Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019, 16930-17071 [2018-07355]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 83, Number 74 (Tuesday, April 17, 2018)]
[Rules and Regulations]
[Pages 16930-17071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07355]



[[Page 16929]]

Vol. 83

Tuesday,

No. 74

April 17, 2018

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





45 CFR Parts 147, 153, 154, et al.





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2019; Final Rule

Federal Register / Vol. 83 , No. 74 / Tuesday, April 17, 2018 / Rules 
and Regulations

[[Page 16930]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 153, 154, 155, 156, 157, and 158

[CMS-9930-F]
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: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule sets forth payment parameters and provisions 
related to the risk adjustment and risk adjustment data validation 
programs; cost-sharing parameters; and user fees for Federally-
facilitated Exchanges and State Exchanges on the Federal platform. It 
finalizes changes that provide additional flexibility to States to 
apply the definition of essential health benefits (EHB) to their 
markets, enhance the role of States regarding the certification of 
qualified health plans (QHPs); and provide States with additional 
flexibility in the operation and establishment of Exchanges, including 
the Small Business Health Options Program (SHOP) Exchanges. It includes 
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: Effective Date: These regulations are effective on June 18, 
2018.

FOR FURTHER INFORMATION CONTACT: 
    Lindsey Murtagh, (301) 492-4106, Rachel Arguello, (301) 492-4263, 
Alper Ozinal, (301) 492-4178, or Abigail Walker, (410) 786-1725, for 
general information.
    Krutika Amin, (301) 492-5153, for matters related to risk 
adjustment, and user fees for Federally-facilitated Exchanges and 
State-Exchanges on the Federal platform.
    Adrianne Patterson, (410) 786-0686, or Abigail Walker, (410) 786-
1725, for matters related to sequestration.
    Melissa Jaffe, (301) 492-4129, for matters related to risk 
adjustment data validation, cost-sharing reductions, and the premium 
adjustment percentage.
    Lisa Cuozzo, (410) 786-1746, for matters related to rate review.
    Jenny Chen, (301) 492-5156, for matters related to establishing a 
State Exchange, and State 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 individual 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 
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.
    Cam Moultrie Clemmons, (206) 615-2338, for matters related to 
minimum essential coverage.
    Christina Whitefield, (301) 492-4172, for matters related to the 
medical loss ratio program.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Stakeholder Consultation and Input
    C. Structure of Final Rule
III. Provisions of the Proposed Rule and Analysis of and Responses 
to Public Comments
    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 State Flexibility for Risk Adjustment
    C. ICRs Regarding Risk Adjustment Data Validation
    D. ICRs Regarding Health Insurance Issuer Rate Increases: 
Disclosure and Review Requirements--Applicability
    E. ICRs Regarding Rate Increases Subject To Review
    F. ICRs Regarding the Small Business Health Options Program
    G. ICRs Regarding Essential Health Benefits
    H. ICRs Regarding Medical Loss Ratio
    I. Summary of Annual Burden Estimates for Final Requirements
    J. Submission of PRA-Related Comments
V. 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 health care 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 premiums 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 final rule, we 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

[[Page 16931]]

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, health care providers, health insurers, patients, recipients 
of health care services, purchasers of health insurance, or makers of 
medical devices, products, or medications. In this rule, within the 
limitations of the current statute, we are finalizing policies to 
reduce fiscal and regulatory burdens across different program areas, 
and to support innovative health insurance models.
    We are finalizing several changes that would significantly expand 
the role of States in the administration of the PPACA. We received 
comments on additional ways to support State Exchanges (SBEs) in 
adopting innovative approaches to operating and sustaining their 
Exchanges, and to make the State Exchange on the Federal platform (SBE-
FP) model a more appealing and viable model for States. We finalize 
policies under which States assume a larger role in reviewing the QHP 
certification standards of network adequacy and essential community 
providers for the Federally-facilitated Exchanges (FFEs). This will 
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 rule also finalizes several policies that will provide States 
with greater flexibility. For example, this rule provides States with 
additional flexibility in applying the definition of EHBs to their 
markets starting with the 2020 plan year. 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. This rule 
also provides States with significantly more flexibility in how they 
operate a Small Business Health Options Program (SHOP), permitting them 
to operate these Exchanges more efficiently, and therefore benefitting 
States, issuers, employers, and employees. These changes 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, the finalized policies provide States 
more flexibility regarding risk adjustment transfers in their markets. 
We also 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 provides States with an 
additional tool to help stabilize, innovate and provide relief in their 
individual markets. Additionally, we make 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 
are finalizing recalibrated parameters for the HHS risk adjustment 
methodology. We are also finalizing 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.
    As we do every year in the HHS notice of benefit and payment 
parameters final rule, we are finalizing updated parameters applicable 
in the individual and small group markets. We are finalizing 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 are finalizing 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 Internal Revenue Code of 1986 
(the Code), and the assessable payment amounts under section 4980H(a) 
and (b) of the Code. We are finalizing updates to the maximum annual 
limitations on cost sharing for the 2019 benefit year for cost-sharing 
reductions plan variations.
    We are finalizing a number of changes related to rate review that 
are intended to reduce regulatory burden on States and issuers in 
regard to the rate filing process. Specifically, we are exempting 
student health insurance coverage from Federal rate review 
requirements, beginning with coverage effective on or after July 1, 
2018. We are also modifying the 10 percent threshold for reasonableness 
review to a 15 percent default threshold.
    Recognizing that Exchanges, including the FFEs, face resource 
constraints, we are changing 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 are allowing an agent, 
broker or issuer participating in direct enrollment to have its 
selected third-party entity conduct operational readiness reviews, 
rather than requiring that those reviews be conducted by entities 
approved by HHS.
    We also finalize relatively minor adjustments to our programs and 
rules as we do each year in the HHS notice of benefit and payment 
parameters. We are finalizing 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 the proposed rule, we sought 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 requested comment on any additional program 
integrity improvements that were not outlined in the proposed rule, but 
could be beneficial in a future rulemaking.
    Finally, as noted in the proposed rule, we intend to consider 
proposals in future rulemaking that would help reduce drug costs and 
promote drug price transparency. We also 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 in order to help consumers 
avoid duplicate enrollments, and the appropriate manner of 
recalculating APTC following a midyear change in eligibility, and 
sought comments on each of these issues as we prepare rulemaking 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

[[Page 16932]]

receiving the amount of financial assistance for which they are 
eligible, 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 pre-enrollment 
verification for special enrollment periods; 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 final 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 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    Section 2703 of the PHS Act, as added by the PPACA, and sections 
2712 and 2741 of the PHS Act, as added by the Health Insurance 
Portability and Accountability Act of 1996 (Pub. L. 104-191) (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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 EHB 
package that includes coverage of EHB (as defined by the Secretary), 
cost-sharing limits, and actuarial value requirements. The law directs 
that EHBs be equal in scope to the benefits 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.

---------------------------------------------------------------------------

[[Page 16933]]

    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 
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 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 EHB 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. In addition, 
the HEALTHY KIDS Act amended section 5000A(f)(1)(A)(iii) of the Code to 
include in the definition of MEC CHIP look-alike plans, which are CHIP 
buy-in programs that provide benefits that are at least identical to 
the benefits provided by the title XXI CHIP program.\4\ 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. Under tax reform legislation that was 
enacted on December 22, 2017, the individual shared responsibility 
payment is reduced to $0, effective for months beginning after December 
31, 2018.\5\
---------------------------------------------------------------------------

    \4\ Public Law 115-120, 101 (2018).
    \5\ Public Law 115-97, 131 Stat. 2054.
---------------------------------------------------------------------------

    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 \6\
---------------------------------------------------------------------------

    \6\ By ``premium stabilization programs,'' 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

[[Page 16934]]

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 
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 \7\ (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.\8\ 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.
---------------------------------------------------------------------------

    \7\ ``Essential Health Benefits Bulletin.'' December 16, 2011. 
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
    \8\ ``Actuarial Value and Cost-Sharing Reductions Bulletin.'' 
February 24, 2012. Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.
---------------------------------------------------------------------------

5. 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

[[Page 16935]]

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 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 EHB, 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 final 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). We 
anticipate continuing to address comments in future rulemaking and 
guidance.

C. Structure of Final Rule

    The regulations outlined in this final rule will be codified in 45 
CFR parts 147, 153, 154, 155, 156, 157, and 158.
    The final regulations in part 147 amend the rules regarding fair 
health insurance premiums and guaranteed availability to reflect final 
changes related to the SHOPs and special enrollment periods.
    In connection with part 153, we are recalibrating 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. This final rule addresses the 
high-cost risk pooling adjustment, where we are finalizing the same 
parameters that applied to the 2018 benefit year for the 2019 benefit 
year risk adjustment. The finalized provisions related to part 153 
include the risk adjustment user fee and modifications to risk 
adjustment data validation. We also finalize a policy to provide States 
flexibility to request reductions in risk adjustment transfers in the 
small group market starting for the 2020 benefit year and beyond.
    The final regulations in part 154 finalize certain modifications to 
reduce regulatory burden and enhance State flexibility for the rate 
review program. We are finalizing an exemption for student health 
insurance coverage from Federal rate review requirements. We are 
finalizing a proposal to raise the default threshold for review of 
reasonableness in the rate review process from 10 percent to 15 
percent. We also are finalizing a proposal 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 are 
finalizing the change to the notification period for States with 
Effective Rate Review Programs to provide advance notice to HHS prior 
to posting rate increases (from 30 days to 5 business days).
    The final 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 will allow agents, 
brokers, and issuers to select their own third-party entities for 
conducting those reviews. We are finalizing modifications to the rules 
around verification of eligibility. We are also finalizing increased 
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 by removing 
the standard requiring physical presence of the Navigator entity in the 
Exchange service area. We are modifying the parameters around certain 
special enrollment periods. We are modifying the effective date options 
for enrollee-initiated terminations, at the option of the Exchange, and 
amending 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 final regulations in part 156 include changes to EHB and the 
QHP certification process. The final regulations in part 156 set forth 
parameters 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. The regulations at part 156 also include finalized 
FFE and SBE-FP user fee rates for the 2019 benefit year for all issuers 
participating on the FFEs or SBE-FPs. The regulations at part 156 also 
include finalized policies related to actuarial value for stand-alone 
dental plans (SADPs).
    The final amendments to the regulations in parts 155, 156, and 157 
include finalized proposals that would provide SHOPs with additional 
operational flexibility, and would modify the requirements for issuers, 
employers, and employees interacting with SHOPs.
    The final amendments to the regulations in part 158 include 
revisions related to reporting quality improvement activity expenses as 
part

[[Page 16936]]

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 Rule and Analysis of and Responses to 
Public Comments

    In the November 2, 2017 Federal Register (82 FR 51052), we 
published the ``Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters for 2019'' proposed rule (proposed 
2019 Payment Notice or proposed rule). We received 416 comments, 
including 99 comments that were substantially similar to one of four 
different letters, each regarding the proposals on EHBs, one addressing 
EHBs and the Navigator program, and one addressing proposals related to 
EHBs, Navigators, SHOPs and network adequacy. Comments were received 
from State entities, such as departments of insurance and State 
Exchanges; health insurance issuers; providers, both individuals and 
provider groups; consumer groups; industry groups; national interest 
groups; and other stakeholders. The comments ranged from general 
support of or opposition to the proposed provisions to specific 
questions or comments regarding proposed changes. We received a number 
of comments and suggestions that were outside the scope of the proposed 
rule that will not be addressed in this final rule.
    In this final rule, we provide a summary of each proposed 
provision, a summary of those public comments received that directly 
related to the proposals, our responses to them, and a description of 
the provisions we are finalizing.
    Comment: We received multiple comments criticizing the short 
comment period, stating that the comment period made it difficult for 
stakeholders to conduct an in-depth analysis of the proposed rule. 
Commenters suggested that HHS adopt a comment period of at least 30 
days from rule publication, and to fully comply with notice-and-comment 
requirements under the Administrative Procedure Act.
    Response: The timeline for publication of this final rule 
accommodates issuer filing deadlines for the 2019 benefit year. A 
longer comment period would have delayed the publication of this final 
rule, and created significant challenges for States, Exchanges, 
issuers, and other entities in meeting deadlines related to 
implementing these rules. We will continue to try to expand the comment 
period for the annual HHS notice of benefit and payment parameters 
while also providing industry and other stakeholders with more time to 
implement the final rule.
    Comment: We received some comments generally supportive of State 
flexibility, stating that by removing existing regulatory barriers, 
issuers will be able to offer a more diverse selection of coverage 
options that meet both the financial and health coverage needs of 
consumers while meeting various State needs.
    Response: We agree that State flexibility with respect to oversight 
of State insurance markets is an important goal, and recognize the 
traditional role States have as the primary regulators of their 
insurance markets. States are best positioned to address the specific 
needs of their consumers, and may be better able than the Federal 
government to develop policies that are tailored to allow issuers in 
their State to develop plans that address both the needs and cost 
concerns of beneficiaries in their State.
    Comment: We received numerous comments cautioning us about making 
changes that would weaken the PPACA. Some commenters expressed concern 
that the proposed changes would remove some of the protections afforded 
by the PPACA, such as the certainty of EHBs.
    Response: Our top priority at HHS is putting consumers first. While 
we have made great strides forward, there is still work to be done, 
including ensuring that coverage is affordable to all consumers. We 
have already taken important steps to streamline our regulations and 
our operations with the goal of reducing unnecessary burden, increasing 
efficiencies and improving the consumer experience. Yet, we have 
recently seen how regulations intended to protect consumers can, 
instead, undermine consumers' access to affordable health coverage. In 
this final rule, we finalize policies that are intended to help control 
costs of coverage in order to make coverage more affordable for 
consumers, particularly unsubsidized consumers. We will continue to 
find innovative ways to reduce costs and burdens while meeting the 
health needs of all Americans. We are continuing to address feedback we 
receive from stakeholders and the public, and in turn we are making 
changes that will better serve consumers and allow States to address 
the unique health needs of their populations.
    Comment: Commenters responded to our request for comment on ideas 
for future rulemaking about ways to help reduce drug costs and promote 
drug price transparency. All commenters acknowledged the consumer 
benefits of lowering drug costs and having more transparent drug 
pricing; however, commenters cautioned that any changes be done in a 
thoughtful manner, that considers value in addition to cost, with input 
from all stakeholders.
    Response: We appreciate the ideas for future rulemaking and will 
consider these suggestions.

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 final rule, we are finalizing 
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 Federally-facilitated 
Small Business Health Options Program (FF-SHOP). As part of these 
changes and, as discussed in the preamble to Sec. Sec.  156.285 and 
156.286, we proposed that, effective on the effective date of this 
rule, 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 proposed 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 did not receive comments on this proposal, and are finalizing 
the change as proposed, with one minor typographical correction.
    We also sought comment on whether issuers offering coverage through 
SHOPs should always be required to offer average enrollee premiums, or 
should be required to do so only if required under applicable State 
law.
    Comment: Comments were mixed regarding whether issuers offering 
coverage through SHOPs should always be required to offer average 
enrollee premiums. One commenter stated that issuers offering coverage 
through SHOPs should always be required to offer average enrollee 
premiums, while others stated that issuers should be required to do so 
only if required by applicable State law. One of these commenters 
further recommended that average premium rating should be permitted 
only when a SHOP does not allow employees to choose plans among 
multiple issuers. The commenter stated that average enrollee premiums 
based

[[Page 16937]]

on employees selecting a particular plan could result in illogical 
rates, such as a richer plan having lower rates than a leaner plan 
because only younger employees selected the richer plan. Another 
commenter stated that all issuers, regardless of whether they are 
offering coverage on or off SHOP, should be allowed to offer average 
enrollee premiums.
    Response: For purposes of consistency, we believe that issuers 
offering coverage through a SHOP should be permitted to offer average 
enrollee premiums to the same extent that issuers may do so off SHOP 
under existing State rules. Also, given the decrease in issuer 
participation in the FF-SHOPs, some SHOP employers only have one issuer 
offering FF-SHOP plans in their area and will not be able to offer 
their employers a choice of plans across issuers. In addition, 
historically, a majority of employers have not offered employee choice 
across different issuers, thus mitigating the risk of variance in 
average premium rates across plans. Therefore, we do not believe 
Federal guidance or regulation is currently warranted in this area. 
Thus, issuers offering coverage through a SHOP may offer average 
enrollee premiums to the extent required or permitted by the applicable 
State, and will not be required under Federal law to do so, unless 
required by the State.
2. Guaranteed Availability of Coverage (Sec.  147.104)
i. SHOP
    As discussed elsewhere in this final rule, we proposed and are 
finalizing substantial changes to the requirements applicable to SHOPs 
to provide them with the flexibility to operate in a leaner fashion, a 
flexibility that we will utilize in the FF-SHOPs. Among those changes, 
effective on the effective date of this rule, the requirements in Sec.  
156.285 will apply for plan years starting before January 1, 2018. New 
Sec.  156.286 specifies those requirements contained in Sec.  156.285 
that, effective on the effective date of this rule, will 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 will be listed in new Sec.  156.286(e). 
The marketwide regulations at Sec.  147.104(b)(1)(i)(B) currently 
reference Sec.  156.285(e), and we proposed to add a reference to Sec.  
156.286(e) to clarify that, effective on the effective date of this 
rule, for plan years that start on or 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. Because we are finalizing 
new Sec.  156.286(e) as proposed, we are also finalizing the proposal 
to reference new Sec.  156.286(e) in Sec.  147.104(b)(1)(i)(B).
    Comment: One commenter supported the proposal to add to Sec.  
147.104(b)(1)(i)(B) a reference to Sec.  156.286(e). One commenter 
opposed permitting QHPs to restrict coverage availability when a group 
health plan cannot comply with group participation rules, while another 
commenter stated that an employer that fails to comply with such rules 
should not be afforded guaranteed availability of coverage, either 
generally or during an annual open enrollment period, either on or off-
SHOP.
    Response: As indicated in the section of the preamble discussing 
the SHOP rule, we are finalizing, as proposed, the proposal to add new 
Sec.  156.286(e), which would apply, to plan years starting on or after 
January 1, 2018, the existing regulatory provision that allows QHPs 
offered in the SHOP to 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. Thus, we are also finalizing 
the proposal to reference new Sec.  156.286(e) in Sec.  
147.104(b)(1)(i)(B).
    We also proposed, and are finalizing, the removal of 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 this rule. 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 did not propose to remove that marketwide 
requirement. We proposed changes to Sec.  147.104 to reflect the SHOP 
changes. Specifically, we proposed to eliminate, from Sec.  
147.104(b)(1)(i)(C), the cross-reference to Sec.  155.725. We proposed 
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 are finalizing 
this proposal, but are modifying the language that will replace the 
cross-reference to clarify that it is permissible for issuers to apply 
an effective date of coverage that is before or on the specified dates. 
We are also modifying the proposed language so that the effective date 
of coverage is tied to the date a group enrollment is received, rather 
than to the date a plan selection is received.
    Comment: All commenters supported in principle the proposal to 
eliminate, from Sec.  147.104(b)(1)(i)(C), the cross reference to the 
effective dates of coverage in Sec.  155.725, and in its place 
explicitly specify in Sec.  147.104(b)(1)(i)(C) those effective dates 
for coverage in the small group market, and for the large group market 
if such coverage is offered through a SHOP. However, several commenters 
noted that our proposal did not import the provisions in Sec.  155.725, 
describing the coverage effective dates, verbatim into Sec.  
147.104(b)(1)(i)(C). They observed that the proposed language in Sec.  
147.104(b)(1)(i)(C) tied the coverage effective date to the date a plan 
selection was received, rather than to the date a group enrollment was 
received, and that tying the coverage date to the date a group 
enrollment was received (as in the effective-date-of-coverage language 
currently set forth in Sec.  155.725) would be more appropriate. 
Commenters also stated that the language we proposed to add in Sec.  
147.104(b)(1)(i)(C), unlike the language in current regulations in 
Sec.  155.725, would prohibit issuers from applying a coverage 
effective date that falls before the first day of the following month, 
or before the first day of the second following month, as applicable, 
after the date a group enrollment is received.
    Response: As commenters pointed out, in the language we proposed 
for Sec.  147.104(b)(1)(i)(C), we tied the coverage effective date to 
the date a plan selection, rather than a group enrollment, was 
received. Given that the proposed language we added appears in a 
section of the rules (Sec.  147.104) that applies marketwide, and not 
just in SHOPs, we agree with the commenters that tying the coverage 
date to a group enrollment, which is a broader term than a plan 
selection (the latter is a SHOP-specific term), would be more 
appropriate. We also agree with the commenters that the existing 
language in Sec.  155.725, which requires issuers to ensure a coverage 
effective date of, rather than on, the dates specified in the existing 
language, permits issuers to apply an enrollment date that falls 
before, rather than only on, the first day of the first month or the 
first day of the second month (as applicable) following the date a 
group enrollment is received, and that issuers should continue to have

[[Page 16938]]

the flexibility to apply an enrollment date that falls before those 
dates. Therefore, in light of those comments, we are finalizing 
language in Sec.  147.104(b)(1)(i)(C).
ii. Special Enrollment Periods
    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 qualifying 
events including those listed in the exceptions in Sec.  
147.104(b)(2)(i). Therefore, we proposed 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. We received no comments on this proposal, and are 
finalizing it as proposed.
    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 finalizing 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 they 
lived in a service area where no qualified health plan was available 
through the Exchange for 1 or more days during the 60 days preceding 
the qualifying event or during their most recent preceding enrollment 
period, as specified in Sec. Sec.  155.410 and 155.420. Section 
155.420(a)(5) applies to qualifying individuals seeking off-Exchange 
coverage through an applicable special enrollment period, so we 
proposed that this exception for individuals living in a service area 
where there were no QHPs offered through an Exchange would also 
apply.\9\ 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 proposed 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. We are finalizing this 
change as proposed.
---------------------------------------------------------------------------

    \9\ As stated in the preamble in the proposed rule 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 cove