB-benchmark
plan using the option in paragraph (a)(3) of this section, a formulary
drug list in a format and manner specified by HHS; and
(4) Other documentation specified by HHS, which is necessary to
operationalize the State's EHB-benchmark plan.
0
41. Section 156.115 is amended by revising paragraph (b)(1)(ii) to read
as follows:
Sec. 156.115 Provision of EHB.
* * * * *
(b) * * *
(1) * * *
(ii) Is substituted within the same essential health benefit
category or between essential health benefit categories, as long as the
plan with substitutions still provides benefits that are substantially
equal to the EHB-benchmark plan, provides an appropriate balance among
the EHB categories such that benefits are not unduly weighted towards
any category, and provides benefits for diverse segments of the
population; and
* * * * *
0
42. Section 156.150 is amended by removing and reserving paragraph (b)
to read as follows:
Sec. 156.150 Application to stand-alone dental plans inside the
Exchange.
* * * * *
(b) [Reserved]
* * * * *
0
43. Section 156.200 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 156.200 QHP issuer participation standards.
* * * * *
(b) * * *
(2) Comply with Exchange processes, procedures, and requirements
set forth in accordance with subpart K of part 155 and, in the small
group market, Sec. 155.705 and Sec. 155.706 of this subchapter;
* * * * *
0
44. Section 156.285 is amended by revising the section heading and
adding paragraph (f) to read as follows:
Sec. 156.285 Additional standards specific to SHOP for plan years
beginning prior to January 1, 2018.
* * * * *
(f) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Additional standards
specific to SHOP for plan years beginning on or after January 1, 2018
are in Sec. 156.286.
0
45. Section 156.286 is added to read as follows:
Sec. 156.286 Additional standards specific to SHOP for plan years
beginning on or after January 1, 2018.
(a) SHOP rating and premium payment requirements. QHP issuers
offering a QHP through a SHOP must:
(1) Accept payment from a qualified employer or an enrollee, or a
SHOP on behalf of a qualified employer or enrollee
(2) Adhere to the SHOP timeline for rate setting as established in
Sec. 155.706(b)(6) of this subchapter;
(3) Charge the same contract rate for a plan year; and
(4) Adhere to the premium rating standards described in Sec.
147.102 of this subchapter regardless of whether the QHP being sold
through the SHOP is sold in the small group market or the large group
market.
(b) Enrollment periods and processes for the SHOP. QHP issuers
offering a QHP through the SHOP must adhere to enrollment periods and
processes established by the SHOP, consistent with Sec. 155.726 of
this subchapter, and establish a uniform enrollment timeline and
process for enrolling qualified employers and employer group members.
(c) Enrollment process for the SHOP. A QHP issuer offering a QHP
through the SHOP must:
(1) Provide new enrollees with the enrollment information package
as described in Sec. 156.265(e); and
(2) Enroll all qualified employees consistent with the plan year of
the applicable qualified employer.
(d) Participation rules. QHP issuers offering a QHP through the
SHOP may impose group participation rules for the offering of health
insurance coverage in connection with a QHP only if and to the extent
authorized by the SHOP in accordance with Sec. 155.706 of this
subchapter.
(e) Employer choice. QHP issuers offering a QHP through the SHOP
must accept enrollments from groups in accordance with the employer
choice
[[Page 51147]]
policies applicable to the SHOP under Sec. 155.706(b)(3) of this
subchapter.
(f) Identification of SHOP enrollments. QHP issuers offering a QHP
through the SHOP must use a uniform enrollment form, maintain processes
sufficient to identify whether a group market enrollment is an
enrollment through the SHOP, and maintain records of SHOP enrollments
for a period of 10 years following the enrollment.
(g) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
Sec. 156.298 [Removed]
0
46. Section 156.298 is removed.
0
47. Section 156.340 is amended by revising paragraph (a)(2) to read as
follows:
Sec. 156.340 Standards for downstream and delegated entities.
(a) * * *
(2) Exchange processes, procedures, and standards in accordance
with subparts H and K of part 155 and, in the small group market, Sec.
155.705 and Sec. 155.706 of this subchapter;
* * * * *
0
48. Section 156.350 is amended by revising paragraphs (a)(1) and (a)(2)
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) * * *
(1) Section 156.285(a)(4)(ii) regarding the premiums for plans
offered on the SHOP, for plan years beginning prior to January 1, 2018;
(2) Section 156.285(c)(5) and (c)(8)(iii) regarding the enrollment
process for SHOP, for plan years beginning prior to January 1, 2018;
and
* * * * *
0
49. Section 156.602 is amended by redesignating paragraph (e) as
paragraph (f) and adding new paragraph (e) to read as follows:
Sec. 156.602 Other coverage that qualifies as minimum essential
coverage.
* * * * *
(e) CHIP buy-in programs. Coverage under a Children's Health
Insurance Program (CHIP) buy-in program that provides identical
coverage to that State's CHIP program under title XXI of the Social
Security Act.
* * * * *
0
50. Section 156.1230 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 156.1230 Direct enrollment with the QHP issuer in a manner
considered to be through the Exchange.
* * * * *
(b) * * *
(2) The QHP issuer must engage a third party entity in accordance
with Sec. 155.221 of this subchapter to demonstrate operational
readiness and compliance with applicable requirements prior to the QHP
issuer's Internet Web site being used to complete a QHP selection.
* * * * *
PART 157--EMPLOYER INTERACTIONS WITH EXCHANGES AND SHOP
PARTICIPATION
0
51. The authority citation for part 157 continues to read as follows:
Authority: Title I of the Affordable Care Act, Sections 1311,
1312, 1321, 1411, 1412, Pub. L. 111-148, 124 Stat. 199.
0
52. Section 157.205 is amended by revising the section heading and
adding paragraph (h) to read as follows:
Sec. 157.205 Qualified employer participation process in a SHOP for
plan years beginning prior to January 1, 2018.
* * * * *
(h) Applicability date. The provisions of this section apply for
plan years beginning prior to January 1, 2018. Section 157.206 is
applicable for plan years beginning on or after January 1, 2018.
0
53. Section 157.206 is added to read as follows:
Sec. 157.206 Qualified employer participation process in a SHOP for
plan years beginning on or after January 1, 2018.
(a) General requirements. When joining the SHOP, a qualified
employer must comply with the requirements, processes, and timelines
set forth by this part and must remain in compliance for the duration
of the employer's participation in the SHOP.
(b) Selecting QHPs. During an election period, a qualified employer
may make coverage in a QHP available through the SHOP in accordance
with the processes developed by the SHOP in accordance with Sec.
155.706 of this subchapter.
(c) Information dissemination to employees. A qualified employer
participating in the SHOP must disseminate information to its qualified
employees about the process to enroll in a QHP through the SHOP.
(d) Employees hired outside of the initial or annual open
enrollment period. Qualified employers must provide employees hired
outside of the initial or annual open enrollment period with
information about the enrollment process.
(e) Participation in the SHOP and termination of coverage or
enrollment through the SHOP. (1) Changes affecting participation.
Employers must submit a new single employer application to the SHOP or
withdraw from participating in the SHOP if the employer makes a change
that could end its eligibility under Sec. 155.710 of this subchapter.
(2) If an employer receives a determination of ineligibility to
participate in the SHOP or the SHOP terminates its eligibility to
participate in the SHOP, the employer must notify the issuer or issuers
of QHPs in which their group members are enrolled in coverage of its
ineligibility or termination of eligibility within 5 business days of
the end of any applicable appeal process under Sec. 155.741, which
could include when the time to file an appeal lapses without an appeal
being filed, when the appeal is rejected or dismissed, or when the
appeal process concludes with an adjudication by the appeals entity, as
applicable.
(3) Employers must promptly notify the issuer or issuers of QHPs in
which their group members are enrolled in coverage if it wishes to
terminate coverage or enrollment through the SHOP.
(f) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2018.
PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS
0
54. 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
55. Section 158.170 is amended by revising paragraph (b) introductory
text to read as follows:
Sec. 158.170 Allocation of expenses.
* * * * *
(b) Description of the methods used to allocate expenses. The
report required in Sec. 158.110 must include a detailed description of
the methods used to allocate expenses, including incurred claims,
quality improvement expenses (unless the report utilizes the percentage
of premium option described in Sec. 158.221(b)(8), in which case the
allocation method description should state so), Federal and State taxes
and licensing or regulatory fees, and other non-claims costs, to each
health insurance market in each State. A detailed description of each
expense element must be provided, including how each specific expense
meets the criteria for the type of expense in which
[[Page 51148]]
it is categorized, as well as the method by which it was aggregated.
* * * * *
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56. Section 158.221 is amended by adding paragraph (b)(8) to read as
follows:
Sec. 158.221 Formula for calculating an issuer's medical loss ratio.
* * * * *
(b) * * *
(8) Beginning with the 2017 MLR reporting year, an issuer has the
option of reporting an amount equal to 0.8 percent of earned premium in
the relevant State and market in lieu of reporting the issuer's actual
expenditures for activities that improve health care quality, as
defined in Sec. Sec. 158.150 and 158.151.
* * * * *
0
57. Section 158.301 is revised to read as follows:
Sec. 158.301 Standard for adjustment to the medical loss ratio.
The Secretary may adjust the MLR standard that must be met by
issuers offering coverage in the individual market in a State, as
defined in section 2791 of the PHS Act, for a given MLR reporting year
if, in the Secretary's discretion, the Secretary determines that there
is a reasonable likelihood that an adjustment to the 80 percent MLR
standard of section 2718(b)(1)(A)(ii) of the Public Health Service Act
will help stabilize the individual market in that State.
0
58. Section 158.321 is revised to read as follows:
Sec. 158.321 Information regarding the State's individual health
insurance market.
(a) Subject to Sec. 158.320, the State must provide, for each
issuer who actively offers coverage in the individual market in the
State, the following information, in accordance with paragraph (b) of
this section, for the preceding calendar year and, at the State's
option, for the current year:
(1) Total earned premium and incurred claims;
(2) Total number of enrollees (life-years and covered lives);
(3) Total agents' and brokers' commission expenses;
(4) Net underwriting gain;
(5) Risk-based capital level; and
(6) Whether the issuer has provided notice to the State's insurance
commissioner, superintendent, or comparable State authority that the
issuer will cease or begin offering individual market coverage on the
Exchange, certain geographic areas, or the entire individual market in
the State.
(b) The information required in paragraphs (a)(1) through (4) and
(6) of this section must be provided separately for the issuer's
individual market plans grouped by the following categories, as
applicable: On-Exchange, off-Exchange, grandfathered health plans as
defined in Sec. 147.140 of this subchapter, coverage that meets the
criteria for transitional policies outlined in applicable guidance, and
non-grandfathered single risk pool coverage. The information required
in paragraph (a)(1) through (5) of this section must be provided at the
issuer level.
(c) The State must also provide information regarding whether any
issuer other than those described in paragraph (a) of this section has
provided notice to the State's insurance commissioner, superintendent,
or comparable State authority that the issuer will cease or begin
offering individual market coverage on the Exchange, certain geographic
areas, or the entire individual market in the State.
0
59. Section 158.322 is revised to read as follows:
Sec. 158.322 Proposal for adjusted medical loss ratio.
A State must provide its own proposal as to the adjustment it seeks
to the MLR standard. This proposal must include an explanation of how
an adjustment to the MLR standard for the State's individual market
will help stabilize the State's individual market.
0
60. Section 158.330 is revised to read as follows:
Sec. 158.330 Criteria for assessing request for adjustment to the
medical loss ratio.
The Secretary may consider the following criteria in assessing
whether an adjustment to the 80 percent MLR standard, as calculated in
accordance with this subpart, would be reasonably likely to help
stabilize the individual market in a State that has requested such
adjustment:
(a) The number and financial performance (based on data provided by
a State under Sec. 158.321) of issuers actively offering individual
health insurance coverage on- and off-Exchange, grandfathered health
plans as defined in Sec. 147.140 of this subchapter, coverage that
meets the criteria for transitional policies outlined in applicable
guidance, and non-grandfathered single risk pool coverage; the number
of issuers reasonably likely to cease or begin offering individual
market coverage in the State; and the likelihood that an adjustment to
the 80 percent MLR standard could help increase competition in the
individual market in the State, including in underserved areas.
(b) Whether an adjustment to the 80 percent MLR standard for the
individual market may improve consumers' access to agents and brokers.
(c) The capacity of any new issuers or issuers remaining in the
individual market to write additional business in the event one or more
issuers were to cease offering individual market coverage on the
Exchange, in certain geographic areas, or in the entire individual
market in the State.
(d) The impact on premiums charged, and on benefits and cost
sharing provided, to consumers by issuers remaining in or entering the
individual market in the event one or more issuers were to cease or
begin offering individual market coverage on the Exchange, in certain
geographic areas, or in the entire individual market in the State.
(e) Any other relevant information submitted by the State's
insurance commissioner, superintendent, or comparable official in the
State's request.
0
61. Section 158.341 is revised to read as follows:
Sec. 158.341 Treatment as a public document.
A State's request for an adjustment to the MLR standard, and all
information submitted as part of its request, will be treated as a
public document. Instructions for how to access documents related to a
State's request for an adjustment on the MLR standard will be made
available on the Secretary's Web site.
0
62. Section 158.350 is revised to read as follows:
Sec. 158.350 Subsequent requests for adjustment to the medical loss
ratio.
A State that has made a previous request for an adjustment to the
MLR standard must, in addition to the other information required by
this subpart, submit information as to what steps the State has taken
since its prior requests, if any, to improve the stability of the
State's individual market.
Dated: October 12, 2017.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: October 23, 2017.
Eric D. Hargan,
Acting Secretary, Department of Health and Human Services.
[FR Doc. 2017-23599 Filed 10-27-17; 4:15 pm]
BILLING CODE 4120-01-P
